4 Customer lending is defined as: loans & advances to customers -/- provision for loan losses.
from €4.7 billion in 2018, which had been negatively affected by the €775 million settlement agreement with the Dutch authorities on regulatory issues. Commercial performance was robust in 2019, further evidenced by an increase in the number of primary retail customers of more than 830,000 to 13.3 million.
in 2018, as 1.2% higher income was more than offset by higher operating expenses. Despite ongoing cost discipline, expenses rose 4.5% due to higher KYC-related expenses, increased staff costs, further increasing regulatory costs and continued investments in business growth. Excluding regulatory costs, the 2019 cost/income ratio was 51.0%.
Responsible finance is our way of measuring how we work with our clients to drive progress on climate action and financial health.
We strive to maintain a high level of system availability of our online payments channels. For 2019, weighted system availability for Retail customers in the Netherlands and Belgium was 99.7%.
At ING, we delivered solid commercial and financial results in 2019 and took important steps to increase our engagement and leadership role in the area of sustainability and in the fight against climate change. It was also a challenging year in which we needed to focus on enhancing our ability to fight financial economic crime and at the same time pursue our business transformation goals.
The digital customer experience is now the key differentiator, and our main competitors are no longer just other banks. They are also Big Tech digital leaders like Apple, Google and Tencent who are increasingly moving into financial services. The content, offerings and digital savvy of these goto platforms cater to a wide range of customers’ primary needs with a personal, instant, relevant and seamless experience.
To achieve our platform ambition, we’re transforming ING. That means creating a uniform and modular technology foundation that helps us share innovations quickly across our businesses and that can be scaled up easily to accommodate growth, as well as open architecture so we can connect to third-party platforms and they with us. We’re implementing one set of processes and procedures, and we’re pursuing one approach to how we store and analyse data, a key resource for understanding customers and anticipating their needs. And we’re uniting in one way of working across ING to increase effectiveness and reduce the time it takes to bring innovations to the customer.
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The easy, 24/7 access to financial services that digitalisation makes possible also poses challenges.
The number of digital contact moments with customers is rising exponentially – in 2019 they came to four billion for ING alone. This requires banks, which traditionally focus on financial risk management, to sharpen non-financial risk management skills in order to continue to play their crucial role as gatekeepers ensuring that the financial system is better protected from fraud and other criminal activities.
we made progress raising awareness, improving the skills and behaviour of our staff and resolving issues in executing KYC procedures. And we also started implementing structural solutions to build sustainable KYC operations and made promising strides in pilots where we apply artificial intelligence, machine learning and other technologies to increase the efficiency and effectiveness of compliance and anti-money laundering procedures. I am convinced that mastering these skills will be vital for maintaining trust in the digital bank of the future.
At the same time we welcome steps by authorities to achieve wider cooperation between banks, law enforcement and regulators on national and European levels to strengthen the resilience of the whole financial system when it comes to fighting financial economic crime. And we view continued progress on the Banking Union in Europe as important to achieve this cooperation.
Looking back at 2019, we see a year of solid commercial performance despite the challenging rate environment, geopolitical uncertainties and an increasingly complex and demanding regulatory environment.
ING took an important step on this journey last year when we announced our Terra approach to steer the impact of our more than €600 billion lending portfolio in support of the Paris Climate
And through ING Wholesale Banking, we are one of the pioneers in sustainable finance. In 2019 we continued to grow our expertise and contribute to the development of this sector by introducing new sustainability improvement concepts and financial products, including the first sustainabilitylinked Schuldschein for machinery and plant manufacturer Dürr.
ING's CEO. I'm proud of this company and its people and what we've achieved together during my tenure as CEO. ING is supported by a strong brand and guided by a clear purpose that it puts into practice every day. This positions it well to be successful in a digital world. I have no doubt that
ING's committed people and management will continue to build on these strong foundations in the future.
Against a backdrop of continuing US-China trade tensions, prolonged uncertainty on Brexit and reduced US fiscal stimulus, global economic growth weakened throughout 2019. The global economic growth rate fell to its lowest level in a decade.
Economic growth in Asia was negatively impacted by the imposition of import tariffs and related uncertainty about global trade. In China, already in the midst of a structural slowdown, economic growth slowed to its lowest rate in 29 years. To address this adverse external environment, both fiscal and monetary stimuli were introduced.
Turkey found a floor. Falling inflation and a return of investor confidence in Turkey contributed to a general decline in interest rates.
Brexit continued to dominate 2019, with the UK finally leaving the EU on 31 January 2020.
Milestones in the year included British Prime Minister Theresa May making way for Boris Johnson, several extensions to withdrawal dates, and a snap general election, which the Conservatives won by a landslide in December.
The GDPR is a landmark personal data protection framework that is arguably the world’s most stringent. It gives customers the right to receive their personal data on request and for their data to be directly transmitted to third parties. ING has been subject to the data protection requirements set out in the EU’s General Data Protection Regulation 2016/679 (GDPR). We have updated our
PSD2 opens banking and allows customers to authorise their bank to share their account information with licensed third parties. For example, customers can view their accounts at other banks in ING’s mobile banking app; or authorise ING to access their account information at other banks when applying for a loan, which can help speed up the approval process. The payment initiation services element of PSD2 allows a third party to initiate a payment on a user's behalf or from their account. As of September 2019, ING’s entities based in Europe comply with PSD2.
Digitalisation in banking, driven by benchmark customer-friendly digital experiences offered by Big
Tech platforms, is improving how customers manage their money, offering increased convenience, financial insights and empowerment.
Netherlands. We’ve also enhanced the experience of our mobile app users by adding Apple Pay in the Netherlands, Germany, Romania and Spain, after introducing it earlier in Australia and Poland.
Trust in the banking sector sharply eroded after the 2007-2009 crisis and has not fully recovered. A
key part of restoring trust in the banking system is acting with integrity and in a fair, transparent and prudent way in all operational and business conduct.
In addition, ING introduced the Orange Code dilemma model in 2017 to support well-balanced and integrity-led decision-making. In 2019, the model was incorporated into existing decision-making processes and experts were trained globally to support the organisation in applying the model.
Read more about our Whistleblower Policy in the ‘Developments in risk and capital management’
ING’s past actions resulted in a loss of trust from stakeholders. We have continued to work hard in 2019 to learn from these, rebuild trust and improve for the future.
AML supervisory practices, both in terms of expectations and sanctions, differ across member states and the cross-border cooperation between authorities could be improved. In its reports, the
True to our partnership approach, ING teamed up with the European Investment Bank (EIB) in 2019 to make €400 million available for large business customers in the Netherlands, Belgium and
There were numerous developments in 2019 with important implications for financial services providers and their future strategic direction. Digitalisation increased, with a growing percentage of customers doing their banking with mobile devices. Big Tech platforms continued to leverage their expertise in the digital customer experience to encroach on banks’ market share by targeting lucrative parts of their traditional value chains, such as payments.
Competition was further spurred by implementation in 2019 of the EU’s PSD2 directive opening the payments market to non-bank competitors. Persistently low interest rates in Europe edged still lower, pressuring banks’ interest income and profits. And the growing threat of climate change intensified the debate about the role business can and should play to promote a sustainable future.
ING chooses to pursue its own platform approach. It aims to create a go-to financial services platform offering one customer experience wherever we operate and one that’s mobile-first in keeping with ING’s clear and easy, anytime anywhere Customer Promise. To support this ambition, we’re evolving to a single global modular technological foundation that can be easily scaled up to accommodate growth, and one that’s open so it’s ready to connect to other platforms and offers users relevant third-party products and services.
To pursue this aim, we are converging businesses with similar customer propositions. The Unite be+nl initiative is combining the Netherlands and Belgium. The Maggie (formerly Model Bank)
Examples of collaborative innovations include beyond banking initiatives for retail customers. In 2019 we launched the first protection products as part of the global insurance partnership with
Our Think Forward strategy was launched in 2014 and guides everything we do. It was visionary then and today is ever more relevant to our success. This section describes the strategy and includes references to examples and additional information on how our strategy links to the material topics identified by our stakeholders.
Discussions in society about data privacy and the tightening of data privacy legislation and regulations, as embodied in the EU’s General Data Protection Regulation (GDPR), are raising awareness of this important issue. At ING, we are committed to handling customer data safely and being open about how we use it.
in 2018, focused on high sustainable performance, talent management and performance transparency. It will be extended to the TFLE in 2020.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Our strategy and how we create value 4. Lending capabilities
Empower people to stay a step ahead in life and in business
We have 200 fintech partnerships helping us to boost innovation. With the
In 2019, we achieved an organisational health index score of 70 percent.
ING paid out €2.6 billion in dividends to shareholders and €3.0 billion in interest to bondholders.
ING is testing and trying all three approaches to prepare ourselves for life as a platform business.
Innovation is at the heart of ING’s Think Forward strategy. It is important that ING not only becomes an innovation-enabled organisation, but also increases the number of adjacent and disruptive
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Innovation and transformation innovation initiatives in the market. Developing truly disruptive products, services and experiences, goes a long way in helping ING’s platform ambitions.
ING Labs are environments where the bank develops disruptive ideas and brings them to market by creating minimal viable products (MVPs). We do this by combining our knowledge and network with the knowledge and skills of others. In the labs, internal and external experts in small crossfunctional teams develop their ideas using ING's PACE innovation methodology (see below). The aim is to turn the idea into a customer-validated MVP within 12 months. Our approach is all about testing and validating assumptions before we build. This ensures innovations are desirable, feasible and viable.
UK-based TradeIX, the world's first open platform for trade finance based on blockchain and investment in Ascent a US-based regtech company.
Global Transformation Office. Transformation management is crucial in connecting all country, business line and functional change. In 2017, a bank-wide transformation management method was introduced to ensure the implementation of our Think Forward strategy.
Running a bank-wide transformation is complex. It involves many interdependencies between different workstreams and may involve trade-offs in local priorities or autonomy so that we prioritise what is best for the bank on a global level. Our transformation management method helps speed up decision-making, resolve issues when they arise or adjust our planning when necessary. All this needs to be done while keeping the bank safe, secure and compliant and minimising any adverse impact.
The IT target operating model (TOM), which aims to create speed, scale and security as well as cost efficiency has gained significant maturity. We introduced one purpose, one common backlog, one technology platform, one workforce of talented engineers and one Way of Working.
The quality of our people is crucial to the quality and efficiency of our Tech services. We build and maintain a global workforce of highly skilled engineers through global performance days where we assess and calibrate our engineers based on one engineering profile. In 2019, 82 percent of our internal engineering workforce work according to this profile.
Touchpoint has been made available in and Asia. In 2019, it has enabled the delivery of several business solutions, including PSD2, covering 17 countries across Europe for Retail and Wholesale
In 2019, we expanded the service portfolio to support further onboarding in the IPC and doubled global adoption of IPC, from around seven percent of global infrastructure in 2018 to around 15 percent by the end of 2019.
Preventative measures are in place for ING data centres and organisational resilience is continuously tested. A dedicated cybercrime expertise and response team continues to predict, protect, detect and respond to e-banking fraud, DDoS and targeted attacks.
Training and awareness for customers and employees is a crucial part of ING’s preventative measures. Our all-staff online integrity programme is regularly updated with the latest cybercrime
Building the digital bank of the future is all about data. Data can provide meaningful insights that help us to understand customers better and enable us to develop innovative products that personalise the customer experience. In addition, data can be used to improve processes and to make better management decisions.
To make raw data meaningful, it needs to be sorted, harmonised and put into context. To do this in an effective way, ING has a data management strategy with major elements of the strategy being standardised data definitions (ING Esperanto) and data models (Esperanto Warehouse Model). Both contribute to the availability, quality, integrity, usability, control and global governance of our data.
ING’s Analytics Unit was established in 2018 to accelerate the bank’s analytics capabilities and lead the transformation to become a truly data-driven company. The unit has two main objectives: promote data fluency among employees and strengthen analytics delivery.
ING’s quest to become data-driven starts by unifying the analytics capabilities of our organisation.
In 2019, an Analytics Academy was launched to put analytics capabilities within everyone’s reach.
▪ Detection of unknown suspicious activities through anomaly detection for financial institutions.
ING has been experimenting with chatbots since 2016. We’ve now passed the exploration phase and are now looking to create value and scale. The benefits for customers include a simplified user experience, 24/7 contact and a reduction in human errors.
More units were onboarded on the global robotics as a service platform including Belgium, Risk and
An example of one of the solutions on this platform is the RoboPlatform developed by ING in
ING colleagues globally and is continuing to provide more specialised and complex services. In
Achievements in 2019 include designing global regulatory and HR processes and defining an approach for implementing global processes across ING.
An agile WoW has been introduced in the delivery area of the Netherlands, Belgium, Spain, Poland,
Orange Code. Bridging cultural differences between countries is supported by WoW ambassadors, training programmes and WoW bootcamps.
“ValueX democratises access to these asset classes, distributing ticket sizes that match any type of investor demand. It enables professional investors to participate in high quality, currently illiquid assets that reflect investors’ ESG values. With distributed ledger technology
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ING’s retail business serves 38.8 million customers. In most of our retail markets we offer a full range of banking products and services, covering payments, savings, insurance, investments and secured and unsecured lending. Our wholesale banking business offers clients advisory value propositions such as specialised lending, tailored corporate finance and debt and equity-market solutions. Our clients range from large companies to multinational corporations and financial institutions.
lending, and our strong savings franchises to fund the expansion of wholesale banking in these markets.
To achieve our business goal of creating a superior customer experience, we focus on four strategic priorities: earning the primary relationship; thinking beyond traditional banking to develop new services and business models; using our advanced data capabilities to understand our customers better and meet their changing needs, and innovating faster.
Earning the primary relationship is a strategic priority for ING as it leads to deeper relationships, greater customer satisfaction and ultimately customers choosing us for more of their banking needs.
In Retail Banking, we define primary customers as those with multiple active ING products, of which one is a current account where they deposit a regular income such as a salary. For Wholesale
We want to use the insights from our 4.5 billion customer interactions to offer a personalised and empowering experience, giving them even more reasons to interact with us. This is how we can differentiate ING from other banks and become an essential part of people’s digital lives.
Wholesale Banking markets. In 2019, NPS played an even more prominent role in gauging client satisfaction in Wholesale Banking, with clearly defined KPIs applied across all parts of the business and a more active feedback process.
Several deals in 2019 reflect this sector focus. In the telecom, media and technology space, ING
Banking. This will help to maximise cross-buy opportunities and improve our client-service delivery with consistent products and a one-client approach everywhere.
ING’s purpose is to empower people to stay a step ahead in life and in business. To continue doing this in a world that is changing quicker than ever before, we need to be where our customers are –
The other advantage with platforms is that they are scalable, open and borderless, offering their users the same experience everywhere. With little to differentiate one bank’s products from another, we believe it is customer experience that will set ING apart.
Belgium, with the introduction of common digital channels in these countries. Unite be+nl is one of several programmes we are rolling out to build ‘one ING’ and is an important step towards a global platform. Maggie (formerly Model Bank) is our transformation programme uniting our retail strategy and capabilities in Spain, Italy, France and the Czech Republic. Its emphasis is on increasing our digital interaction with customers, improving customer satisfaction and boosting sales.
Following our 2018 acquisition of a 90 percent stake in Dutch digital real-estate platform
The ‘do your thing’ tagline articulates ING’s purpose and our customer promise. It encourages people to do more of the things that move them or their business. It’s not about irresponsible behaviour, but about people being free to live the life they want to live, knowing they are making their world a little better for it.
(FIU), the Public Prosecution Service, Fiscal Information and Investigation Service (FIOD) and relevant ministries.
We participated in the launch of instant payments in the Netherlands and Belgium by the Dutch
In Wholesale Banking, highlights in innovation in the digitalisation space include two KYC initiatives: Domino and CoorpID. Using advanced algorithms, Domino collects and connects payments, lending and financing data to provide insights that would not normally be readily available. The platform is live in several departments and used by approximately 800 retail and WB colleagues, of which 50 serve around 20 percent of ING’s Dutch corporate clients. CoorpID provides a centralised digital vault for corporate customers to store and share all their KYC documentation in a secure way. It enables clients to manage their own KYC data and easily share it with other banks, insurance companies, or auditors.
Easy Trading Connect platform was one of the first to digitalise commodity trade financing.
ING teamed up with IBM and MineHub on a new blockchain platform for mining and metals, aimed at making the entire supply chain more secure, transparent and efficient. This will help our clients in the sector to lower costs, increase transparency and contribute to sustainable production and trading. The solution is being built on IBM’s cloud-based blockchain platform.
In the Netherlands and Germany, Wholesale Banking clients can now easily open an account digitally and directly from their ERP via e-Bank Account Management, using a SWIFT standard. In developing this, we enable clients to standardise the process for account openings and later mandate changes to be able to create the basis for digital lifecycle management.
Banking. Our main interactive channel for business clients, it offers a single point of access to a growing range of corporate banking services, online and through a mobile app. It provides all the touch points that business clients need, through a single sign-on, giving them real-time insights and a single source to manage all their financial transactions at any time, and on any device. We launched InsideBusiness in 2015 and it now has around 18,000 companies using it, with 57,000 active users, 6,000 of whom use the mobile app. Large corporates make up 32 percent of users, with the rest being mid-corporates. Our goal is to have all our corporate clients using it – and we’re gradually closing in on that target.
In time, all of ING’s branches will adopt this new, home-like concept. Some have already opened in
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Our business customers, we’re transforming our current service model and building digital capabilities to offer compelling end-to-end digital customer journeys supported by a common infrastructure.
Magazine as the world’s best Integrated Corporate Banking site for 2019. It currently provides around 65,000 SME and mid-corporate clients with a single access point for all their banking products and services and handles more than 70 million transfer orders a year. In Romania, the business platform processed its first one million payments in 3Q 2019.
Also in Poland, ING is the first bank to launch its own payment gateway – imoje – that provides merchants with a unique ‘buy now, pay within 21 days’ payment option. Co-created with Czech fintech Twisto, 1,500 shops are now using the payment gateway and 580,000 transactions have been carried out on imoje since April 2018.
One year later, we published our first progress report on Terra, providing a status update on the alignment of our lending portfolio with the pathway to the goal. The report presented our climate alignment performance, targets, challenges and next steps for five of the nine sectors with the biggest influence on greenhouse gas emissions: power generation, automotive, commercial real estate, residential real estate and cement.
The report’s centrepiece, the Climate Alignment Dashboard (CAD), discloses quantitative results on the climate alignment of our lending portfolio. It shows the CO2e intensity per sector of our portfolio compared to the market and the relevant below two-degrees climate scenario. It also displays the climate alignment target per sector and ING’s intended decarbonisation pathway per sector to converge towards the target.
As each sector requires a custom approach, Terra draws upon more than one methodology for target-setting. Currently, we focus on the Paris Alignment Capital Transition Assessment (PACTA)
for corporate lending, and the Science Based Targets Initiative’s Sectoral Decarbonisation Approach
PACTA was co-developed with the 2˚ Investing Initiative (2˚ii), a global think-tank developing climate metrics in financial markets. It looks at the technology shift that’s needed across certain sectors to slow global warming and then measures this against the actual technology clients are using – or plan on using in the future. The SBTi SDA sets out sector-specific decarbonisation pathways designed so as to be in line with the science-based scenarios using intensity metrics. Both methodologies use science-based scenarios developed by independent organisations like the
In addition to lending, we supported 62 mandates for clients through green, social and sustainability bonds. ING increased its bonds business by 68 percent year-on-year to €5.6 billion, outpacing the total euro denominated bond market growth.
In 2019, we introduced the first sustainability-linked Schuldschein, together with machinery and plant manufacturer Dürr. ING jointly arranged and structured the transaction.
provided to SBM Offshore, a global company that supplies floating production units to the offshore energy industry. The SID is an interest rate swap that hedges the interest rate risk of the construction of one of SBM Offshore’s floating production, storage and offloading facilities. It’s the world’s first derivative with a price linked to the company’s sustainability performance, as well as trading risk, capital requirements and profit. The credit spread of the SID can increase or decrease based on SBM Offshore’s ESG performance, as scored by Sustainalytics, an independent provider of
We supported 61 sustainability improvement loans, and 62 green loans and social and sustainability bonds in 2019. These include green finance frameworks and green loans for Italo,
Alongside the growing number of green loans and bonds, there were a number of sustainability firsts in 2019. ING issued the largest green Schuldschein with Porsche for €1 billion, and the first green bond framework in the telecom sector with UK telecoms company Vodafone. The Porsche transaction is also the first of its kind by a car manufacturer, and the huge demand resulted in the original order book volume having to be increased. ING acted as the green advisor on the project.
ING also issued its first-ever green covered bond. In October, ING Bank Hipoteczny in Poland launched a PLN 400 million (USD 93 million) five-year green covered bond on the back of strong investor interest.
To this end, we are developing retail products, tools and services to help homeowners make their houses more sustainable. As houses generally account for about 20 percent of CO2 emissions, we believe this could have a meaningful impact in the fight against climate change. At the same time it will help our customers to lower their CO2 footprint and energy bill. We have already provided green mortgages in Germany through development bank KfW. Customers can use the new products to finance solar panels, for example, or insulate their homes. In the Netherlands and
Netherlands, for example, can check the energy profile of their homes on our website, as well as the options and financing available to improve in this area. We also provide Dutch homeowners who want to invest in upgrading their energy label with a free rating as we know how insights can help people to take the first steps towards a more sustainable home.
Belgium, Luxembourg and Germany. In 2019, our retail customers in these countries invested a combined € 9.3 billion using ING’s SI services, up from € 6.3 billion in 2018. SI services represented seven percent of ING’s total retail banking customer investments in 2019. We have the ambition to grow our SI services.
Products and services are similar across banks. We differentiate ourselves by going a step further and innovating to create tools that help customers make better financial decisions. For example: ▪ In the Netherlands, we introduced our new voice-activated ATMs in branches of Albert Heijn and at Schiphol Airport. The speech function on the cash machines makes it easier for people who have difficulty reading or who are visually impaired to withdraw money themselves.
Our involvement in both the communities we operate in and in developing countries also contributes to financial health. For example: ▪ Globally, we continued our Power for Youth partnership with UNICEF to empower adolescents with financial, entrepreneurial, and civic leadership skills. Since 2015 the partnership has directly empowered more than 500,000 adolescents, benefiting more than 11 million indirectly.
The Think Forward Initiative (TFI) supports research and innovation that empowers people to make better financial decisions. This is based on the belief that society is better off when people make sound financial decisions. The TFI Research Hub works to gain a deeper understanding of the behaviours behind financial decision-making, while the TFI Accelerator Hub translates these insights into innovation. The
In 2019, eight start-ups were selected for the Accelerator Hub’s six-month Growth
Track programme, which is designed to help them scale fast. These include: Monkee, an app that motivates people to save by setting defined goals and weekly targets.
During the year, the Research Hub published several academic research reports on topics such as ‘how to stimulate debtors to pay up’, ‘how family members manage household money’ and ‘the benefits of joint and separate financial management of couples’.
WestlandUtrecht Bank (WUB) run-off portfolio, Retail’s net core lending book grew by €16.1 billion.
Underlying operating expenses declined 0.5 percent on 2018. This was mainly due to lower regulatory costs, benefits from the ongoing cost-saving initiatives and some positive one-offs, partly offset by increased salaries as well as higher KYC and IT-related expenses.
Risk costs in 2019 increased to a relatively low €91 million, or 6 basis points of average customer lending, partly caused by a change in the house price index that is used for Dutch mortgages. This
The underlying result before tax of Retail Belgium rose 8.7 percent to €647 million in 2019, compared with €595 million in 2018. The increase reflects higher income and stable expenses, only partly offset by an increase in risk costs.
Underlying income increased to €2,442 million from €2,369 million in 2018. The interest result was 4.2 percent up to €1,907 million, mainly due to volume growth, increased margins on mortgages, and supported by higher net interest income from Treasury-related products. This was in part offset by lower net interest income from savings and current accounts, reflecting the low interest rate environment, and some margin pressure on non-mortgage lending. The net growth in customer lending (excluding Treasury) was €3.3 billion, of which €1.2 billion was in residential mortgages and €2.1 billion in other lending. The net inflow in customer deposits (excluding
Operating expenses rose 5.2 percent to €1,080 million from €1,027 million in 2018. The increase was mainly due to a restructuring provision related to the completion of ING’s agile transformation in Germany, higher KYC-related expenses, investments to accelerate the acquisition of primary customers, and the launch of Interhyp in Austria.
Retail Other consists of the Other Challengers & Growth Markets, including the bank stakes in Asia.
Lending posted an underlying result before tax of €1,597 million, down 20.4 percent compared with 2018. The decline reflects lower income combined with higher expenses (including increased regulatory costs and KYC-related expenses) and higher risk costs due to a number of large individual files. Despite higher average volumes, Lending income declined, mainly due to some pressure on margins and the €66 million gain related to an equity-linked bond in Belgium recorded in 2018. The underlying result before tax from Daily Banking & Trade Finance declined 24.3 percent to €476 million from €629 million in 2018. A modest increase in income, reflecting improved margins at lower average volumes, could not compensate for higher expenses and elevated risk costs. The increased expenses reflect higher regulatory costs and KYC-related expenses as well as investments in Payvision and regulatory changes (including PSD2). Risk costs in 2019 included a sizeable provision for a suspected external fraud case.
and staff-related expenses, partly offset by continued cost-efficiency savings. The underlying cost/income ratio increased to 55.4 percent, from 50.3 percent in 2017.
“Many customers still prefer personal contact when it comes to making important financial decisions”
“That’s why we’ve introduced a new concept that’s all about making customers feel at home and providing them with a refreshing and warm experience when they enter a branch. We’ve created spaces where people can get personal advice and we’ve changed the waiting area into a welcoming place where you can get a good cup of coffee.
ING's first global customer experience day (CX Day) was inspired by the theme ‘small changes, big impact’ and saw retail teams across the globe come up with the best ideas to make the customer experience more personal, easy and smart. “In Luxembourg, we tackled 13 topics,” says Caroline Vappiani, Customer Experience specialist, ING Luxembourg. “We came up with a number of solutions: for the ‘easy’ principle, we added a cancellation link for the online appointments; for the ‘personal’ principle, we added a dynamic greeting message in My ING, tailored to the time of day, and for the ‘smart’, we developed a visual overview of incoming and outgoing funds in My ING. Also, a milestone achievement was being able to fix a bug in My ING’s secure messaging system that caused problems when people used some fairly common special characters, like apostrophes or percentages. Sounds like a small detail, but our customers had to replace or delete each special character in their message before they could send it, which was really tedious. It took nine hours of coding, but we fixed the problem on CX Day. To identify improvements such as these, it’s vital that we listen to our customers and respond to their needs. Our actions must be driven by their feedback so we can offer them the smoothest customer journey possible.”
Orange Code. We assess them against the Orange Code behaviours as part of the performance management process. All new joiners are introduced to the Orange Code through an e-learning module that explains ING’s culture, way of working and what we expect from our employees. There is also a global dilemma model to help employees recognise dilemmas and make balanced decisions in line with the Orange Code values and behaviours. This also applies to decisions and dilemmas arising from the increasing use of data in our business and we have local and global Data
We expect every ING employee to ensure we are a bank people can trust and that we can be proud of. This starts at the top. Leaders should create the right conditions for our employees to safeguard the bank and society from financial economic crime. The Behavioural Risk Management team takes on common behavioural themes with partners such as HR, Audit, Compliance and the business units to ensure alignment across the organisation and to embed the desired leadership and risk behaviours (speak up, psychological safety, communication, guiding leadership).
Among the findings was an improved showing in leadership practices, with increased focus on supportive, challenging and consultative leadership. Employees indicated that managers encourage honesty, transparency and open dialogue. However, they felt less involved in ING’s direction and we made less progress than we hoped for in operational rigour. While innovation and managing external relationships are still core organisational strengths, we did not score as well in these areas as in previous years.
ING’s International Talent Programme selects and develops graduates with high growth potential.
ING is committed to training its people to ensure they have the capabilities to stay a step ahead. In 2019, we spent €64 million to help employees become the best they can be. Employees are responsible for taking the lead in their own development and we expect them to continually update their skills. To facilitate this, we provide a wide range of local and global training programmes to help them develop professionally and personally.
Like all companies, we need to plan our resources carefully to meet our future needs. One of the challenges ING faces is finding, attracting and retaining people with the skills required to build a digital, data-driven bank. A large proportion (more than half) of vacancies at ING are currently related to data analytics or technology skills, and this is expected to grow in the coming years.
To help us recruit new talent we continued to make improvements to our careers site in 2019.
▪ The Coach & Care programme in Belgium includes a number of initiatives to help staff maintain their positive energy and to provide support. This includes training on energy and stress prevention, relaxation rooms and an employee assistance programme offering individual coaching to employees and their family members who encounter difficulties in their personal or professional lives.
ING tracks absenteeism at a local level to ensure we comply with local laws in the countries where we operate. To get a global picture we bring the aggregated results together manually in the overview in the non-financial appendix. Data analysis can help us understand the work-related causes of employee absenteeism by identifying trends and patterns at a local and team level. We also look at the links to stress and ways to alleviate this. For example, we promote flexible working to help employees better manage their work-life balance, have company councellors available in many of our locations and provide reintegration support for colleagues returning to work after an extended absence.
For the Supervisory Board and Management Board there is a 30 percent gender target set by the
Dutch government. The Supervisory Board met this in 2019. Three of its nine members (33 percent)
Recognising our efforts and commitment to gender equality, Bloomberg included ING in its 2019
▪ Recognised by ‘Great Place to Work’ in Germany, Austria and Turkey.
▪ Named by recruitment platform Intermediar as the top financial employer (and number three across all industries) among highly educated professionals.
“It’s hard to create products and services for customers if we don’t reflect those customers internally”
says Ana de Melo e Faro, Human Resources business partner for Maggie. “From the start we focused on building a diverse team with local know-how and expertise from the countries where it will be implemented. There are currently almost 250 people with more than 20 nationalities working on Maggie. Their average age is 37, and just under half (47 percent) are women. Although we are based in Spain, we communicate in English. Of course there are cultural differences, but we recognise the value of having so much diversity in the team. It’s hard to create relevant products and services for customers if internally we don’t reflect those customers. When you have people in the team who understand local needs, local sensitivities and local laws, you can be sure you are offering local customers what they want. At the same time, you’re giving them more choice from a bigger set of products and services from all the countries. To build the bank of the future, you also need to have the expertise of people who’ve worked in other transformation programmes, and people who have the skills to design and develop a scalable platform that offers a superior customer experience, optimises efficiencies and sets the operational standard. Maggie is a journey, also in terms of how we value our differences and work as one unit to achieve the same goal. Our Czech customers were the first to benefit from Maggie. In 2020, we will continue to use our team’s diversity to also give customers in France, Italy and Spain the same common customer experience and create one go-to platform for all their financial needs.”
Central Bank’s review of internal models, or TRIM) had an effect on our credit capital requirements.
In 2019, we issued €2.4 billion and redeemed €0.9 billion additional Tier 1 instruments.
Corporate Audit is our third line of defence. It provides an independent assessment of our internal controls over the risks to our business processes and assets, including the risk management activities performed in the first and second lines of defence.
Reputation starts with satisfied customers. In today’s always-on, convenience-oriented society, people expect their bank to be available 24/7. Tolerance for technical failures is low. And customers can quickly and easily share their dissatisfaction online, increasing the risk of reputational damage, or move their account to another bank, risking a loss of business. We therefore have to ensure our systems are available whenever our customers need them. Round-the-clock access is the first element for delivering a differentiating digital experience for customers. To this end, ING continued in 2019 to focus strongly on managing exposure to IT risks, including the cost of new technologies that until proven effective have to run in parallel with legacy systems, user access management and increasing the efficiency and effectiveness of our IT structure and continuity of IT processing.
For more information about how we protect customers and our bank against IT risks such as cyberattacks or loss of service, see the ‘Innovation and transformation’ chapter.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Developments in risk and capital management
ING has set solid standards in line with international guidelines for platform security, data management, cybercrime resilience and security monitoring, as well as for identity and access management. This aims to ensure the right people have the right access to the right resources at the right time. User Access Management remains an important element of our control framework to mitigate unauthorised and inappropriate access to our data and information. We are building on our cybercrime resilience to further enhance the control environment to protect, detect and respond to digital fraud, DDoS and targeted attacks. Read more about security and identity and access management at ING in the ‘Innovation and transformation’ chapter.
Behavioural risk is complex and less tangible than other types of risks. Detecting and reducing highrisk behaviours requires a deep understanding of what drives them. In August 2018, we set up a global Centre of Expertise, which carries out behavioural risk assessments to identify, analyse and mitigate high-risk behaviours within ING and provides management with specific direction on how to change these behaviours.
Philippines, were shared with the top 200 managers at ING’s International Conference in March 2019, and with the departments involved. Based on these outcomes, a number of interventions that aim to change high-risk behavioural patterns have been implemented. Theory and evidencebased techniques and tools developed in behavioural science play an important role in designing and evaluating interventions.
Reporting Standard (CRS), and US withholding tax and information reporting regulations. Some of these trainings are specifically for risk and compliance experts, others aim to raise awareness among all employees and new joiners.
(‘horizontaal toezicht’), which implies overall transparency and disclosure of relevant tax risks to the
(NYSE). Options on ING Group ordinary shares or in the form of American depository receipts (ADRs)
Pursuant to the Dutch Financial Supervision Act, shareholders and holders of ADRs of ING Groep N.V.
Own ordinary shares held by ING Group and its subsidiaries 0.9 1.1
Our stakeholders need information on our financial and non-financial performance to assess our ability to create value in the short, medium and long term. We believe that integrated reporting is the broad-based framework that can help our stakeholders and the providers of capital to make decisions that are forward looking, inclusive and impactful.
We continuously listen to our stakeholders and adapt our strategy and reporting to meet their evolving expectations. As part of our materiality analysis in 2019 we consulted key stakeholder groups - retail customers, business clients, investors, academia, civil society organisations, financial regulators, employees and senior management – in a quantitative engagement process. The results of our materiality analysis were used to define the content of this report. The report including materiality disclosures is reviewed and approved by the Executive Board.
This report is intended to serve the information needs of key stakeholder groups that affect, and are affected by our business. An overview of key figures and impacts in 2019 is available on www.ing.com. Please refer to the Stakeholder engagement section in the Non-financial appendix.
ING Group Annual Report 2019 KPMG Accountants N.V., registered with the trade register in the Netherlands under number 33263683, is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (‘KPMG International’), a Swiss entity. 89
(hereafter: ‘the Four Specific Topics’); of ING Groep N.V. (‘ING Group’) based in Amsterdam, The Netherlands.
Basis for our conclusion on the Non-Financial Information and our opinion on the Four Specific Topics
We obtained an understanding of the data collection process, evaluated the changes made during the year in tooling used for monitoring, and tested the effectiveness of the relevant controls for the Netherlands, Belgium and wholesale banking clients globally. We assessed the applicability, clarity and consistency of the definitions applied and re-performed the aggregation and calculation of the reported indicator. In addition, we inspected incident logging reports and performed a media-search for reported unavailability for the Netherlands and Belgium and Wholesale Banking globally.
In our professional judgement, the results of our procedures regarding the KPI System Availability were satisfactory.
The Non-Financial Information and the Four Specific Topics includes prospective information such as ambitions, strategy, plans, expectations and risk assessments. Inherent to prospective information, the actual future results are uncertain. We do not provide any assurance on the assumptions and achievability of prospective information in the Non-Financial Information and the Four Specific Topics.
The Executive Board of ING Group (hereafter: ‘Executive Board’) is responsible for the preparation of the Non-Financial Information and the Four Specific Topics in accordance with the reporting criteria as included in the section ‘Reporting criteria’ of our report, including the identification of stakeholders and the definition of material topics. 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 are free from material misstatement, whether due to fraud or error.
Auditor’s responsibilities for the review of the Non-Financial Information and the audit of the Four Specific Topics
Our audit of 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.
ING Group Annual Report 2019 KPMG Accountants N.V., registered with the trade register in the Netherlands under number 33263683, is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (‘KPMG International’), a Swiss entity. 91
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 the company; - evaluating the appropriateness of the reporting criteria used, their consistent application and related disclosures of 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; - 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
- Evaluating the reliability of external experts in providing input data for the Net Promoter Score and Feeling of Financial Empowerment indicators.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Chairman’s statement 2019 was a tough year, but also one in which ING performed solidly. As Supervisory Board we look back on a very intensive year with important topics on our agenda, including KYC/AML, progress on the delivery of ING’s strategy, the proposed updates of our remuneration policy and continuous dialogue with stakeholders.
Agreement’s aim to limit the rise in global temperatures to well under two degrees.
One of our tasks as Supervisory Board is to monitor the progress of the implementation of ING’s
I realise that achieving this systemic approach will not be easy, since it involves cooperation between national authorities and regulators and changes to privacy laws and how information is shared between banks and tax and legal authorities. But a joint approach is essential to fight the many forms of financial economic crime.
Herna Verhagen the members worked together to define policies on remuneration for both the
Meeting in 2020. For more information see the chapter on Remuneration in this report.
Education was an important part of our activities throughout the year. In addition to our annual
Executive Board, the Management Board Banking, the Supervisory Board and its committees. It’s important to make sure that ING, and we as Supervisory Board, are ready for the future and that we have the right skills and experience.
Supervisory Board (committee) meeting effectiveness. In our report you can read about the actions we took in response to the 2018 self-assessment and the ones we have defined for this year, resulting from the 2019 self-assessment. We took steps to ensure that the 2019 self-assessment approach and set-up were made more comprehensive, not only for the Supervisory Board, but also for the Executive Board and Management Board Banking. These now more specifically address the
Board meeting. For part of the regular meetings only the chief executive officer was present; this was dependent on the nature of the topics being addressed. The Supervisory Board also had sessions with its individual members only, prior to its regular meetings when justified by the nature of the topics on the agenda. The purpose of pre-meetings and Supervisory Board-only meetings is to allow the Supervisory Board independent reflection on, and consideration of, important matters in the absence of the Executive Board and Management Board Banking. The Supervisory Board aims to strike a balance between the interests of all stakeholders while maintaining an open dialogue with ING’s internal organisation and external supervisors.
Anti-Money Laundering (AML) to a sustainable high level. For further details on this programme,
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Report of the Supervisory Board read more in the ‘Developments in risk and capital management’ chapter and the Risk
ING interacts with shareholders and other stakeholders on a daily basis. Naturally, the settlement and its resulting impact on ING have been frequent topics on which engagements have taken place, and on which ING continuously reports progress. Further details on ING’s bilateral contacts with shareholders can be found in the ‘Corporate governance’ chapter of this report.
Continuous dialogue with stakeholders ING aims to maintain continuous interaction with customers, shareholders, employees, and our societal and other stakeholders. For the Supervisory Board the dialogue between ING and external supervisors was a standard agenda item throughout the year. This included a discussion on the results of the annual Supervisory Review and Evaluation Process (SREP) through which the
The topic of managing ING’s reputation and brand was also on the Supervisory Board agenda. The
As part of its review, the Supervisory Board held meaningful discussions with stakeholders to ensure the proposed remuneration approach achieves the right balance among their various viewpoints and interests. It also took into account public sentiment around remuneration.
Shareholders will have the opportunity to cast a binding vote (≥ 75 percent) on the proposed new remuneration policies at the 2020 AGM. The policies aim to maintain a sustainable balance between the short and long-term interests of our stakeholders and build on ING’s long-term responsibility towards customers, shareholders, employees, other stakeholders and society at large.
Board’s understanding of and engagement with ING’s business operations and its stakeholders.
In 2019, ING continued to implement its Think Forward strategy focused on long-term value creation and guided by our purpose to empower people to stay a step ahead in life and in business.
ING identified six key accelerators, which were shared with investors during ING’s Investor Day on 25 March 2019: growing primary customers, increasing cross-buy through our own products or those of our partners, improving cross-border scalability, faster time to volume, benefiting from an attractive funding and lending mix, and leveraging our sustainability profile.
KPMG for the audit of the financial statements for a subsequent four years (2020 to 2023 inclusive).
Board, its committees and potential candidates were recurring topics of discussion in light of various developments. ING’s talent and succession planning were also discussed, including the outcome of the Annual Talent Review. Remuneration was another recurring agenda item.
ING and the Supervisory Board are operating is now even more complex and challenging than before. The Supervisory Board will therefore continue to closely monitor and assess developments in the areas of financial and non-financial risk, compliance and internal control, as well as in the regulatory and external supervision landscape.
plenary meetings by rethinking the meeting approach and set-up, potentially enhancing them with deep dives and thematic sessions. The Supervisory Board will also enhance its lifelong learning. In addition to participating in the annual plenary permanent education sessions that will be more specifically linked to ING’s key themes, priorities and challenges, the Supervisory Board members will additionally take in knowledge on specific topics, for example via written public and already existing ING reports of the Executive Board and Management Board Banking.
The Audit Committee met five times in 2019. On average, 96 percent of the members were present at the scheduled meetings. The Audit Committee discussed the quarterly results, the interim accounts and the financial statements. Key audit matters, as included in the auditors’ reports, were also a topic of discussion.
Board approving those items as required from a governance perspective. In each quarterly Risk
GDPR/GDPP, PSD2, MiFID II, sourcing and data quality) and implementation of related regulatory programmes.
While transforming its organisation, ING needs to ensure that integrity continues to come first and that critical non-financial risk areas stay top of mind, because this is an integral part of who we are.
We need to build up strong foundations with structural solutions that continue to earn the trust of our customers and society at large.
Read more in the ‘Developments in risk and capital management’ chapter and the ‘Risk
In addition the Nomination and Corporate Governance Committee focused on improving diversity at the higher management levels, supported by senior management succession planning and accelerating refreshment. Time was spent on the role requirements and succession of several senior management roles that have a direct reporting line to the boards, such as the chief compliance officer, the general manager of the internal audit function, the general counsel and the chief HR officer. Talented individuals are being identified internally who are considered to have the potential to assume more senior and complex roles in the organisation over time, also taking into account ING’s diversity policy (70 percent principle for mixed-teams) as published on www.ing.com.
General Meeting, including the publication of the booklet on ING’s application of the Dutch
Annual General Meeting voting against discharge of the corporate boards, its implications and how to take this further going forward; the Winning Performance Culture results over 2018 (the employee engagement survey we hold every two years, alternating with an organisational health survey in the years in between) and related attention points for the future; and the development and implementation of a global suitability policy framework that brings together several already existing policies and procedures, sets out clear criteria and a process for assessment and reassessment of governing bodies and key function holders in scope. Standard topics on the committee’s agenda also included the annual review and update of the corporate board charters.
The Remuneration Committee also reviewed the remuneration proposals pertaining to the preceding performance year for Identified Staff, including potential cases for holdback of deferred compensation by way of malus. In addition, the proposed annual targets for the Executive Board and the Management Board Banking members were discussed and the ING Bank Remuneration
Remuneration Committee as per the end of the 2019 Annual General Meeting, having completed the maximum allowed regulatory term. Mike Rees and Herna Verhagen were appointed as
Verhagen’s membership became effective as of 1 October 2019. In between the end of the 2019
As from that date Mike Rees has taken over the role of chairman of the Risk Committee.
Giroday, are to be regarded as independent on 31 December 2019. Eric Boyer de la Giroday is considered not independent because of his position as chairman of the Board of Directors of ING
Board Banking, succeeding Koos Timmermans. The Supervisory Board nominated Tanate Phutrakul for appointment as a member of the Executive Board of ING Group, which was subsequently approved by the Annual General Meeting on 23 April 2019. These appointments and the appointments of Mike Rees and Herna Verhagen have been approved by the European
This chapter, including the parts of this Annual Report incorporated by reference, with the separate publication ‘ING’s application of the Dutch Corporate Governance Code’ dated 2 March 2020 (see www.ing.com), together comprise the ‘corporate governance statement’ as specified in section 2a of the decree with respect to the contents of the Annual Report (‘Besluit inhoud bestuursverslag’)1
The Dutch Banking Code (‘Banking Code’), a revised version of which was adopted by the Dutch
Code can be downloaded from the website of the Dutch Banking Association (www.nvb.nl). Its application by ING Bank is described in ‘Application of the Dutch Banking Code by ING Bank N.V.’, available on ING Group’s website. ING Group voluntarily applies the principles of the Banking Code regarding remuneration of the members of its Executive Board. ING Group’s remuneration policy for the Executive Board and senior management is compliant with the Banking Code principles.
The authorised capital of ING Group consists of ordinary shares and cumulative preference shares.
Group. No (former) Executive Board member, (former) Supervisory Board member, (former) ING
believed the vast majority of retail investors were located at that time); 4. Qualified or institutional investors in Canada and Australia.
Shares that are included in the Securities Giro Transfer system are transferred in accordance with the Securities Giro Transfer Act (Wet Giraal Effectenverkeer). A shareholder, who wishes to transfer such shares, must instruct the securities intermediary where his shares are administered accordingly.
Pursuant to section 5.3 of the Dutch Financial Supervision Act (‘Major Holdings Rules’) ), any person who, directly or indirectly, acquires or disposes of an interest in the voting rights and/or the capital of (in short) a public limited company incorporated under the laws of the Netherlands with an official listing on a stock exchange within the European Economic Area, as result of which acquisition or disposal the percentage of voting rights or capital interest, whether through ownership of ordinary shares, American depositary receipts (ADRs) or any other financial instrument, whether stock-settled or cash-settled, such as call or put options, warrants, swaps or any other similar contract, reaches, exceeds or falls below 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% or 95%. With respect to ING, the Major Holdings Rules would require any person whose interest in the voting rights and/or capital of ING reached, exceed or fell below those percentage interests, whether through ownership of ordinary shares, ADSs or any other financial instruments whether stock settled or cash settled, such as call or put options, warrants, swaps or any other contract to notify in writing the Dutch Authority for the Financial Markets (Autoriteit
These are broadly accessible to interested parties. The publication dates of quarterly earnings releases are announced in advance on ING Group’s website.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Corporate Governance specific conditions. It is ING’s policy not to initiate bilateral contacts or contacts with the press during the period immediately prior to publication of regular quarterly results.
Europe and 7 percent in Rest of the World. These figures are based on year-end 2019 estimates of institutional share ownership from investor intelligence service provider IHS Markit.
▪ Any other matters proposed by the Supervisory Board, the Executive Board or shareholders in accordance with the Articles of Association.
As of the date of convening a General Meeting, all information relevant for shareholders is made available via the ING Group website and through its head office. Information relevant for shareholders includes the notice of the General Meeting, the agenda with instructions on how to participate in the meeting (either in person or by proxy), the place and time of the meeting, the address of the website of ING Group, the explanatory notes to the agenda including the verbatim text of the proposals, as well as the reports of the Executive Board and the Supervisory Board.
Shareholders may attend a General Meeting in person or may grant a proxy in writing to a third party to attend the meeting and vote on their behalf. Prior to a General Meeting, ING will make proxy forms available on its website. For logistical reasons, attending the General Meeting, either in person or by proxy, is subject to the requirement that ING Group is notified in advance. Instructions to that effect are included in the notice for the General Meeting.
General Meetings are webcast via ING Group’s website www.ing.com, so that shareholders who do not attend the General Meeting in person may nevertheless follow the meeting online.
▪ the adoption of the financial statements; ▪ the declaration of dividends, subject to the power of the Executive Board to allocate part or all of the profits to the reserves – with approval of the Supervisory Board – and the declaration of other distributions, subject to a proposal by the Executive Board and approved by the Supervisory
▪ the appointment of the external auditor; ▪ an amendment of the Articles of Association, a legal merger or division of ING Group, and winding-up of ING Group, all subject to a proposal made by the Executive Board with approval by the Supervisory Board; ▪ the issuance of shares or rights to subscribe for shares, the restriction or exclusion of pre-emptive rights of shareholders, and delegation of these powers to the Executive Board, subject to a proposal by the Executive Board that has been approved by the Supervisory Board; ▪ the authorisation of a repurchase of outstanding shares and/or a cancellation of shares. In addition, the approval of the General Meeting is required for Executive Board decisions that would be expected to have a material effect on the identity or nature of ING Group or its enterprise.
Board Profile. Based on this profile, the Supervisory Board is responsible for selecting and nominating candidates for appointment or reappointment to the Executive Board.
CFO Koos Timmermans, in early 2018, the Supervisory Board was faced with the challenge of appointing a successor as soon as possible. For the succession of the CFO position we reviewed a number of suitable candidates from diverse backgrounds. When searching for new Executive Board members, the Supervisory Board looks broadly at diversity – considering all aspects as well as primarily looking to ensure ING has the best candidate for the job.
No member of the Executive Board has corporate directorships at listed companies outside ING.
Executive Board obtains financial products and services, other than loans, which are provided by
For an overview of loans granted to members of the Executive Board, see page 133 of the
(Born 1966, Dutch nationality, male; appointed in 2013, will step down as of 30 June 2020)
International from 2010 to 2011, and CEO of ING Belgium and Luxembourg from 2011 to 2013. Due to the resignation of the head of Market Leaders in July 2019, he took up this role on an interim basis, with responsibility for ING Bank’s operations in the Benelux. In late 2019, Pinar Abay was appointed head of Market Leaders and member of the Management Board Banking, effective from 1 January 2020. Ralph Hamers holds a Master of Science degree in Business
Chairman and CEO of the Executive Board of ING Groep N.V. and of the Management Board Banking of ING Bank N.V.
Other relevant ancillary positions Member of the Management Board of the Nederlandse Vereniging van Banken (NVB), member of the Board of Directors of the Institute of International Finance, Inc., non-executive member of the board Concertgebouw Orkest and member of UNICEF’s Global Board of the Young People’s Agenda.
(Born 1965, Thai nationality, male; appointed in 2019, term expires in 2023)
Member and CFO of the Executive Board of ING Groep N.V., member and CFO of the Management
Candidates for appointment to the Supervisory Board are subject to a suitability and reliability assessment by DNB and ECB and must continue to meet these while in function.
Board, specified in the Articles of Association, in the Charter of the Management Board and in
The Supervisory Board has drawn up a profile to be used as a basis for its composition. It is available on the website of ING Group (www.ing.com).
Former members of the Executive Board are not eligible for appointment to the position of chairman or vice-chairman of the Supervisory Board.
With respect to gender diversity, three female members currently serve on the Supervisory Board: Mariana Gheorghe, Margarete Haase and Herna verhagen, the latter appointed on 23 April 2019, with her membership becoming effective per 1 October 2019. With the appointment of Herna
Committee, the Audit Committee, the Nomination and Corporate Governance Committee and the
Separate charters have been drawn up for the Risk Committee, the Audit Committee, the
Nomination and Corporate Governance Committee and the Remuneration Committee. These charters are available on the website of ING Group (www.ing.com). A short description of the duties of the four permanent committees follows below.
(chairman), Jan Peter Balkenende, Eric Boyer de la Giroday, Mariana Gheorghe, Hermann-Josef
(Born 1951, Dutch nationality, male; appointed in 2017, term expires in 2021)
Former position: chief executive officer and member of the Executive Board of AkzoNobel N.V.
Chairman of the Supervisory Board of ING Groep N.V./ING Bank N.V. and member of the Supervisory
(Born 1952, Belgian nationality, male: appointed in 2014, term expires in 2022)
(Born 1953, Austrian nationality, female; appointed in 2017, term expires in 2021)
(Born 1956, British nationality, male; appointed in 2019, term expires in 2023)
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. (per 1 October 2019), CEO of
The Supervisory Board and Executive Board are assisted by the company secretary Cindy van
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Corporate Governance
CFO, ING evaluates the effectiveness of internal control over financial reporting, based on the criteria of the Committee of Sponsoring Organisations of the Treadway Commission (COSO) in
At the Annual General Meeting held on 11 May 2015, KPMG was appointed as the external audit firm for ING Group for the financial years 2016 through 2019. This appointment includes the responsibility to audit the financial statements of ING Group for the financial year 2019, to audit the effectiveness of internal control over financial reporting on 31 December 2019, to report on the outcome of these audits to the Executive Board and the Supervisory Board and to provide an audit opinion on the financial statements of ING Group. Additionally KPMG performs a review of the sustainability information in the annual report to obtain limited assurance and for a number of non-financial KPI’s reasonable assurance, about whether this information is free from material misstatement. As sustainability is of strategic importance to ING, the auditor is involved to provide assurance on this information.
More information on ING Group’s policy on External Auditor Independence is available on www.ing.com.
The Developments in risk and capital management chapter as part of the Report of the Executive
Board and the Risk Management section elaborate on ING’s identified financial and non-financial risks (such as credit risk, market risk, operational risk, IT risk, model risk, compliance risk, funding & liquidity risk and business risk) and how these risks are managed. These sections provide insight into the potential impact on the results of ING Groep N.V. that come forth from these identified risks. The design and functioning of the internal risk management and control systems is based on the Risk Appetite Framework and the Non-Financial Risk Framework. Both frameworks, explained in detail in the Risk Management section, combine various financial and non-financial risk disciplines into a single converged approach and provide the businesses with a overview on their risks and the way these are managed.
We are continuing our know your customer (KYC) enhancement programme, which we started in 2016, emphasising regulatory compliance as the key priority. The organisation continues to work hard on enhancing our customer due diligence files and on a number of structural solutions to bring our anti-money laundering activities to a sustainably better level.
▪ the report of the Executive Board in the ING Group Annual report 2019 provides sufficient insights into shortcomings in the effectiveness of the internal risk management and control systems; ▪ those systems provide reasonable assurance that the ING Group Annual report 2019 does not contain material inaccuracies; ▪ based on the current state of affairs, it is justified that the ING Group Annual report 2019 is prepared on a going concern basis; and
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Report of ING Continuity Foundation
Stichting Continuïteit ING (‘ING Continuity Foundation’), a foundation organised under the laws of the Netherlands, established in Amsterdam, was founded on 22 January
Continuity Foundation may again exercise its right, subject to the provisions of the preceding sentence. On acquisition of cumulative preference shares, at least 25 percent of the nominal value must be paid on said shares.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Conformity statement
International Financial Reporting Standards (IFRS) that were endorsed by the European Union.
ING’s remuneration principles are important to achieve the bank’s strategy, its purpose – to empower people to stay a step ahead in life and in business – and its risk profile. These principles apply to all employees, including members of the Executive Board (hereafter ‘EB’). They aim to maintain a balance between short-term and long-term value creation for all stakeholders while being responsible and fair. Ultimately, it’s about making sure we are able to effectively reward success and avoid rewarding for failure.
In this report we look back on the year 2019. We report on ING’s performance and how 2019 events have impacted remuneration. We outline the current Executive Board and Supervisory Board remuneration policies and share details of remuneration awarded in 2019 to the Executive Board, including variable remuneration, and to the Supervisory Board.
Thereafter, we set out the remuneration approach that applies to all employees and explain more about how total direct compensation and variable remuneration work within ING. We also explain the performance management process and its link to remuneration, and we provide more information on the measures we have in place to mitigate risk.
This 2019 remuneration report is our first under the requirements of the Dutch Act implementing the Shareholder Rights Directive II (SRD II). This report is also drafted in the spirit of the European
We did this review in 2019, in consultation with advisory bodies and a broad range of stakeholders, holding meaningful discussions to make sure our remuneration approach and subsequent proposal achieves the right balance among the various viewpoints and interests.
A long list of stakeholders participated in these discussions, including our Dutch Central Works
Council, representatives of Dutch trade unions, the Advisory Council of ING Netherlands, trade bodies and regulatory and governmental authorities such as the Dutch central bank and the
European Central Bank. A number of institutional shareholders together holding approximately 24% of ING’s share capital were also consulted, as well as proxy advisory firms and Dutch shareholder advocacy groups. A specialised market research firm elicited qualitative feedback from customers, and we asked current members of the Executive Board for their views, in line with the
A summary of the proposed policy is included on page 156. Among other things it aims to provide more clarity on the performance metrics to be used for awarding variable remuneration, how targets are set and how achievements are measured, as well as reflecting ING’s risk culture and compliance initiatives.
In February 2019, Tanate Phutrakul was appointed as ING’s chief financial officer and a member of the Management Board Banking. He was subsequently appointed to the Executive Board at the
Executive Board fully understand and share the underlying disappointment, especially regarding the shortcomings in the prevention of financial and economic crime, which was also expressed by shareholders in the many direct contacts during the year. Both boards have taken the vote as a clear signal and firm encouragement to continue with the enhancement programme announced in
September 2018 and ensure we make structural improvements to bring our gatekeeping function in the area of customer due diligence and anti-money laundering to the appropriate level.
Total direct compensation for the Executive Board is determined and reviewed periodically by the
The Supervisory Board pre-determines the performance criteria for the Executive Board each year to ensure alignment between ING's strategy and performance objectives.
Defined Contribution (CDC) pension plan with respect to their annual salary-up to €107,593 for 2019. This is similar to all employees working in the Netherlands without a supplementary pension scheme. Above this amount, members of the Executive Board are compensated for the lack of pension accrual by means of a savings allowance (see Benefits), to be annually determined, on the same terms that apply to other participants in the Dutch pension scheme.
Executive Board members are eligible for additional benefits (all within benchmarks), such as: - costs associated with the use of a company car; - contributions to company savings plans; - expatriate allowances (if applicable); - banking and insurance benefits from ING (on the same terms as for other employees of ING in the Netherlands); - tax and financial planning services to ensure compliance with the relevant legislative requirements.
In the event of an involuntary exit, Executive Board members are eligible for an exit arrangement. If termination of the contract is based on mutual agreement, the Executive Board member is also eligible for a severance payment. These arrangements are subject to specific requirements (e.g.
employees. On that basis the internal ratio in 2019 was 1:21.24The higher ratios compared to 2018, is due to fact that no variable remuneration was granted over performance year 2018.35
The table below shows the link between directors’ remuneration, company performance and the average remuneration of an ING employee. This is done by presenting the relative development of the remuneration for the Executive Board and Supervisory Board members over the last five years.
Due to the strict regulations on variable remuneration in the Netherlands (e.g. 20% bonus cap) and due to the fact that Executive Board members did not receive any variable remuneration over performance year 2018, the link between remuneration and company performance is relative.
FY 2019 FY 2019 vs FY 2018 FY 2018 vs FY 20174 FY 2017 vs FY 2016 FY 2016 vs FY 2015 FY 2015 vs FY 2014
Average fixed and annual variable remuneration 65 7% -1.1% - - 1 The remuneration of the Executive Board consist of base salary and variable remuneration (total direct compensation).
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Remuneration report 2019 Executive Board base salary
▪ Common equity Tier 1 ratio (SREP) → hurdle for variable pay
▪ Sustainability: increasing ING’s social and environmental impact through our sustainability activities 2019 Executive Board performance evaluation The table below highlights key achievements, collectively accomplished by the Executive Board in 2019 in the areas mentioned. It reflects both ING’s overall ambitions and the specific performance priorities agreed with the Supervisory Board at the beginning of 2019.
Achieved underlying result before tax of €6,834 million down 9.2% from 2018, reflecting a well-diversified loan book with resilient margins, despite margin pressure on customer deposits. The net profit is €4,781 million, up 1.7% from
Grew net core lending by €17.2 billion (+2.9%); increased customer deposits by
Customer Increased the number of primary customers by more than 830,000 to 13.3 million in 2019 (+6.7%).
▪ Further progress was made in strengthening the global KYC organisation and governance structure throughout ING.
ING keeps investing in regulatory compliance, developing promising tools to increase accuracy and efficiency in KYC operations: ▪ A virtual alert handler using artificial intelligence (AI) to sort ‘false positives’
from the alerts that need more investigation, so far reducing ‘false positives’ by half.
▪ A tool to detect instances of fraudulent transactions related to “smurfing”; the practice of breaking up transactions into smaller amounts to evade conventional rule-based monitoring systems.
Markets, Lending and Transaction Services, setting up a pan-European Daily banking Desk and by expanding our client platform InsideBusiness, which is used by more than 18,000 international clients.
New initiatives developed and aligned with partners to improve the customer experience being: ▪ ING’s partnership with AXA reached another milestone in 2019 by going live with its global platform, which will provide home, mobility and health insurance services in six markets via the mobile app. The first product
Sustainability In September ING published the first progress report on Terra, ING’s approach to steer its €600 billion lending book in line with the goals of the Paris
The disclosure addresses developments and climate alignment for the sectors: power generation, fossil fuels, automotive, shipping, aviation, steel, cement, residential mortgages and commercial real estate. These are the sectors in
Based on these achievements, the Supervisory Board has concluded that the Executive Board members did well overall to deliver these results. This was despite a challenging rate environment and increase in costs related to the KYC enhancement programme. Although the underlying result before tax and underlying return on equity decreased compared to 2018, good progress was made in the execution of the Think Forward Strategy. This is shown by the continued growth of the primary customer base and the increase in mobile interactions by retail customers. Risk costs remained below the through-the-cycle average. ING also continued executing the KYC
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Remuneration report portfolio towards the climate goals of the Paris Agreement. Overall this has resulted in a variable remuneration for the Executive Board members of between 15 and 16%.
The tables below (i.e. total direct compensation, pension costs and other emoluments) show the remuneration awarded to individual Executive Board members with respect to the performance years 2019, 2018 and 2017. The 2019 figures reflect a partial year as Executive Board members for
All remuneration of the Executive Board is paid directly by ING, in other words no payments have been made by any of our subsidiaries.
1 Pension accrual only applies to salary up to an annually set amount (i.e. €103,317 for 2017, €105,075 for 2018 and 2 Tanate Phutrakul was appointed to the Executive Board immediately following the 23 April 2018 AGM. Thus, the figures reflect a partial year as an Executive Board member.
The individual members of the Executive Board receive other emoluments, including savings allowances to compensate for the loss of pension benefits on salary above €107,593 for 2019, employer contributions to savings schemes, reimbursement of costs related to home/work commute, costs associated with a company car and for expats, the costs associated with housing and schooling.
1 The 2019 emoluments reflect the partial year as an Executive Board member for Tanate Phutrakul.
The table below contains the total remuneration of the Executive Board members over 2019.
As recognised in the profit or loss statement of 2019, the expenses for each member of the
Ralph Hamers LSPP 11 May 2016 11 May 2019 11 May 2021 28,404 5,682 10.44 0
5 Number of shares granted includes both deferred and upfront part awarded at the granting date.
▪ Manage financial and non-financial risk within Board approved risk appetite (CRO)
3 Herna Verhagen was appointed to the Supervisory Board by the 23 April 2019 AGM. Her appointment became effective as of 1 October 2019. The remuneration figures for 2019 reflect a partial year as a member of the Supervisory Board.
Compensation of former members of the Supervisory Board who are not included in the table above amounted to nil in 2019, €69,000 in 2018 and €344,000 in 2017.
The Supervisory Board members do not receive privileged financial services. On 31 December 2019, there were no loans and advances outstanding to Supervisory Board members.
ING’s remuneration principles are aligned with the business strategy and company goals.
▪ For all employees in control functions (Legal, Risk, Finance, Compliance, Audit and HR), no individual financial KPIs are allowed, unless required by local law.
ING aims to provide total direct compensation levels for expected business and individual performance which, on average, are at the median of the markets in which we operate, benchmarked against relevant peer groups. In line with the Dutch Banking Code, for the Executive
Board and the Management Board Banking we aim for a level below the median. To ensure we adhere to this policy, we regularly monitor and benchmark salary levels across ING.
Remuneration Accrual Model (VRAM) set-up and approach for determining the 2019 variable remuneration pool based on the new VRAM formally approved in 2018.
Within each of these three elements specific criteria are used to measure performance (e.g.
The proposal for the variable remuneration pool is prepared by Human Resources, Risk and Finance, and in line with the VRAM principles. The Management Board Banking then proposes the amount of the overall variable remuneration pool to the Supervisory Board, taking into account the advice of the Risk and the Remuneration committees.
The variable remuneration pool (for both individual and collective variable remuneration), encompasses all employees eligible for variable remuneration globally, including Identified Staff.
ING takes a multi-step approach to determine whether to award variable remuneration in a given performance year and the maximum amount of the pool. Within this process, a range of risk elements is assessed at various levels and, where appropriate, risk adjustments are made to the variable remuneration pools at both a group and business line level.
These are: ▪ The Common Equity Tier 1 (CET1) ratio must be at or above the threshold established by applicable regulations; ▪ The Return on Equity (RoE – IFRS-EU) is equal to or higher than the percentage determined at the beginning of each performance year by the Management Board Banking and the Supervisory
In addition, ex post risk adjustments are a key element in the process of determining both final variable remuneration pools and individual awards. Here, the chief risk officer may provide additional input at a more granular level to risk adjust (downwards) ING’s overall or business line and/or country variable remuneration pools in circumstances where a business line or a specific unit is not performing in line with desired risk parameters or based on events that have a material impact on ING’s financial results or reputation.
Additional risk requirements apply to Identified Staff who are considered risk takers in accordance with CRD IV. These risk requirements set the minimum standards to be met during the performance year. Deviation from these standards may lead to downward adjustment of the variable remuneration, a so-called risk modifier. This process is run independently by the Risk function for which the chief risk officer is ultimately responsible. The Supervisory Board, advised by its Risk
At the 2017 AGM, shareholders approved to apply an increased maximum percentage of up to 200% for employees outside the EEA for a period of five performance years, from 2017 up to and including 2021. ING uses this facility very rarely. In 2019, it was applied to no employees worldwide.
The total amount of variable remuneration awarded to all eligible employees (worldwide) for 2019 was €378 million, compared to total employee costs of €5,755 million. For 2018, the total amount was €303 million and €403 million for 2017. In comparison, the total employee costs in 2018 were €5,420 million and €5,202 million in 2017. Variable remuneration includes both individual and collective variable remuneration such as profit sharing arrangements.
In 2019, eight employees in the Corporate staff, Wholesale Banking and Retail Banking business lines - excluding members of the Management Board Banking - were awarded total annual remuneration (including employer pension contributions and severance payments made) of €1 million or more. In comparison, in 2018 seven employees were awarded total annual remuneration of €1 million or more and 14 employees in 2017.
Summary and further explanation of the proposed new remuneration policy for the Executive Board and Supervisory
SRD II, the Supervisory Board will propose a new Executive Board remuneration policy to shareholders at the 2020 AGM, where it will be subject to a binding approval vote. The full proposal will be provided to our shareholders.
ING recognises that remuneration is an area of particular interest to stakeholders including shareholders, employees and customers. The Supervisory Board actively engages with stakeholders and takes into account their views as well as ING’s need to attract, motivate and retain leaders with the ability, experience, skills, values and behaviours to meet its strategic priorities and its stakeholder interests.
The Supervisory Board notes that stakeholder views, especially on remuneration, can vary.
However, the Supervisory Board values the insight and engagement that these interactions provide, including the expression of different views. This engagement is meaningful and helpful to the
The Supervisory Board and the Remuneration Committee are responsible for reviewing the
Board remuneration policy. The amended Executive Board remuneration policy will be submitted to shareholders at the AGM for binding approval. In case of no amendments the policy will be submitted to the AGM for approval every four years.
Board remuneration policy without prejudice to the tasks of the Remuneration Committee.
Executive Board to be below the median when benchmarked against comparable positions inside and outside the financial industry, taking into account the relevant international context. In recent years stakeholders have expressed discontent with the use of the EURO STOXX 50 index, which ING
The new benchmark is more fitting to ING, incorporating relevant companies rather than an index proxy. Rules and regulations prescribe a mix of comparable relevant Dutch and relevant European financial and non-financial institutions. Given the very different pay structures in the UK and
Switzerland we have excluded those institutions from our benchmark. Smaller companies and financial institutions active only in one or two countries were also excluded as they are not comparable in terms of scope and complexity.
Western-European financial services peers, this ranges from one third up to three times the size of ING.
For this reason ING does not operate separate short- and long-term incentive plans but rather one plan that has many characteristics of a long-term incentive plan. The amount of variable remuneration awarded to the Executive Board members can range from 0% to 20% of annual base salary.
Based on compensation data for 2018, compared to the peer group, total direct compensation levels for the CEO amount to approximately 57% of the median (43% compared to the median of the EURO STOXX 50). Total direct compensation levels of the CRO and CFO amount to approximately 81% of the median (63% compared to the median of the EURO STOXX 50).
Once adopted, the new Supervisory Board remuneration policy will be effective retroactively from 1
January 2020 until the 2024 AGM at the latest. The remuneration policy is available in full on ING's corporate website In case of any differences between this summary and the published Supervisory Board remuneration policy, the latter is leading. If any changes are proposed, the revised Supervisory Board remuneration policy will be subject to AGM
views on remuneration and (iii) regulatory requirements. Following the periodic review, the
General Meeting for adoption. In the event of no amendments the policy will be submitted to the
The remuneration structure of the Supervisory Board members reflects the roles and responsibilities of individual Supervisory Board members. All fees for Supervisory Board members are paid out fully in cash. No variable remuneration is provided to ensure that the Supervisory
Board members can maintain independence. Additionally, the Supervisory Board members are not eligible for retirement benefits nor for any other benefits in relation to their position on the
Belgium: Herman van Eesbeek, Franck Goethals, Ahmed Sanhayi, Jan Claude Van den
The risk management section contains information relating to the nature and the extent of the risks of financial instruments as required by International Financial Reporting Standards (IFRS) 7
▪ The EB is responsible for managing risks associated with all activities of ING Group, whereas the
The key risk committees described below act within the overall risk policy and delegated authorities granted by the MBB: ▪ Global Credit & Trading Policy Committee (GCTP) discusses and approves policies, methodologies, and procedures related to credit, trading, country, and reputation (i.e. environmental and social risk or ESR) risks. The GCTP meets on a monthly basis. After the MBB and the GCTP, the Credit &
meets twice a week; ▪ Asset and Liability Committee Bank (ALCO Bank) discusses and steers, on a monthly basis, the overall risk profile of all ING Bank’s balance sheet and capital management risks. ALCO Bank discusses and approves policies, methodologies and procedures regarding solvency, market risk in the banking book and funding and liquidity risks; ▪ Non-Financial Risk Committee Bank (NFRC Bank) is accountable for the design and maintenance of the Non-Financial Risk Management Framework including Operational Risk Management,
▪ The Model Risk Management Committee (MoRMC) aims to align overall model strategy, model risk appetite, supporting model frameworks, policies and methodologies.
All policies, procedures and control standards are published on ING’s intranet and new and updated documents are periodically communicated by means of a policy update to all country senior managers and heads of business departments.
The MoRM department is one of the cornerstones of ING’s risk model governance. The department sets and maintains a model risk framework containing (1) the governance setting out the responsibilities; (2) the model risk appetite; (3) model risk management policies and standards; and
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 non-negotiable promises we make to the world, principles we seek to stick to, no matter what.
The ING behaviours (take it on and make it happen, help others to be successful, and always be a step ahead) represent our way to differentiate ourselves. The Orange Code is embedded in commitments we make to each other and the standards by which we will measure each other’s performance.
Risk awareness is about being alert to potential threats that can occur during day-to-day business, which can be specific to the sector, the region or the clients ING is doing business with. To support the further embedding of risk culture into business practices, ING has initiated different programmes and issued several guidelines.
To reinforce the values and behaviours in our Orange Code, which puts integrity above all, we invite all employees to participate in e-learnings that aim to equip them to make the right decisions when faced with a dilemma or issue. In 2019, we commenced the creation of new e-learnings on anticompetitive conduct, anti-bribery and corruption and data protection for launch early 2020. We also developed a global code of conduct that builds on the Orange Code and sets the standards we expect our people to uphold. This global code of conduct was launched during 1Q 2020.
In the Netherlands, employees of all financial institutions – and that includes ING – are required to take the Banker’s Oath. This requirement came into force on 1 April 2015 as part of the joint approach from all banks, known as ‘Future-oriented Banking.' The introduction of social regulations, the revision of the Dutch Banking Code, and the implementation of a Banker’s Oath (with the associated rules of conduct and disciplinary law), are a way for Dutch banks to show society what they stand for and are accountable for, as both individual banks and as a sector.
Behavioural Risk Management (BRM) is a new expertise that has been added to ING's global Risk organisation. Behavioural risk is an increasingly important risk area for ING and across the financial industry. It arises when behavioural patterns are at the root of financial and non-financial risks in the organisation.
This chart provides high level information on the risks arising from ING’s business activities: Risk cycle process
ING uses a step-by-step risk management approach to monitor, manage and mitigate its financial and non-financial risks. The approach consists of a cycle of five recurrent activities: risk identification, risk assessment, risk control, risk monitoring, and risk reporting. In short, this implies: determining what the risks are, assessing which of those risks can really do harm, taking mitigating measures to control these risks, monitoring the development of the risk to see if the measures taken are effective, and reporting the findings to management at all relevant levels to enable them to take action when needed.
Each identified risk is assessed to determine its importance. This enables ING to decide which of the identified risks need control measures and how strict or tolerant these measures should be. Known risks are re-assessed to detect any change in the risk level.
Risks can be controlled by mitigating measures that lower the likelihood the risk occurs, lower the impact when it occurs or both. The ultimate measure to lower a risk is to stop the activity or service that causes the risk (risk avoidance). Risk control and mitigation measures are defined and maintained at both the bank-wide and local level.
Management Board Banking (MBB) and senior management to form an opinion on the adequacy of internal risk management and control systems for the risks ING faces while pursuing its strategy.
Cascading is done via a number of detailed risk appetite statements which have been defined per risk type, the combination of which ensure compliance with the overarching Solvency,
▪ Scenario reporting: For each stress test, a report is prepared after each calculation which describes the results of the scenario, gives a recap of the scenario and its main assumptions and parameters. It is complemented, if needed, with an advice for management action based on the stress testing results.
(MREL) instruments are tightened and a new category of large banks with a balance sheet size greater than EUR 100 billion, is introduced.
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.
In order to make capital levels more comparable and to reduce variability in banks’ internal models, the European Central Bank (ECB) introduced the Targeted Review of Internal Models (TRIM) in June 2017 to assess the reliability and comparability between banks’ models. The TRIM aims to create a level playing field by harmonising the regulatory guidance around internal models with the ultimate goal to restore trust in European banks’ use of internal models.
During 2019, several changes were made to our top and emerging risks. The top risks in 2019 are related to financial crime, cybercrime and persistent low interest rates in Eurozone. Also, climate change risk remains an emerging risk, reflecting the impact a deterioration of the climate may have for the financial position and/or reputation of ING.
The economic activity was marked in 2019 by a slowdown in global growth led by prolonged uncertainty on Brexit, effects of US-China trade tensions and reduced US fiscal stimulus. The decision of the United Kingdom to leave the European Union (‘Brexit’) remains a major political and economic event that continues to affect sentiment. Despite negotiating a revised deal in October 2019, the vote in the UK parliament did not go ahead. The UK parliament chose to postpone the vote on the deal until legislation needed to turn the withdrawal agreement into UK law was completed. ING continued to take steps throughout the year to prepare for various options.
The coronavirus, COVID-19, is recently dominating global news. As the coronavirus outbreak spreads rapidly, 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.
Knowing who we do business with helps us to protect our customers, society and our bank from financial economic crimes (FEC). We believe that as gatekeepers to the financial system we have an obligation to prevent criminals from misusing it or detect and respond when it is being misused. We believe we can be even more effective in safeguarding the financial system if we join forces and work with other banks and with national, European and global authorities and law enforcement agencies to tackle financial economic crime.
Risk management also depends on models more and more as banking has become a digital business in a volatile, uncertain, complex and ambiguous world with constantly changing customer needs, more demanding regulatory expectations, increasing dependency on the use of models and the need to adapt and react quickly.
The urgency around climate change is escalating and climate-related risk tops the World Economic
Terra, our pathway towards climate alignment in the sectors most responsible for climate change.
(TCFD) and we continue to work on the challenging exercise of translating potential climate risks and transition risks into financial risk for ING.
Disclosures (TCFD) recommendations. This voluntary disclosure outlines the progress made to date.
Force on Climate-related Financial Disclosures (June 2017)’. We conducted an Energy Transition assessment for particularly sensitive sectors within the Transportation, Industrials, Power and Real
We have set climate-related targets in our lending portfolio. This includes exiting coal by 2025 and steering our €600 billion portfolio towards meeting the Paris Agreement’s well-below two degree goal (Terra Approach). Under Terra, we need to set one target per sector for each of the nine sectors. As of year-end 2019, we had developed an approach and target for five sectors. For details refer to our 2019 Terra Progress Report. For our approach to setting opportunity-related metrics and targets please refer to Climate Finance.
Credit risk is a Tier 1 level risk function within ING and is part of the second line of defence. It is managed by regional and/or business unit CROs. The CRO Wholesale Banking (WB), CRO Challengers
▪ Providing consistent credit risk policies, systems and tools to manage the credit lifecycle of all activities.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Credit risk capital consumption for credit risk. It is used as a reference amount in the credit approval process.
Chemicals, health & pharmaceuticals 2.0% ● ● ● ● ● ● ●
Banking (WB) segment. WB is therefore the initial focus of our assessments and where we promote active ESR dialogue. We have been working with wholesale clients for more than 15 years to support them in understanding and managing their environmental and social impact. A simplified version of the ESR policy framework, following the same rationale and principles, applies to ING’s retail activities for mid-corporates and small medium enterprises.
The renewed ESR Framework went live in July 2019. In this review, building on internal and external stakeholder input, we improved our structure and aimed to provide more clarity on the scope and governance of ESR. The Framework now includes standalone policies on human rights and climate change and an infrastructure policy. This reflects external developments, societal expectations and our ambitions for these topics and sustainability in general.
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 and social challenges we face: ▪ ING and the Equator Principles (EPs): The EPs, an environmental and social risk management framework adopted by over 100 banks globally, were updated in 2019. The new version (EP4), has increased the scope to capture more project-related transactions. It contains new commitments on human rights, climate change, Indigenous people and biodiversity. ING, an active EP Association member, co-led the coordination of the EP4 update process. ING is a member of several working groups, including those on social risks, climate change and scope. ING
▪ Dutch Banking Sector Agreement: We continued our engagement in Dutch multi-stakeholder platforms to implement the Dutch Banking Sector Agreement on International Responsible
(export credit agencies, EP financial institutions, commercial banks, development institutions, etc.) organised by the OECD in Paris, enhancing knowledge sharing and collaboration.
By taking part in the above-mentioned initiatives, we aim to contribute our viewpoint and those of our clients, employees and other stakeholders to help shape a consensus and develop clear guidelines that can serve as a standard for our industry.
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.
plus regulatory-based add-on. For internal capital purposes, ING uses a combination of a MtM plus model add-on approach and a scenario simulation approach.
Method (IMM) under Pillar1. Under Pillar 2 however, for FX and interest rate derivatives, ING uses a risk sensitive approach based on Monte Carlo simulations.
exposures which arise from trading activities, including derivatives, repurchase transactions and securities lending/borrowing transactions. This is also commonly referred to as counterparty credit risk.
The prior period outstandings have been updated to improve consistency and comparability to the current year presentation. This is applicable to all following tables in the sections credit risks portfolio, credit risk mitigation and credit quality that include outstandings with prior period comparatives.
In Retail Challengers & Growth Markets, the increase in AAA-rating was explained by increased reserve deposit to Deutsche Bundesbank. Volume growth in AA and A-rated residential mortgages was visible in Australia, Germany, Poland and Spain. This positive effect on the rating composition of C&G was slightly off-set by an increase in B rating related to lower ratings of Turkey’s midcorporate segment.
In Retail Benelux the slight increase in Belgium and Luxemburg was largely off-set by the overall reduction in Dutch mortgages due to a trend of early pre-payments and the transfer from
Within Wholesale Banking, the sector development in Central Governments and Central Banks is consistent with the aforementioned development in the AAA-rating category. Exposure towards
UK, Republic of Korea and Spain. Outstanding to Non-Bank FIs increased, most notably in funds & fund management sub-industry in Western Europe.
The most noticeable outstanding trends in the Netherlands were the previously mentioned reduction in regulatory reserves with the central bank. The lower volumes of residential mortgage loans were almost completely off-set by a growth in term loans granted to SMEs. For Belgium the overall exposure remained fairly stable as the reduction in the central bank deposit was off-set by increased exposures to Non-Bank FIs and growth in term loans to mid-corporates. Outstanding in
Over the year, the collateralisation level of the total portfolio remained stable. Excluding the presettlement portfolio, 53.5% of ING Group’s outstandings were fully collateralised in 2019 (2018: 52.9%). Since investments traditionally do not require covers, the percentage for ‘no covers’ in this portfolio is close to 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.
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 WOZ (fiscal market value, determined by government authorities) or an automated model valuation (the Calcasa ING Valuation) are permitted. In most cases, a valuation is performed by certified valuers that are registered at one of the organisations accepted by ING. In addition, the valuer must be a member of the NVM (Nederlandse Vereniging van Makelaars – Dutch Association of Real Estate Agents), VBO (Vereniging Bemiddeling Onroerend Goed – Association of Real Estate
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. 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,
▪ Restructuring: A client is classified in Restructuring when there are concerns about the client’s financial stability, credit worthiness, and/or ability to repay, but where the situation does not require the recall or acceleration of facilities or the liquidation of collateral. ING’s actions aim to maintain the going concern status of the client by: ▪ Restoring the client’s financial stability; ▪ Supporting the client’s turnaround; ▪ Restoring the balance between debt and equity; and
relationship or even to enter into bankruptcy. ING will prefer an amicable exit, but will enforce and liquidate the collateral or claim under the guarantees if deemed necessary.
Aging analysis (past due but performing): Business lending by geographic area, outstandings
2 Economic sectors not specified in above overview are grouped in Other.
Forbearance may enable clients experiencing financial difficulties to continue repaying their debt.
Non-Investment grade 1 Compared to the credit risk portfolio, the differences are mainly undrawn committed amounts (EUR 115 billion) not included in Credit outstandings and non-IFRS 9 eligible assets (EUR 100 billion, mainly guarantees, letters of credit and pre-settlement exposures)
4 The table is generated in 2019 for the first time, no comparable schedule for 2018 available.
Transfer into lifetime ECL not credit impaired (Stage 2) -21,577 -73 22,382 474 -805 -81 320
The net remeasurement line represents the changes in provisions for facilities that remain in the same stage.
Transfer into lifetime ECL credit impaired (Stage 3) -7 -86 707 615
The following table provides the following information: - Information on 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 (i.e. stage 2).
Gross carrying amount at 31 December of financial assets for which loss allowance has changed to 12-month measurement during the period 689 908
As a baseline for IFRS 9, ING Group uses the consensus outlook for economic variables. The Oxford
The alternative scenarios are technically based on the forecast errors of the OEGEM. 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, Oxford Economics runs a survey with respondents from around the world and across a broad range of industries. In this survey the respondents put forward their views of key risks.
The approach consists of a cycle of five recurring activities: risk identification, risk assessment, risk control, risk monitoring and risk reporting.
▪ Market risk management results and findings are reported to the necessary governing departments and approval bodies.
A governance framework has been established defining specific roles and responsibilities of business management units, market risk management units, and internal approval bodies per activity.
Financial Markets trading books. FR and FI-FM Risk are responsible for determining adequate policies and procedures for actively managing market risk in the banking and trading books and for monitoring ING’s compliance with these guidelines.
Limit excesses are reported to senior management on a timely basis and the business is required to
Several committees govern communication between the parties involved in market risk management. These committees have a functional reporting line to ALCO Bank, which derives its global discretion from the ING Group Decision Structure and as such is the highest level ING Bank body with the exception of the Management Board Banking (MBB). The Market Risk Model
The management of interest rate risk follows the Interest Rate Risk in the Banking Book (IRRBB)
▪ Savings and demand deposits are generally invested with the goal to hedge their value and minimize the sensitivity of the margin to market interest rates. Interest rate risk can arise when there is a lag between savings rate adjustments and the adjustments experienced through market rates or when market rate changes cannot be passed on to clients. Interest rate risk is modelled based on the stability of the deposit and the pass through rate. This takes into account different elements, such as pricing strategies, volume developments and the level and shape of the yield curve. Savings volumes are typically assumed not to be sensitive to interest rate shocks; ▪ Interest rate risk for mortgages arises through prepayment behaviour. In modelling this risk, interest rate dependent pre-payments are considered. Next to the dependence on interest rates, modelled prepayment may include other effects such as loan to value, seasonality and the reset date of the loan. In addition, the interest sensitivity of embedded offered rate options is considered; and
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 for example for the pass through rate and customer behaviour are determined based on historical data and expert opinion. Models are back tested and updated when deemed necessary. Model parameters and the resulting risk measures are approved by (local) ALCO.
Group Treasury manages the strategic interest rate position including capital investments. The main objective is to maximise the economic value of the book and to generate adequate and stable annual earnings within the risk appetite boundaries set by ALCO Bank.
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
+/-100bps) is primarily caused by the convexity risk in the mortgage and savings portfolio due to the embedded options and pricing constraints.
The full value impact cannot be directly linked to the financial position or profit or loss account, as fair value movements in banking books are not necessarily reported through the profit or loss account or through Other Comprehensive Income (OCI). The value mutations are expected to materialise over time in the profit and loss account if interest rates develop according to forward rates throughout the remaining maturity of the portfolio.
The asymmetry between the NPV-at-Risk for a downward and an upward shock scenario is primarily caused by the convexity risk, which arises from (embedded) optionality in the savings and mortgage portfolio.
IBORs in the years to come, where we take 2022 as the potential first date that this could materialise. Due to the many uncertainties the overall IBOR transition still faces, at this stage the potential impact of this major event on ING’s credit risk profile, business model and funding profiles is not entirely clear. We would like to underline however that ING is aware of the significant impact of this transition and is therefore putting all efforts into making sure that it is properly prepared for this transition in a timely manner. For this purpose, ING has established a global program across all areas of the bank to coordinate ING’s transition activities and to assess the potential risks and impacts of any transition. It is a multi-year global program that encompasses various workstreams and departments including the client facing teams, Legal, Finance, Operations and IT.
Given that IBOR reform may have various accounting implications, the International Accounting
Standards Board (IASB) has commenced a two phase project. Phase 1 addresses those issues that affect financial reporting before the replacement of an existing benchmark and Phase 2 focuses on issues that may affect financial reporting when the existing benchmark rate is reformed or replaced. In 2019, ING early adopted the amendments to IFRS issued by the IASB as part of Phase 1
ING’s strategy is to keep the target CET1 ratio within a certain range when FX rates fluctuate, whilst limiting the volatility in the profit and loss account. Therefore, hedge accounting is applied to the largest extent possible. Taking this into account, the CET1 ratio hedge can be achieved by deliberately taking foreign currency positions equal to certain target positions, such that the target
Equity price risk arises from the possibility that an equity security’s price will fluctuate, affecting the value 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 1,790 million (2018: EUR 1,203 million) and equity securities held at fair value through other comprehensive income (FVOCI) of EUR
Investments in associates and joint ventures are measured in accordance with the equity method of accounting and the balance sheet value is therefore not directly linked to equity security prices.
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 2019, ING continued its strategy of undertaking trading activities to develop its client-driven franchise and deliver a differentiating experience by offering multiple market and trading products.
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
Backtesting is a technique for the ongoing monitoring of the plausibility of the HVaR model in use.
model is used for all legal entities within ING with market risk exposure in the trading portfolio.
ING’s Event Risk policy is based on a large set of possible stress scenarios per risk type. In stress scenarios, shocks are applied to prices (credit spreads, interest rates, equity, commodities, and fx rates) 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 example, for equity products 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.
Average 1D/10D HVaR, 10D SVaR and IRC over 2019 are in line with the average over 2018. The average for foreign exchange decreased compared to 2018 while credit spread increased compared to 2018, both driven by portfolio changes. The VaR at the period end of 2019 and 2018 was EUR 13 million, however the asset class decomposition changed significantly. The risk moved from foreign exchange and equity and commodity towards interest rate asset class.
Approach with fixed risk weights. ING does not have a correlation trading portfolio or any other securitisations in the trading book.
Comprehensive Risk Measure – CRM (higher of values a, b and c)
The following tables show the five largest trading positions in terms of sensitivities to foreign exchange, interest rate and credit spread risk factor movements. These largest exposures also reflect concentrations of risk in FX risk per currency, IR risk per currency, and Credit Spread risk per country and rating and sector. Due to the nature of the trading portfolios, positions in the portfolios can change significantly from day to day, and sensitivities of the portfolios can change daily accordingly.
Not rated – – 1 1 Credit Spread Sensitivity (CS01) measures the impact on value of a 1 basis point increase in credit spreads.
ING’s policies, standards and guidelines on F&L risk management as well as for setting the F&L risk appetite. Furthermore, the Financial Risk function measures funding & 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 and regulatory reporting related to funding and liquidity risk management.
ING’s funding consists mainly of retail and corporate deposits contributing 51% and 21% of the total funding respectively. These funding sources provide a relatively stable funding base. The remainder of the required funding is attracted primarily through a combination of long-term and short-term professional funding. Group Treasury manages the professional funding in line with the
F&L risk appetite to ensure a sufficiently diversified and stable funding base.
▪ Regulatory requirements: e.g. understanding the changing regulatory landscape as well as the impact of ING’s actions on existing regulatory boundaries.
The stress testing framework considers idiosyncratic, market-wide and combined (idiosyncratic and market-wide) stress scenarios. Moreover, it differentiates between stress events that develop in a gradual and in a fast manner. The generic design of the framework, which is based on empirical evidence supplemented by expert judgment, can easily be applied to a specific scenario. For example, it can be used as input for firm-wide stress testing and reverse stress testing.
In line with ECB regulation, ING’s liquidity position is stress tested on a monthly basis using particular scenarios that form part of the F&L risk appetite statement. In addition, the results of all
Non-financial risk 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 Non-Financial Risk (NFR)
Services & Digitalisation Unit report to the global head of NFR, who directly reports to the bank
continues to strengthen its global cybercrime and fraud resilience through extensive collaboration with financial industry peers, law enforcement authorities, government (e.g. National Cybersecurity
Dealing with current and emerging fraud threats effectively requires continuous improvement of fraud management capabilities such as real-time transaction and response capabilities and better alignment and standardisation of cross border fraud management across ING and related platforms as well as exchanging data cross border. With legislation such as EBA PSD2 and the continuing emphasis on duty of care, financial institutions are becoming more and more responsible for losses incurred by clients, and taking on more of the burden of reclaiming those losses.
Management (‘ERM’) Framework gatekeeper for policy design. ERM is designed to be an overarching risk management framework (RMF) pulling together common design principles and roles & responsibilities for all risk types (Financial, Non-financial, and Strategic). The purpose and benefits of the ERM Framework facilitates clear and easy communication and improving the visible and transparent link to ING’s Strategy, business activities and processes. The ERM Framework is being implemented to ensure standardisation of all risk frameworks and, once finalised, it will apply to all businesses lines and entities on global and local level.
UAM is one of the focus areas of ING and an important element in our control framework to mitigate the risk of unauthorized and / or inappropriate access to systems, processes and the data and information contained therein. Consequently, the UAM processes, controls and practices are periodically reviewed, tested, adapted and improved by a dedicated UAM team to address ongoing developments in and outside ING. In 2019, ING continued to mature, with attention to
In January 2013 the Basel Committee on Banking Supervision published the principles for effective risk data aggregation and risk reporting (BCBS 239), which is adopted by the ECB and became effective for all G-Sib’s as of January 2016. ING initiated a central program which is continued in 2019 to improve the risk data aggregation and reporting capabilities.
CCO is a permanent participant of the Risk Committee of the Supervisory Board. The CCO regularly meets the chairman of the Risk Committee of the SB.
Controls aiming to mitigate the compliance risks associated with the above-mentioned risk areas are designed and applied to the day-to-day processes in the bank. The effectiveness of the controls is tested and monitored periodically, and senior management is responsible for ensuring that processes are compliant with applicable laws and regulations, ING’s internal policies, and the
Brigitte Unger, University of Utrecht, found almost €13 billion worth of criminal money is laundered in the Netherlands each year – around 1.6 percent of the GDP. However, money laundering is not contained within a single country or jurisdiction, it is a global challenge that impacts the entire financial system. ING, like all other participants in the financial services industry, has an important role to play in helping to combat financial economic crime. We contribute knowledge and capacity to various public-private partnerships fighting financial crime. We believe we can be even more effective in safeguarding the financial system if we join forces and work with other banks and with national and European authorities and law enforcement to identify and manage the financial economic crime risks better, taking all relevant laws and regulations into account. Improving the way we manage compliance risk, especially when it comes to preventing criminals from misusing the financial system, is a key priority for ING.
entities also includes local procedures aimed at enabling them to comply with local laws and regulations and the KYC Policy Framework. Where local laws and regulations are more stringent, these more stringent local laws and regulations are applied.
ING continues to believe that for business reasons doing business involving certain specified countries should be discontinued. In that respect, ING has a policy not to enter into new relationships with clients from these countries and processes remain in place to discontinue existing relationships involving these countries. At present these countries are Cuba, Iran, North
▪ Assessing selected past transactions and follows the applicable reporting process should any unusual transactions be identified.
▪ The global KYC policy may be stricter than local requirements, in which case the global risk appetite statement is used as the starting point to execute a uniform risk assessment and to determine the local KYC-related risk appetite.
▪ As part of our due diligence process we updated the environmental and social risk (ESR)
▪ Tooling: This pillar aims to improve processes and tooling around customer due diligence, screening and monitoring. This entails rolling out a bank-wide KYC digital service and fulfilling client acceptance and maintenance life cycle on one global digital platform. In addition, all required screening components (name screening, pre-transaction screening, adverse media screening) are incorporated into the client acceptance due diligence process. Once a customer is onboarded, ongoing screening and monitoring of transactions can then be activated. Steps taken in 2019 included: ▪ Developed new customer due diligence case management modules for Private Banking clients in Luxembourg, and mid-corporates in Poland, which is to be rolled out in other countries with similar client segments.
ING’s correspondent banking clients. Developed by ING, the tool uses advanced analytics to detect changes in behaviour that could indicate money laundering or other financial
▪ Client Integrity Risk Committees (CIRCs) were set up in the retail business lines and Wholesale
Banking to steer decisions around client acceptance and exits, based on compliance criteria and risk appetite. The committee members represent both the first and second lines of defence to ensure proper decision-making is adhered to.
Regulation is becoming more extensive and complex. An example is the implementation of DAC6 which like FATCA and CRS requires financial institutions to report detailed client-related information to the competent authorities. Customer due diligence (CDD), (sanctions) screening and transaction monitoring impose requirements on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report to the competent authorities on e.g. money laundering and terrorist financing.
The increasing regulatory scrutiny drives the need to continuous change in the various processes, procedures and IT systems. In some situations the applicable laws and regulations, at local and/or at global level, seem to be conflicting with each other, which imposes a significant challenge on banks as part of the implementation of requirements. In addition, the timeline for implementation of those new/changed requirements is sometimes very short, which is challenging in general, yet especially in IT development. Obviously ING will continuously work on embedding the processes and procedures reflecting the applicable requirements in our IT systems and data sources, driving a business environment which is compliant by desire and design, and will execute ongoing training and awareness to develop its people to have the right knowledge and skills.
ING expects to revise the KYC policy framework to reflect the requirements of the 5th AML Directive.
Similarly, the Organisation for Economic Cooperation and Development (‘OECD’) has developed a
mandatory for all its member states. The first information exchange by the Netherlands (as for approximately half of the signatory countries) was executed in 2017. Most other signatory countries commenced their information exchange in 2018 and some in 2019.
▪ The 3rd LoD is the internal audit, reviewing the quality of execution in all lines of defence and providing independent assurance.
Model management is executed through the model life cycle with two types of components, which are (i) the stages that each individual model goes through, from initiation to final decommissioning and (ii) the overarching components to manage ING’s model risk of all models: continuous model inventory and reporting.
The next figure provides a schematic overview of the model lifecycle, where orange represents the 1st model LoD, blue the 2nd and grey the 3rd. It is composed of a set of processes starting after a model is identified. The objectives of the different processes are outlined below.
During the implementation stage, the model is realised, tested and made available in a production environment.
Continuous model inventory and reporting: Keeping an inventory of all models and their status during their lifecycle is a continuous process. It supports management and control of the models in scope, both per individual model and the overarching management of all ING’s models. Periodic model risk reporting provides the relevant internal and external stakeholders with an overview of the models in use and the associated model risk given the defined model risk appetite.
Expense risk only concerns non-financial expenses (e.g. staff and IT expenses); financial expenses are not in scope.
Deviations from this ambition are monitored as part of the financial projections that are discussed continuously within different parts of the organisation.
General information 448 file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx file:///C:/Users/XF47KN/AppData/Local/Temp/CDM/444CCAC53D430BC7D858D1347D52FE5E57AF471EBD0BBA2A6310E07C48C95E2B/pnr1fr5y.docx
– Designated as at fair value through profit or loss 3,076 2,887 – Designated as at fair value through profit or loss 47,684 59,179
Investments in associates and joint ventures 8 1,790 1,203 Debt securities in issue 18 118,528 119,751
Valuation results and net trading income 23 754 1,124 628 1 The amounts for the period ended 31 December 2019 and 2018 have been prepared in accordance with IFRS 9. The adoption of IFRS 9 led to new presentation requirements. 2017 period amounts have not been restated.
Share of result from associates and joint ventures 8 48 143 178
References relate to the accompanying notes. These are an integral part of the Consolidated financial statements.
Items that will not be reclassified to the statement of profit or loss: Realised and unrealised revaluations property in own use 58 1 26
Change in fair value of own credit risk of financial liabilities at FVPL –116 199 n/a
Items that may subsequently be reclassified to the statement of profit or loss: Unrealised revaluations AFS investments and other revaluations n/a n/a –283
Realised gains/losses on AFS investments reclassified to the statement of profit or loss n/a n/a –92
Total amount recognised directly in other comprehensive income net of tax 223 418 641 44 685
Realised gains/losses on debt instruments at fair value through other comprehensive income reclassified to the statement of profit or loss –54 –54 –2 –56
Total amount recognised directly in other comprehensive income net of tax –287 –211 –498 24 –474
Unrealised revaluations available-for sale investments and other revaluations –293 –293 10 –283
Net cash flow from/(used in) operating activities 13,055 6,915 –5,253 Proceeds from debt securities 90,793 152,543 95,458
– Other investments –395 –258 –264 Net cash flow 6,406 28,349 2,553
Cash and cash equivalents at end of year 33 54,031 47,529 18,977 1 The amounts for the period ended 31 December 2019 and 2018 have been prepared in accordance with IFRS 9. The adoption of IFRS 9 led to new presentation requirements. 2017 period amounts have not been restated.
2 Includes dividends received as recognized within Investment Income, from equity securities included in the Financial assets at fair value through profit or loss, Financial assets at fair value through OCI, and from Investments in associates and joint ventures. Dividend paid and received from trading positions have been included.
IFRS as adopted by the EU are IFRS Standards and IFRS Interpretations as issued by the
ING Group changed its accounting policies in 2019 as a result of adopting IFRS 16 ‘Leases’.
The impact of the adoption of IFRS 16 is disclosed in paragraph 1.4.3 ‘Changes to accounting policies in 2019’ of Note 1.
Group’s accounting policies, ING Group’s results or financial position: ▪ Annual Improvements to IFRS Standards 2015-2017 Cycle: Amendments to IFRS 3 ‘Business
Apart from the amendments to IAS 39 and IFRS 7 in relation to Interest Rate Benchmark Reform,
The following published amendments are not mandatory for 2019 and have not been early adopted by ING Group. ING Group is still currently assessing the detailed impact of these amendments, however the implementation of these amendments is expected to have no significant impact on ING Group’s Consolidated financial statements.
▪ Amendments to References to the Conceptual Framework in IFRS Standards (issued on 29 March 2018)*.
Effective in 2022 (not yet endorsed by the EU): ▪ Amendments to IAS 1 ‘Presentation of Financial Statements’: Classification of Liabilities as
On transition to IFRS 16, ING Group recognised lease liabilities of EUR 1,301 million and right-of-use assets of EUR 1,279 million equal to the lease liability adjusted for any previously recognised prepaid or accrued lease payments on that lease.
The weighted average incremental borrowing rate applied to lease liabilities recognised in the statement of financial position at the date of initial application is 2.47%.
January 2019 as short-term leases; ▪ The exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application; and
▪ The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
Subsequently, the right-of-use asset will amortise using a straight-line method to the income statement over the life of the lease. The lease liability will subsequently increase for the accrual of interest and decrease when payments are made. Any remeasurement of the lease liability due to a lease modification or other reassessment result in a corresponding adjustment to the carrying amount of the right-of-use asset.
Leases entered into by ING Group as a lessee were primarily operating leases. The total payments under operating leases were recognised in the statement of profit or loss on a straight-line basis over the period of the lease.
The preparation of the consolidated financial statements requires management to make judgements in the process of applying its accounting policies and to use estimates and assumptions. The estimates and assumptions affect the reported amounts of the assets and liabilities and the amounts of the contingent assets and contingent liabilities at the balance sheet date, as well as reported income and expenses for the year. The actual outcome may differ from these estimates. The process of setting assumptions is subject to internal control procedures and approvals.
ING Group has identified areas that require management to make significant judgements and use critical accounting estimates and assumptions based on the information and financial data that may change in future periods. These areas are: ▪ The determination of the fair values of financial assets and liabilities; ▪ Loan loss provisions; and
For further discussion of the significant judgements and critical accounting estimates and assumptions in these areas, reference is made to the relevant parts in paragraph 1.6 ‘Financial instruments’, 1.17 ‘Provisions, contingent liabilities and contingent assets’ of Note 1 and the applicable notes to the Consolidated financial statements.
Financial assets are recognised in the balance sheet when ING becomes a party to the contractual provisions of the instrument. For a regular way purchase or sale of a financial asset, trade date and settlement date accounting is applied depending on the classification of the financial asset.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where ING Group has transferred substantially all risks and rewards of ownership. If
Business models are classified as Hold to Collect (HtC), Hold to Collect and Sell (HtC&S) or Other depending on how a portfolio of financial instruments as a whole is managed. ING Group’s business models are based on the existing management structure of the bank, and refined based on an analysis of how businesses are evaluated and reported, how their specific business risks are managed and on historic and expected future sales. Sales are permissible in a HtC business model when these are due to an increase in credit risk, take place close to the maturity date (where the proceeds from the sales approximate the collection of the remaining contractual cash flows), are insignificant in value (both individually and in aggregate) or are infrequent.
In addition, interest can include a profit margin that is consistent with a basic lending arrangement.
▪ features that modify consideration of the time value of money. These are contracts with for example an interest rate which is reset every month to a one-year rate. ING Group performs either a qualitative or quantitative benchmark test on a financial asset with a modified time value of money element. A qualitative test is performed when it is clear with little or no analysis whether the contractual cash flows solely represent SPPI.
Other remaining equity investments are measured at FVPL. All changes in the fair value are recognised in Valuation result and Net trading income in the Consolidated statement of profit or loss.
Financial liabilities are classified and subsequently measured at AC, except for financial guarantee contracts, derivatives and liabilities designated at FVPL. Financial liabilities classified and measured at FVPL are presented as follows: ▪ the amount of change in the fair value that is attributable to changes in own credit risk of the liability designated at FVPL is presented in OCI. Upon derecognition this Debit Valuation
A financial guarantee contract is a contract that requires ING Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Such a contract is
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It assumes that market participants would use and take into account the characteristics of the asset or liability when pricing the asset or liability. Fair values of financial assets and liabilities are based on unadjusted quoted market prices where available. Such quoted market prices are primarily obtained from exchange prices for listed financial instruments. Where an exchange price is not available, quoted prices in an active market may be obtained from independent market vendors, brokers, or market makers. In general, positions are valued at the bid price for a long position and at the offer price for a short position or are valued at the price within the bid-offer spread that is most representative of fair value in the circumstances. In some cases where positions are marked at mid-market prices, a fair value adjustment is calculated.
To include credit risk in fair value, ING applies both Credit and Debit Valuation Adjustments (CVA,
‘Risk management’ section of the Annual Report for the basis of the determination of the fair value of financial instruments and related sensitivities.
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently measured at fair value. Fair values are obtained from quoted market prices in active markets, including market transactions and valuation techniques (such as discounted cash flow models and option pricing models), as appropriate. All derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Fair value movements on derivatives are presented in profit or loss in Valuation result and net trading income, except for derivatives in either a formal hedge relationship and so-called economic hedges that are not in a formal hedge accounting relationship where a component is presented separately in interest result in line with ING’s risk management strategy.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in the statement of profit or loss, together with fair value adjustments to the hedged item attributable to the hedged risk. If the hedge relationship no longer meets the criteria for hedge accounting, the cumulative adjustment of the hedged item is, in the case of interest bearing instruments, amortised through the statement of profit or loss over the remaining term of the original hedge or recognised directly when the hedged item is derecognised. For non-interest bearing instruments, the cumulative adjustment of the hedged item is recognised in the statement of profit or loss only when the hedged item is derecognised.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in the Other Comprehensive Income. The gain or loss relating to the ineffective portion is recognised immediately in the statement of profit or loss. Amounts accumulated in the Other Comprehensive Income are recycled to the statement of profit or loss in the periods in which the hedged item affects net result. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in the Other Comprehensive Income at that time remains in the Other Comprehensive
When determining whether a forecast transaction is highly probable, it is assumed that the interest rate benchmark on which the hedged cash flows are based is not altered as a result of the reform.
▪ Designation of a component of an item as a hedged item
by considering on a discounted basis the cash shortfalls it would incur in various default scenarios for prescribed future periods and multiplying the shortfalls by the probability of each scenario occurring. The LLP is the sum of these probability-weighted outcomes and the ECL estimates are unbiased and include supportable information about past events, current conditions, and forecasts of future economic conditions. ING Group’s approach leverages the existing regulatory capital models that use the Advanced Internal Ratings Based (AIRB) models for regulatory purposes.
Financial assets are classified in any of the below 3 Stages at each reporting date. A financial asset can move between Stages during its lifetime. The Stages are based on changes in credit quality since initial recognition and defined as follows: ▪ Stage 1: 12 month ECL
Financial assets showing a significant increase in credit risk since initial recognition. A provision is made for the life time ECL representing losses over the life of the financial instrument (lifetime
ING Group established a framework, incorporating quantitative and qualitative indicators, to identify and assess significant increases in credit risk (SICR). This is used to determine the appropriate ECL Staging for each financial asset.
PD x EAD x LGD, adjusted for the time value of money. Assets that are collectively assessed are grouped on the basis of similar credit risk characteristics, taking into account loan type, industry, geographic location, collateral type, past due status and other relevant factors. These characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated.
If there is no reasonable expectation of recovery and/or collectability of amounts due a write-off can occur. The following events can lead to a write-off: ▪ After a restructuring has been completed and there is a high improbability of recovery of part of the remaining loan exposure (including partial debt forgiveness); ▪ In a bankruptcy liquidation scenario; ▪ After divestment or sale of a credit facility at a discount; ▪ Upon conversion of a credit facility into equity; or
When a loan is uncollectable, it is written off against the related loan loss provision. Subsequent recoveries of amounts previously written off are recognised in the statement of profit or loss.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Basis of preparation and accounting policies > 1 assumptions is assessed in the credit risk section of the ‘Risk Management’ section in the Annual
section of the Annual Report, where the un-weighted ECL under each of the three scenarios for some significant portfolios is disclosed.
The significant judgements are: The criteria for identifying a significant increase in credit risk. When determining whether the credit risk on a financial asset has increased significantly, ING Group considers reasonable and supportable information available to compare the risk of default occurring at reporting date with the risk of a default occurring at initial recognition of the financial asset. Whilst judgement is required in applying each financial asset with a PD rating, there is significant judgement used in determining the stage allocation PD banding thresholds. The process of comparing a financial asset’s PD with the PD banding thresholds determines its ECL stage. Assets in Stage 1 are allocated a 12 month ECL, and those in Stage 2 are allocated a lifetime ECL, and the difference is often significant. As such, the judgement made both in assigning financial asset PDs and in setting PD
Financial assets and liabilities designated at fair value through profit or loss
Unrealised gains and losses arising from changes in the fair value are recognised in equity and are recycled to the statement of profit or loss as Investment income when the asset is disposed.
Impairments of financial assets at amortised cost (loan loss provisions) (IAS 39)
ING Group assesses periodically and at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, but before the balance sheet date, (a loss event) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The following circumstances, among others, are considered objective evidence that a financial asset or group of assets is impaired: ▪ The borrower has sought or has been placed in bankruptcy or similar protection and this leads to the avoidance of or delays in repayment of the financial asset;
▪ Power over more than half of the voting rights through an agreement with other investors.
A list of principal subsidiaries is included in Note 48 ‘Principal subsidiaries’.
Group companies are subject to restrictions on the amount of funds they may transfer in the form of dividends, or otherwise, to the parent company.
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The Consolidated financial statements are presented in euros, which is Group’s presentation currency.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Basis of preparation and accounting policies > 1 statement of profit or loss as incurred. Expenditure incurred on major improvements is capitalised and depreciated.
These groups of CGUs represent the lowest level at which goodwill is monitored for internal management purposes. Goodwill is tested for impairment by comparing the carrying value of the group of CGUs to the recoverable amount of that group of CGUs. The carrying value is determined as the IFRS net asset value including goodwill. In compliance with IAS 36 ‘Impairment of assets’, the carrying value is determined on a basis that is consistent with the way in which the recoverable amount of the CGU is determined. When the carrying values need to be allocated between Retail and Wholesale, solvency (risk-weighted assets) are used as a basis. The recoverable amount is
Critical accounting estimates and assumptions for the reorganisation provision are in estimating the amounts and timing of cash flows as the announced transformation initiatives are implemented over a period of several years. Reference is made to Note 16 ‘Provisions’.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Basis of preparation and accounting policies > 1 assumptions could have a significant impact on the defined benefit plan obligation and future pension costs.
The recognition of a net defined benefit asset in the Consolidated statement of financial position is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
using effective interest rate method’. Interest result on financial assets and liabilities voluntarily designated as at FVPL and derivatives in so called economic hedges and instruments designated at fair value are presented in ‘Other interest income (expense)’. Interest result on all other financial assets and liabilities at FVTPL is recognised in ‘Valuation results and net trading income’.
The proceeds from leasing out assets under operating leases are recognised on a straight-line basis over the life of the lease agreement. Lease payments received in respect of finance leases when
Expenses are recognised in the statement of profit or loss as incurred or when a decrease in future economic benefits related to a decrease in an asset or an increase in a liability has arisen that can be measured reliably.
Fee and commission expenses are generally a result from a contract with ING service providers in order to perform the service for ING Group’s customers. Costs are generally presented as
corresponding increase in equity is recognised for equity-settled share-based payment transactions. A liability is recognised for cash-settled share-based payment transactions. The fair value of equity-settled share-based payment transactions are measured at the grant date, and the fair value of cash-settled share-based payment transactions are measured at each balance sheet date. Rights granted will remain valid until the expiry date, even if the share based payment scheme is discontinued. The rights are subject to certain conditions, including a pre-determined continuous period of service.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Cash and balances with central banks > 2 2 Cash and balances with central banks
Cash advances, overdrafts and other balances 0 1 4 3 5 3
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Financial assets at fair value through other comprehensive income > 5 loans were first designated, amounts to EUR 29 million (2018: EUR -23 million) and the change for the current year amounts to EUR -52 million (2018: EUR 17 million).
As at 31 December 2019, Loans and receivables mandatorily measured at fair value through profit or loss includes EUR 38,985 million (2018: EUR 63,022 million) with regard to reverse repurchase transactions.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Securities at amortised cost > 6
Opening balance as at 1 January 3,228 3,983 27,995 65,747 31,223 69,730
Changes in the composition of the group 1 Fair value through other comprehensive income debt instruments includes both debt securities and loans and advances.
of EUR 79,659 million (31 December 2018: EUR 76,111 million) is specified as follows: Debt Securities at
Loans and advances to customers and Loans and advances to banks include finance lease receivables and are detailed as follows: Maturities of gross investment in finance lease receivables - more than 1 year but less than 5 years n/a 5,959
No individual finance lease receivable has terms and conditions that significantly affect the amount, timing or certainty of the consolidated cash flows of the Group.
Enterprise (SME), and Retail customers. TMB is domiciled in Bangkok, Thailand and is listed on the
Stock Exchange of Thailand (SET). In December 2019 TMB merged with Thanachart Bank and became Thailand’s sixth-largest bank. Prior to this merger ING paid a capital contribution to TMB of
EUR 381 million. As a result of the merger transaction ING recognized a gain of EUR 16 million mainly to partial release of the related foreign currency reserves.
Other investments in associates and joint ventures are mainly financial services and financial technology funds or vehicles operating predominantly in Europe.
As ING has implemented IFRS 16 Leases without restating comparatives, no Right-of-use assets were recognised in 2018. Reference is made to Note 1 ‘Accounting policies’, 1.4.3. IFRS 16 ’leases’ –
Amounts recognised in the statement of profit or loss for the year
Changes in the composition of the group and other changes 3 –4 –5 1 –3 –2
Accumulated impairments as at 31 December –1 –1 –1 –0 –1 –1
Right-of-use assets relates to leased land and buildings, cars and other assets.
Changes in the composition of the group and other changes 8 59 1 52 9 111
Accumulated impairments as at 31 December –9 –4 –2 –2 –11 –6
Wholesale Banking 1 Values in use 7.29% 0.69% 268 274 1 Goodwill related to Growth Countries is allocated across two groups of CGUs, EUR 209 million to Retail Growth Markets and
Changes in the goodwill in 2019 mainly relate to the acquisition of 80% of the shares of
Intersoftware Group B.V. The transaction resulted in recognition of EUR 17 million of goodwill which is fully allocated to Retail Netherland CGU.
(e.g. share price of a listed subsidiary), and the local parameters for CET1, discount rate and long term growth rates. The model was tested for sensitivity by changing the key parameters in the model to more conservative values. The sensitivity analysis did not trigger additional impairment considerations.
In 2018, Changes in the composition of the group and other changes mainly relates to the recognition of intangible assets following the acquisition of Payvision. Reference is made to Note 47
Accrued assets relate to income to be received attributable to 2019 and amounts paid in advance in respect of costs chargeable to subsequent periods.
Deposits from banks includes ING’s participation in the targeted longer-term refinancing operations
Reference is made to Note 43 ‘Transfer of financial assets’ for information on securities lending as well as sale and repurchase transactions included in Trading liabilities and Financial liabilities designated at fair value through profit or loss.
Other non-trading derivatives mainly includes interest rate swaps and foreign currency swaps for hedging purposes, but for which no hedge accounting is applied.
As at 31 December 2019, financial liabilities designated at fair value through profit or loss include funds entrusted of EUR 38,492 million (2018: EUR 49,010 million) with regard to repurchase transactions.
In 2019 the addition to the reorganisation provision is mainly related to ING’s Agile transformation in Germany and updates in existing reorganization provisions.
As ING has implemented IFRS 16 Leases without restating comparatives, no Lease Liabilities were recognised in 2018. Reference is made to Note 1 ‘Accounting policies’, 1.4.3. IFRS 16 ’leases’ –
In 2019 Debt securities in issue decreased by EUR 1.2 billion. This decrease is mainly attributable to a decrease in commercial paper of EUR 6.1 billion, matured savings certificates of EUR 1.2 billion, the redemption of RMBS (residential mortgage backed securities) of EUR 2.3 billion, partly offset by the issuance of long term maturity bonds of EUR 2.8 billion, covered bonds of EUR 2.9 billion and certificates of deposits of EUR 1.9 billion, and an increase in other Debt securities in issue of EUR 0.8 billion.
The average interest rate on subordinated loans is 4.38% (2018: 4.44%). The interest expense during the year 2019 was EUR 660 million (2018: EUR 711 million).
In 2019, 2018 and 2017 respectively, ING Groep N.V. issued USD 2,750 million, nil and nil Perpetual
currently consists of 14,729 million ordinary shares. As at 31 December 2019, 3,897 million ordinary shares were issued and fully paid.
Ordinary shares - Restrictions with respect to dividend and repayment of capital
The following equity components cannot be freely distributed: Revaluation reserves, Net defined benefit asset/liability remeasurement reserve, Currency translation reserve, Share of associates and joint ventures reserve and Other reserves including the part related to the former Stichting
As at 31 December 2019, an amount of EUR 1,818 million (2018: EUR 1,638 million; 2017: EUR 1,478 million) related to the former Stichting Regio Bank and the former Stichting Vakbondsspaarbank
Without prejudice to the authority of the Executive Board to allocate profits to reserves and to the fact that the ordinary shares are the most junior securities issued by ING Groep N.V., no specific dividend payment restrictions with respect to ordinary shares exist.
Groep N.V., the amount paid up on the cumulative preference shares will be repaid together with the accrued dividend as well as any dividend shortfall in preceding years, insofar as this shortfall has not yet been made up.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Net interest income > 21 21 Net interest income
Interest income on financial assets at amortised cost 673 780 1 n/a Interest expense on debt securities in issue 2,350 2,254 2,054
Interest income on investments n/a n/a 1,494 Interest expense on financial liabilities at fair value through profit or loss 1,695 1,578 n/a
Total interest income 28,454 28,148 44,064 Total interest expense 14,376 14,232 30,350 1 The prior periods have been updated to improve consistency and comparability.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Net fee and commission income > 22 and trading loans / deposits (mainly repo’s) to presenting the full fair value movements in
The portion of trading gains and losses relating to trading securities still held as at 31 December 2019 amounts to EUR -82 million (2018: EUR 396 million; 2017: EUR -68 million).
In 2019, Derivatives trading results include EUR 39 million CVA/DVA adjustments on trading derivatives (2018: EUR -20 million; 2017: EUR 47 million).
Kotak Mahindra Bank by ING Mauritius during 1Q 2019. ING Mauritius is in the process of being liquidated and consequently the release of the currency translation reserve (CTA) and the release of the Net Investment Foreign Entities reserve resulted in a one-off gain of EUR 119 million.
In 2017 the Result on disposal of group companies included realised deferred profits on divestments in prior periods related to Baring Private Equity Partners.
The share awards granted in 2019 relate to the performance year 2018. In 2019, no share awards
The option rights are valid for a period of ten years. Option rights that are not exercised within this period, lapse. Option rights granted will remain valid until the expiry date, even if the option scheme is discontinued. The option rights are subject to certain conditions, including a predetermined continuous period of service. The exercise prices of the options are the same as the quoted prices of ING Groep N.V. shares at the date on which the options are granted.
The weighted average share price at the date of exercise for options exercised during 2019 is EUR
Cash received from stock option exercises for the year ended 31 December 2019 is EUR 7 million
Regulatory costs represent contributions to the Deposit Guarantee Schemes (DGS), The Single
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Earnings per ordinary share > 29 29 Earnings per ordinary share
In respect of 2018 - Interim dividend, paid in cash in August 2018 0.24 934 - Final dividend, paid in cash in May 2019 0.44 1,714
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Net cash flow from operating activities > 31 31 Net cash flow from operating activities
– Other non-cash items included in Result before tax 32 –1,763 703
Total as included in the statement of financial position: – Deposits from banks –34,826 –37,330 –36,821
Included in Cash and cash equivalents, are minimum mandatory reserve deposits to be held with various central banks. Reference is made to Note 42 ‘Assets not freely disposable’ for restrictions on
Retail Netherlands Income from retail and private banking activities in the Netherlands, including the SME and mid-corporate segments, and the Real Estate Finance portfolio related to Dutch domestic mid-corporates. The main products offered are current and savings accounts, business lending, mortgages and other consumer lending in the Netherlands.
Retail Belgium Income from retail and private banking activities in Belgium (including
SME and mid-corporate segments in specific countries. The main products offered are similar to those in the Netherlands. (Challengers & Growth Markets)
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices b. ING Group
Net result IFRS attributable to equity holder of the parent 18,306 11,472 1,955 99 4,781 18,176 11,338 2,027 108 4,703 17,773 10,505 2,281 82 4,905
2 Special items in 2018 comprised a settlement agreement with the Dutch authorities on regulatory issues as announced on 4 September 2018.
4 Underlying figures are derived from figures according to IFRS by excluding the impact of divestments, special items and Insurance Other.
Total investment and other income 1,352 8 1,360 1,360 1,350 19 1,369 1,369 1,259 17 1,277 1,277
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices c. Banking activities
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Information on geographical areas > 35 35 Information on geographical areas
The Netherlands Netherlands ING Bank N.V. Wholesale / Retail 14,415 13,600 13,141 5,565 5,911 5,757 269,564 261,466 241,379 1,763 1,754 2,301 530 624 639
Belgium Belgium ING België N.V. Wholesale / Retail 7,694 8,248 8,893 2,721 2,807 2,957 122,546 120,589 119,400 735 866 1,009 236 275 408
Germany ING DiBa A.G. Wholesale / Retail 4,639 4,625 4,587 2,484 2,421 2,312 147,924 144,911 138,153 1,374 1,309 1,240 465 431 396
Spain Branch of ING Bank N.V. Wholesale / Retail 1,233 1,201 1,135 706 600 509 26,118 23,757 23,858 249 195 97 72 71 25
Russia ING Bank (Eurasia) Z.A.O. Wholesale 293 277 270 93 82 136 1,499 1,449 1,607 68 25 78 22 3 20
Czech Republic Branch of ING Bank N.V. Wholesale / Retail 339 306 245 94 104 66 4,486 6,272 5,641 16 37 16 3 9 3
Hungary Branch of ING Bank N.V. Wholesale 138 141 146 24 40 32 1,299 1,227 1,003 –7 5 2 3 2
Slovakia Branch of ING Bank N.V. Wholesale 703 571 497 14 14 14 587 487 677 2 –0 2 –0 1 1
Portugal Branch of ING Bank N.V. Wholesale 12 11 11 18 18 14 899 905 667 14 13 9 4 4 3
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Information on geographical areas > 35
North America Canada Payvision Canada Services Ltd. Wholesale 1 1 3 3 1 2 2 0 0
Latin America Brazil Branch of ING Bank N.V. Wholesale 89 88 78 43 35 47 2,921 1,974 1,184 27 16 16 6 9 4
Asia China Branch of ING Bank N.V. Wholesale 89 86 81 35 37 35 2,031 2,107 2,298 7 3 7 –1 7 –2
Japan Branch of ING Bank N.V. Wholesale 33 32 35 31 36 33 5,109 2,300 2,238 22 19 17 8 5 11
Singapore Branch of ING Bank N.V. Wholesale 592 546 512 349 340 297 27,982 32,222 25,803 76 176 133 13 21 9
Taiwan Branch of ING Bank N.V. Wholesale 34 33 33 26 23 23 2,873 2,839 3,910 10 7 11 0 0
Turkey ING Bank A.S. Wholesale / Retail 4,074 4,709 5,221 677 678 741 9,927 11,521 13,798 304 245 267 66 50 54
The relatively high tax charge of 30% in the Netherlands (compared to statutory rate of 25%) is mainly caused by the non-deductible Dutch bank tax (EUR 177 million) and the non-deductible AT1 interest expenses (EUR 276 million).
The relatively high tax charge of 36% in the Netherlands (compared to statutory rate of 25%) is mainly caused by non-deductible expenses of EUR 775 million upon the settlement agreement reached with the Dutch authorities on regulatory issues.
ING Group provides other post-employment benefits to certain employees and former employees.
The most recent (actuarial) valuations of the plan assets and the present value of the defined benefit obligation were carried out as at 31 December 2019. The present value of the defined benefit obligation, and the related current service cost and past service cost, were determined using the projected unit credit method.
Changes in the composition of the group and other changes 0 –1
Actuarial gains and losses arising from changes in financial assumptions –206 153
(equity) is EUR -378 million (EUR -336 million after tax) as at 31 December 2019 (2018: EUR -453 million, EUR -394 million after tax).
The net defined benefit asset/liability is reviewed and adjusted annually. The assumptions used in the determination of the net defined benefit asset/liability and the Other post-employment benefits include discount rates, mortality rates, expected rates of salary increases (excluding promotion increases), and indexation. The rates used for salary developments, interest discount factors, and other adjustments reflect country-specific conditions.
The key assumption in the determination of the net defined benefit asset/liability is the discount rate. The discount rate is the weighted average of the discount rates that are applied in different regions where ING Group has defined benefit pension plans (weighted by the defined benefit obligation). The discount rate is based on a methodology that uses market yields on high quality corporate bonds of the specific regions with durations matching the pension liabilities as key input.
IFRS 16 Leases (implemented per 1 January 2019) requires lessees to recognise right-of-use assets and lease liabilities on the balance sheet. The above table shows netted amounts which include in the row ‘Other’ a deferred tax amount for right-of-use assets of EUR 370 million (1 January 2019: EUR 320 million) and a deferred tax amount for lease liabilities of EUR -376 million (1 January 2019: EUR -323 million).
Impact on deferred tax from change in tax rates –64 –8 55
The weighted average statutory tax rate in 2019 is equal to the rate of 25.9% in 2018. The weighted average statutory tax rate in 2018 is lower compared to 2017, due to a decrease in statutory income tax rates in the USA and Belgium in that year.
The effective tax rate in 2017 was with 31.4% significantly higher than the weighted average statutory tax rate. This was caused by the following items: ▪ A relatively high amount of prior period tax adjustments which ING, for the most part is reimbursed by NN Group (reimbursement is included in the result before tax), recognised under
‘Adjustment to prior periods’; ▪ Impact on deferred tax positions following changes in the income tax rate in the USA and
Unrealised revaluations financial assets at fair value through other comprehensive income and other revaluations 6 86 103
– Designated as at fair value through profit or loss 47,684 59,179 47,684 59,179 1 Other assets do not include, among others: (deferred) tax assets, net defined benefit asset, inventory, property development and property obtained from foreclosures.
2 Other liabilities do not include, among others: (deferred) tax liabilities, net defined benefit and related employee benefit liabilities, reorganisation and other provisions, other taxation, social security contributions and lease liabilities.
ING maximises the use of market observable inputs and minimises the use of unobservable input in determining the fair value. The fair value can be subjective dependent on the significance of the unobservable input to the overall valuation. All valuation techniques used are subject to internal review and approval. Data used in these valuation techniques are validated on a daily basis when possible.
tests and confirms the reliability of the market data used in these valuations and can lead to adjustments in valuation. The IPV process is performed at least monthly or more frequently depending on the nature of the market or trading activity. Multiple data sources are used to the extent that such prices are available and taking into account cost-benefit ratio of retrieving such prices. Valuation differences between primary and secondary source data are assessed. When differences resulting from price testing exceed pre-approved thresholds, adjustments to the profit and loss shall be made. Differences and adjustments must be assessed individually, approved by the Local Parameter Committee, and reported back in the meeting minutes. In case a material difference in value is found through the IPV process, it must be fully understood what the underlying cause is for the difference, and if a systematic change is required (e.g. change of source). Pricing and price testing is applied at individual trade level and is organised at a desk level.
▪ Bilateral Valuation Adjustment (BVA) is the valuation component for the counterparty credit risk of the derivative contracts. It has bilateral nature, where both counterparty’s credit risk and ING’s own credit risks is taken into account. The calculation is based on the estimation of the expected exposure, the counterparties’ risk of default, and taking into account the collateral agreements as well as netting agreements. The counterparties’ risk of default is measured by probability of default and expected loss given default, which is based on market information including credit default swap (CDS) spread. Where counterparty CDS spreads are not available, relevant proxy spreads are used. Additionally, wrong-way risk (when exposure to a counterparty is increasing and the credit quality of that counterparty deteriorates) and right-way risk (when exposure to a counterparty is increasing and the credit quality of that counterparty improves) are included in the adjustment.
▪ ING applies Debt Valuation Adjustment (DVA) to own issued financial liabilities that are measured at fair value through profit or loss, if the credit risk component has not been included in the prices. In the DVA calculation, the default probability of the institution are estimated based on the ING Funding spread.
The fair values of publicly traded equity securities are based on quoted market prices when available. Where no quoted market prices are available, fair value is determined based on quoted prices for similar securities or other valuation techniques.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Fair value of assets and liabilities > 38 estimated by taking into account prepayment behaviour. Loans with similar characteristics are aggregated for calculation purposes.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Fair value of assets and liabilities > 38 for all significant inputs into a valuation model is not available), and asset backed securities for which there is no active market and a wide dispersion in quoted prices.
(unadjusted) quoted prices in an active market that ING Group can access. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer markets, brokered markets, or principal to principal markets. Those prices represent actual and regularly occurring market transactions with sufficient frequency and volume to provide pricing information on an ongoing basis. Transfers out of Level 1 into Level 2 or Level 3 occur when ING Group establishes that markets are no longer active and therefore (unadjusted)
This category includes financial instruments whose fair value is determined using a valuation technique (e.g. a model) for which more than an insignificant part of the inputs in terms of the overall valuation are not market observable. This category also includes financial assets and liabilities whose fair value is determined by reference to price quotes but for which the market is considered inactive. An instrument in its entirety is classified as Level 3 if a significant portion of the instrument’s fair value is driven by unobservable inputs. Unobservable in this context means that there is little or no current market data available from which to derive a price that an unrelated, informed buyer would purchase the asset or liability at.
In 2019, the decrease in financial assets mandatorily at fair value through profit or loss, mainly relates to reverse repurchase transactions for which the valuation technique is supported by observable inputs.
Changes in the composition of the group and other changes – 2 2 1 Net gains/losses were recorded as ‘Valuation results and net trading income’ in the statement of profit or loss. The total amount includes EUR 115 million of unrealised gains and losses recognised in the statement of profit or loss.
Unrealised gains and losses that relate to ‘Financial assets at fair value through other comprehensive income’ (2019 and 2018) are included in the Revaluation reserve – Equity securities at fair value through other comprehensive income or Debt Instruments at fair value through other comprehensive income (2019 and 2018).
Financial assets measured at fair value in the statement of financial position as at 31 December 2019 of EUR 131 billion includes an amount of EUR 4.8 billion (3.6%) which is classified as Level 3
December 2018: EUR 0.9 billion, being 1.0%). Changes in Level 3 from 31 December 2018 to 31
Financial assets and liabilities in Level 3 include both assets and liabilities for which the fair value was determined using (i) valuation techniques that incorporate unobservable inputs as well as (ii)
Furthermore, Level 3 financial assets includes approximately EUR 1.3 billion (31 December 2018: EUR 1.1 billion) which relates to financial assets that are part of structures that are designed to be fully neutral in terms of market risk. Such structures include various financial assets and liabilities for which the overall sensitivity to market risk is insignificant. Whereas the fair value of individual components of these structures may be determined using different techniques and the fair value of each of the components of these structures may be sensitive to unobservable inputs, the overall sensitivity is by design not significant.
Level 3 financial assets is established using valuation techniques that incorporates certain inputs that are unobservable.
Equity securities 146 162 1 Price based Price 0 0 5,475 5,475
– Credit 102 67 183 86 Present value techniques Credit spread (bps) 2 8 11054 364
– Equity 42 68 50 54 Option pricing model Equity volatility (%) 4% 4% 84% 94%
– Loans and advances 1,680 2,379 Present value techniques Prepayment rate (%) 6% 6% 6% 6%
Level 3 equity securities mainly include corporate investments, fund investments and other equity securities which are not traded in active markets. In the absence of an active market, fair values are estimated on the basis of the analysis of fund managers reports, company’s financial position, future prospects, and other factors, considering valuations of similar positions or by the reference to acquisition cost of the position. For equity securities best market practice will be applied using the most relevant valuation method.
Prepayment rate is the estimated rate at which mortgage borrowers will repay their mortgages early, e.g. 5% per year. Reset spread is the future spread at which mortgages will re-price at interest rate reset dates.
As ING has chosen to apply a 90% confidence level for its IFRS valuation of fair valued financial instruments, the downward valuation uncertainty has become immaterial, whereas the potential upward valuation uncertainty, reflecting a potential profit, has increased.
Unrealised gains and losses on Property in own use are included in the Revaluation reserve –
At the reporting date, ING Group assessed the extent to which hedge relationships are subject to uncertainties driven by the IBOR reform.
Except for EONIA and EUR LIBOR all IBOR’s in scope of ING’s program are a component of either hedging instrument and/or hedged item where the interest rate and/or foreign currency risk are the designated hedged risk. The hedged exposures are mainly loan portfolio’s, issued debt securities and purchased debt instruments.
LIBOR indexed fair value and cash flow hedges are expected to be directly affected by the uncertainties arising from the IBOR reform. In particular, uncertainties over the timing and amount of the replacement rate may impact the effectiveness and highly probable assessment.
Micro fair value hedge accounting is mainly applied on issued debt securities and purchased debt instruments for hedging interest rate risk.
Additionally, for portfolio (macro) fair value hedges of ING Group’s fixed rate mortgage portfolio, ineffectiveness also arises from the disparity between expected and actual prepayments
Gains and losses on the effective portions of derivatives designated under cash flow hedge accounting are recognised in Other Comprehensive Income. Interest cash flows on these derivatives are recognised in the statement of profit or loss in ‘Net interest income’ consistent with the manner in which the forecasted cash flows affect net result. The gains and losses on ineffective portions of such derivatives are recognised immediately in the statement of profit or loss in ‘Valuation results and net trading income’.
ING Group determines an economic relationship between the cash flows of the hedged item and the hedging instrument based on an evaluation of the quantitative characteristics of these items and the hedged risk that is supported by quantitative analysis. ING Group considers whether the critical terms of the hedged item and hedging instrument closely align when assessing the presence of an economic relationship. ING Group evaluates whether the cash flows of the hedged item and the hedging instrument respond similarly to the hedged risk, such as the benchmark interest rate of foreign currency. In addition (for macro FX hedging relationships) a regression analysis is performed to assess whether the hedging instrument is expected to be and has been highly effective in offsetting changes in the fair value of the hedged item.
677 million (2018: EUR 1,012 million) respectively ‘Financial liabilities at fair value through profit or loss – Non-trading derivatives’ EUR 339 million (2018: EUR 458 million). The remaining derivatives are offset with other derivatives and collaterals paid or received.
For ING Group’s main currencies the average exchange rates used in net investment hedge accounting for 2019 are EUR/USD 1.12 (2018: 1.18), EUR/PLN 4.30 (2018: 4.26), EUR/AUD 1.61
Less than 1month months months year years years years >5 years Total
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Assets by contractual maturity > 40 2019 Less than 1 month 1 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Total
2 This column reconciles the contractual undiscounted cash flows on financial liabilities to the statement of financial position values. The adjustments mainly relate to the impact of discounting, and for derivatives, to the fact that the contractual cash flows are presented on a gross basis (unless the cash flows are actually settled net).
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Assets not freely disposable > 42 42 Assets not freely disposable
The assets not freely disposable consist primarily of Loans and advances to customers pledged to secure Debt securities in issue, deposits from the Dutch Central Bank and other banks. They serve to secure margin accounts and are used for other purposes required by law. The assets not freely disposable are as follows: Banks
Loans and advances to customers 75,755 74,352 1 The prior period amounts have been updated to improve consistency and comparability.
Loans and advances to customers that have been pledged as collateral for Debt securities in issue and for liquidity purposes, amount in The Netherlands to EUR 45,530 million (2018: EUR 46,320 million), in Germany to EUR 13,222 million (2018: EUR 12,143 million), in Belgium EUR 11,298 million
(2018: EUR 11,894 million), in Australia to EUR 4,150 million (2018: EUR 2,638 million) and in the
Included in the table above are the carrying amounts of transferred assets under repurchase agreements, and securities lending that do not qualify for derecognition.
Net amounts of financial assets presented in the statement of financial position
Impact of enforceable master netting arrangements or similar arrangements1 Derivatives –6,731 7,620 –889 1 The line ‘Impact of enforceable master netting agreements or similar arrangements’ contains derivative positions under the same master netting arrangements being presented in different statement of financial position line items.
Net amounts of financial liabilities presented in the statement of financial position
In addition, in February 2020 the Banca d’Italia imposed an administrative fine on ING Italy. Both amounts were already provisioned for in 2019.
Tax cases: Because of the geographic spread of its business, ING may be subject to tax audits, investigations and procedures in numerous jurisdictions at any point in time. Although ING believes that it has adequately provided for all its tax positions, the ultimate resolution of these audits, investigations and procedures may result in liabilities which are different from the amounts recognised. ING has also identified issues in connection with its U.S. tax information reporting and withholding obligations in respect of prior periods. ING has agreed with the US Internal Revenue
Service (‘IRS’) to resolve these issues by paying the tax owed. ING has made the payment out of the provision it had already recognised.
SIBOR – SOR litigation: In July 2016, investors in derivatives tied to the Singapore Interbank Offer
As requested by the AFM, ING has reviewed a significant part of the files of clients who bought interest rate derivatives. In December 2015, the AFM concluded that Dutch banks may have to reassess certain client files, potentially including certain derivative contracts that were terminated prior to April 2014 or other client files. As advised by the AFM, the Minister of Finance appointed a
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Consolidated companies and businesses acquired and divested > 47
Court ruled that Stamp Duty (Impuesto de Actos Jurídicos Documentados) expenses are chargeable to the customer, while in October 2018 it ruled that Stamp Duty is chargeable to the banks. In
financial effect of this claim. On 30 September 2019, the relevant court dismissed the antitrust complaint, finding that the plaintiffs had failed to identify any facts that links each defendant to the alleged conspiracy. On 9 December 2019, the plaintiffs filed an amended complaint removing all ING entities as defendants on the condition that the ING entities enter into a tolling agreement for the duration of two years. The relevant ING entities subsequently entered into a tolling agreement, which provides that the statute of limitations will not be tolled for the two year duration of the agreement. Should the plaintiffs discover any evidence of potential involvement by
ING in the activities alleged in the complaint, ING could be brought back into the litigation.
In July 2019 ING completed the sale of part of the ING Lease Italy business. The settlement price amounted to EUR 1.162 million, consisted of a EUR 368 million cash settlement, a EUR 20 million
Deferred Purchase Price and a EUR 774 million Senior Loan facility for the portfolio of lease receivables. The deferred purchase price is linked to the performance of the sold portfolio and is reported under the financial assets mandatorily measured at fair value through profit and loss. The additional loss in 2019 amounted EUR -2 million (2018: EUR -123 million). The Italian lease business was reported as Assets Held for Sale as at 31 December 2018 and previously included in the business line segment Wholesale Banking and geographical segment Other Challengers.
Reference is made to Note 12 ‘Assets and liabilities held for sale’ and Note 25 ‘Result on the disposal of group companies’.
ING’s activities involving structured entities are explained below in the following categories: 1 Consolidated ING originated securitisation programmes; 2 Consolidated ING originated Covered bond programme (CBC); 3 Consolidated ING sponsored Securitisation programme (Mont Blanc); 4 Unconsolidated Securitisation programme; and 5 Other structured entities.