Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Contents
€1.23 €13.80 8.7 0.77 1 Subject to reasonable assurance by KPMG. Throughout the report indicated with an Ⓐ. See ‘Independent auditor’s assurance report’, page 89.
ING recorded a 2019 net result of €4.8 billion, an increase of 2%
ING Group's underlying ROE was 9.4% compared to 11.2% in 2018.
This is slightly below our ambition to generate an underlying ROE
between 10 and 12 percent. ING’s underlying return on equity is calculated using IFRS-EU shareholders' equity after excluding
The CET1 ratio was strong at 14.6%, which is slightly higher than the 14.5% recorded at year-end 2018, and remained well above our CET1 ratio ambition of around 13.5%. Total RWA increased by €12.3 billion, and includes €13.2 billion as part of the expected supervisory impact on RWA which was already taken in the fourth quarter of 2019. The impacts from volume growth, model updates and higher operational RWA were offset by positive risk migration.
Non-financial review 7 Top rankings out of 14 countries €18.7 bln Climate Finance €0.7 bln Social Impact Finance €9.3 bln Net Promoter Score Retail Banking
Since 2015, we have been measuring our efforts to improve the financial behaviour of our customers and society. In 2019, 25.9 million customers felt financially empowered as a result of interactions with our financial empowerment initiatives Ⓐ.
Human Capital Return on Investment (HCROI) provides an indication of ING’s profitability in relation to total employee costs.
The fundamental force shaping the financial services sector is digitalisation. It’s not only profoundly influencing customer preferences and expectations, but also the competitive landscape. And developments like digital currencies and blockchain are even driving debates about the very governance of the financial system in the future. As with all disruptive change, it presents both opportunities and threats – one increasingly urgent example is the growing threat of financial economic crime.
CEO Statement – “The digital customer experience is the key differentiator”
At ING, we continued our digital transformation in 2019, with a primary focus on meeting our customers’ evolving needs and ensuring we stay relevant to them in the future through a mobilefirst approach.
ING’s ambition is to be a leader in terms of the digital banking experience, offering retail and wholesale customers everywhere the same empowering and differentiating experience. More than 80 percent of our customer interactions are through mobile devices. Over a third of our customers only interact with us through a mobile device. We are digitalising more processes to fulfil our clear and easy, anytime anywhere customer promise. In 2019, for example, we enhanced the experience of our mobile app users in the Netherlands, Germany, Romania and Spain with Apple Pay, and we introduced instant payments in the Netherlands and Belgium with funds credited to beneficiary accounts within 10 seconds.
Netherlands and Germany clients can now easily open an account digitally, and we saw growth in the number of clients using our Virtual Cash Management, which allows companies with local accounts to manage their cash position via a single master account.
To compete in this new environment, banks have to think beyond banking and develop their own platforms. Financial services aren’t a primary need but rather a means to an end; something to help people accomplish their personal and business goals, like buying a place to live, paying for education, or investing to grow their business.
experience complemented by beyond banking and third-party offerings that add value for users.
The open nature of platforms means they have the potential to facilitate the whole customer journey around major life events. In 2019, ING and partners launched real-estate marketplace
Scoperty across Germany. This proposition based on high-quality data and machine learning connects buyers and sellers with the aim to offer consumers more transparency and a broader range of offerings by showing 40 million real estate properties in Germany.
Innovation is core to how we’re preparing ING for the future. In addition to cultivating our own internal culture of innovation, we also bring disruptive ideas to market by combining ING’s knowledge and network with the knowledge and skills of others.
I'm very proud of the major step in this direction that we took in 2019 with the opening of the
Cumulus Park innovation district in Amsterdam Zuidoost, which is also where ING is located. This initiative of ING together with the city of Amsterdam and locally based educational institutions offers businesses, academics and innovators workspaces designed to co-create, learn, research and inspire in a collaborative atmosphere around the themes of urbanisation and digital identity.
At ING, this took the form of a continued focus in 2019 on our know your customer (KYC)
The Board proposes to pay a full-year 2019 cash dividend of €0.69 per ordinary share, subject to shareholder approval at the Annual General Meeting in April 2020. This is in line with our goal of paying a progressive dividend over time, while ING is committed to maintaining a CET1 ratio of around 13.5%, taking into account potential RWA inflation from regulatory developments.
At the same time, our responsibility clearly goes beyond the strict confines of our business and extends to the special role we and other banks can play in the wider society, whether that be in the environmental and social area or in preventing financial economic crime.
The successes we achieved in 2019 and the steps we took to prepare for the future would not have been possible without the dedication and tireless efforts of our employees. We are also grateful for the continuing loyalty of our shareholders and the engagement of many stakeholders, whether that be in collaboration with us or in challenging us to be the best we can be. To all of them,
I and my colleagues on the Executive Board and Management Board Banking wish to extend our sincere thanks.
As announced in February, I will leave ING after a career of 29 years, the last seven of which as
Our business is shaped by social and economic factors. These include the ever-evolving expectations of our customers and industry stakeholders, digital technologies, market conditions and new regulations. To deliver long-term value to our stakeholders and society, ING not only responds to these, but also aims to be a catalyst for change.
To stay ahead, we engage with our internal and external stakeholders in various ways, and respond to their feedback. We also constantly monitor external shifts via regulatory developments and the analysis of market trends. This gives us insight into the most important topics for our stakeholders and how these relate to our actions and decisions.
Our annual materiality assessment – quantitative research on the importance of specific topics among different stakeholder groups – helps us identify which economic, environmental and social topics we should focus on. The results of the 2019 materiality analysis that underpin our strategic business decisions are highlighted in this report.
In addition, the first months of 2020 were marked by the spread of corona (COVID-19) virus-linked infections in and beyond China, negatively affecting Chinese manufacturing and trade, and posing the threat of significant disruption to global supply chains, global manufacturing, travel and tourism, investment and consumer spending.
Central banks in some of the main emerging market economies eased policy to pre-empt a further deterioration of economic circumstances. Brazil, India, Korea and Mexico, among others, lowered their policy rate.
Exchange rate fluctuations have an influence on the business of a globally operating bank like ING, including in the areas of profitability and funding. Several factors in the course of the year contributed to the exchange rate of the euro weakening against the dollar. These included yields in the euro area persistently being below those of the US, uncertainty around the possibility of a broadening of the US trade dispute from China to Europe, and the negative fall-out on economic activity of a possible no-deal Brexit.
Brexit scenarios, with the aim of ensuring the resilience of the banking sector even in the face of a no-deal scenario. For banks, the implementation of their contingency planning was a key priority.
On the legislative side, EU and UK regulators took the necessary steps ensuring operational continuity.
We take our responsibility seriously to safeguard our customers against loss or misuse of data. This is not only our duty of care towards customers, but a wider social responsibility to act as gatekeepers to the financial system, keeping it safe, secure and protected against fraudulent and criminal activities.
Protecting our IT infrastructure and systems and personally identifiable information from cyberattacks will remain an extremely important factor for the banking sector and for ING.
Breaches can lead to serious legal, reputational and financial damage. Digital innovation and the further development of our data-driven business models (e.g. open platforms), along with more stringent regulations on data privacy, pose compliance and cybersecurity risks.
Two crucial pieces of the new personal data architecture were rolled out across the EU in 2018 – the second Payment Services Directive (PSD2) and the General Data Protection Regulation (GDPR).
Global Data Protection Policy (GDPP) accordingly and are implementing revised and new requirements in each country. To know more about what personal data ING collects, what we do with it and who we share it with, go to our Privacy Statement on ing.com or any local ING website.
Digital banking, innovation and transformation are key to our business. Being digital guides our investments and transformation efforts; all our initiatives are geared towards creating one efficient and safe ING worldwide.
The world is becoming increasingly digital and technology-driven – banking is no different.
Read more about this in the ‘Innovation and transformation’ and ‘Our business’ chapters
We need to adhere to a complex set of policies and rules relating to business conduct issues, including insider trading, anti-trust, price fixing, and market manipulation. Commercial banks like
ING are in scope of regulations to help detect and prevent tax evasion, fraud, money laundering, and corrupt practices. In addition, various regulators are increasingly scrutinising the cultures and behaviour of banks.
Banks that are able to ensure regulatory compliance through robust internal controls will be better positioned to build trust with clients and shareholders. Ensuring regulatory compliance to counter financial economic crime is a key priority for ING. However, merely having policies in place is not enough.
Our shared ING values and commitments to integrity should always and everywhere guide us in how we empower our customers and how we live up to our responsibilities to stakeholders. In 2018,
In 2019, we continued to focus on our global know your customer (KYC) enhancement programme.
We made progress raising awareness and improving the skills and behaviour of our staff and our governance of KYC across ING. The programme will deliver the basis for ING’s KYC operations.
Further improvements, from continuous learning and quality-assurance cycles, will continue to be embedded.
We are working with the Dutch Banking Association (NVB) and the Dutch Central Bank (DNB) on harmonising efforts to counter financial economic crime and participate actively in various working groups and project teams in this area. To help in the fight against money-laundering, ING joined several other Dutch banks in 2019 to explore the possibilities of setting up a joint organisation to monitor payment transactions: Transactie Monitoring Nederland (‘transaction monitoring
The European Commission also finds that national implementations and interpretations of EU AML
We base our own human rights policy on these conventions. We seek to judge employees on their merit and skills and without discrimination according to race, age, sex, religion, ability or belief. We believe that by respecting human rights and increasing our efforts in diversity, we are strengthening our workforce and our business. Read more in our Human Rights Update 2019.
There is an increased urgency around climate change – it’s now viewed to be at crisis stage and is topping global agendas. The International Monetary Fund (IMF) is examining the impact of climate on the world’s financial markets and whether it is priced into market valuations. The financial cost of climate change was the subject of many discussions at the IMF at its meetings in 2019. Climaterelated risk also tops the World Economic Forum’s (WEF) 2019 global risk ranking in terms of likelihood and impact. The environmental risk category is becoming more prominent.
We call our strategy to get there the Terra approach. In September 2019, we published the first progress report on Terra. The report presents ING’s pathway towards climate alignment in the sectors most responsible for climate change and is intended to be published every year.
Read more in the ‘Developments in risk and capital management’ chapter.
No one sector, much less one bank, has the ability to solve the world’s problems. That’s why we seek to increase our impact through partnerships and coalition-building. For our Terra climate approach, we worked with the 2˚ Investing Initiative (2˚ii) to develop an open-source methodology to measure our loan book and steer it towards the climate goals of the Paris Agreement. We then personally and individually engaged with more than 40 banks interested in the work ING
Banking, adopted by more than 130 banks representing a third of the world's banking assets.
The next day, ING and more than 30 of these banks pledged to turn these principles into action by signing the Collective Commitment to Climate Action, which was created using our Katowice
It was a year of rapid transformation in the competitive landscape, regulation, customer preferences and the economic context.
Our Think Forward strategy – with its purpose to empower people to stay a step ahead in life and in business – continued to guide our strategic response to the challenges and opportunities these developments present. Chief among these is how banks can master the digital customer experience and tap into its opportunities.
In concrete terms, this translates into a focus on primary relationships. These are relationships where we serve multiple banking or other needs of retail customers and wholesale banking clients and which allow us to know these customers and their needs better so we can add value for them and grow the relationship. To do this, we aim to master data management and analytics skills, including artificial intelligence. To provide for future needs, we promote a culture of innovation within ING and partner with fintechs and other innovative partners to develop interesting propositions, both in financial services and beyond banking that can add value for our customers and others.
They offer customers a superior digital experience through an open platform approach that delivers a range of their primary needs in a go-to digital ecosystem. This ability to provide for primary needs, with both proprietary and third-party offerings that are easily accessed through mobile devices, defines their success. Banking, by contrast, is a facilitator and not a primary need. The choice for banks is to challenge their existing business models, to disrupt themselves, or risk being disintermediated and relegated to a status of white label facilitators of others’ platforms.
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
And through ING Labs in Amsterdam, Brussels, London and Singapore we’re also collaborating with fintechs and others on disruptive innovations in value spaces that best match the expertise and ecosystems in those locations.
ING’s empowerment purpose is not limited to our own customers. In striving to help people to stay a step ahead in life and in business, we see a key role for ING in promoting a sustainable society, as well as important opportunities both for us and our customers.
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 understand what customers want and need. We use these insights to personalise our interactions with customers and empower them to make their own financial decisions. Data skills are also essential to know our customers from a regulatory and risk perspective, to prevent fraud, improve operational processes and generate services that go beyond traditional banking. At ING, we recognise that excelling at data management is a core competency if we are to realise our ambition to create a personal digital experience for customers. We are on course to implement one global approach to data management to ensure we maximise the potential of this key resource.
systems and shared services. We also apply one Way of Working (WoW), based on agile principles, across many areas of ING to speed up the pace of innovation and bring new customer solutions to market faster, as well as to enable global collaboration and knowledge sharing.
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 as leaders should create the right conditions for our employees to safeguard the bank and society from financial economic crime. In 2019, we developed a new global e-learning module that will be rolled out in early 2020 to all employees to enhance their KYC
awareness. And a global code of conduct was rolled out in the first quarter of 2020 that builds on the Orange Code and gives employees worldwide concrete examples of how to put the ING values into practice.
We promote a more diverse and inclusive workforce by aiming for ‘mixed teams’. We have adopted the 70 percent principle, which gives managers a basis for building mixed teams around appropriate dimensions of diversity (with a focus on gender, nationality and age group) and strives for a minimum 30 percent difference in team make-up. In 2019, we worked to further this aim by deep-diving into diversity dimensions ING-wide and setting up dashboards to help different areas of the business monitor their progress. Like many other financial organisations, getting the right mix of people remains a challenge in parts of the business and there is more to be done to redress imbalances that still exist.
Think Forward Initiative, we have successfully reached consumers with insights and innovation on 15 million occasions, to empower them to make better financial decisions.
In 2019 we completed our first analysis of five out of the nine sectors most responsible for greenhouse gas emissions
Platforms are the success story of the digital age. So much so, that most of the world’s most valuable companies are now based on platform business models. Platform leaders like Apple, Google,
Platform providers are obsessed with the customer experience. They use data to pinpoint the customer need and partner with third parties to ensure there is always a fitting product or service for any customer need. This ensures customers always come back to them for more.
With a shift towards platform models, to participate in that space there are three positions a company can take: become a platform yourself, provide ‘capability as a service’ or become a producer on third party platforms. Successful companies often play across two or three positions.
Secondly, in addition to pursuing strategic platform moves, ING also invests in independent initiatives in their own right, outside of the above-mentioned platform plays, such as what ING
The third way is to connect to the existing platforms of others. With more and more companies and people interacting on platforms, it is important for ING to continue to be where its customers are.
ING’s approach is centred on two of ING’s strategic priorities: 1. Increase the pace of innovation to keep satisfying customers' changing needs. These can vary widely - from what customers expect from their bank, to how they use our apps and services, to the kinds of products that help them be successful, and, 2. Think beyond traditional banking by developing new banking services and business models that the industry, or even the world, has never seen before.
To narrow down these new banking services and business models, efforts are directed into certain value spaces. These are based on emerging themes and trends for customers, as well as our own capabilities.
A feature of PACE is continuous validation with the customer to ensure we are creating the right product or service for them. This way, we use our scarce resources to develop only what the customer really wants. PACE has been introduced and is being applied in most ING countries and business units. The establishment of a global PACE Academy, complete with online modules, helps employees work with the methodology.
To create one user experience for all 38.8 million customers, we must become one ING. By building a global foundation that standardises how we design and manage processes, our IT infrastructure, our Way of Working and how we store and analyse data, we can offer similar products and services everywhere. To achieve this, ING announced a series of transformation programmes in 2016 to unite similar businesses and bring us closer to one mobile-first digital platform that offers a uniform and superior customer experience.
▪ A gated process that supports teams to continuously improve the maturity of their programmes in line with best practices.
▪ Ninety-day agile delivery cycles to facilitate continuous improvement, planning and prioritisation that ultimately lead to a better impact on customers and other stakeholders.
Bank, ING’s new, mobile bank in the Philippines, ING’s digital insurance platform and the first open banking API. Many programmes, such as Unite be + nl and Maggie have been enabled by
Touchpoint. Touchpoint now provides its users with access to 21.8 million customers (57 percent of our customer base).
In 2019, we saw increased professionalisation and automation of criminal organisations. Relatively unskilled, criminally motivated hackers adopted the tactics, techniques and procedures of more sophisticated nation-stated backed adversaries. There is also evidence that techniques are becoming more widely commoditised with cybercrime-as-a-service being made available.
maintains a strong global cybercrime alliance with the financial industry. Cybercrime travels across sectors and borders, and therefore we encourage a common, cross-industry response where companies and public authorities work together to combat crime. ING recognises the value of an effective regulatory framework and is in favour of cybersecurity being led more by actual cyber threats, and less by rule-based compliance. The ECB’s TIBER-EU framework for cyberresilience testing is a good example. Testing critical systems on actual, real-life threats helps entities gain insight about their protection, detection and response capabilities.
Netherlands and Romania. One of those DDoS attacks in Romania meant customers couldn’t access our services for a couple of hours. No customer claims were made, nor any financial losses incurred.
Protection Regulation 2016/679 (GDPR). We have updated our Global Data Protection Policy (GDPP)
The department is responsible for the global coordination of analytics activities, better alignment with the business strategy, establishing one analytics and data community that supports knowledge sharing and apprenticeships and better use of investments in tooling, talent and partnerships. It is organised around nine main capability domains and supported by analytics teams and common infrastructure.
This allows us to accelerate change, scale and innovate for customers. Currently, more than 100 data scientists work across Analytics centres of expertise (CoEs) and countries.
A bank-wide Analytics for All campaign was also launched for employees encouraging them to be data-fluent and think like a data scientist. To help develop data science capabilities, we also added an analytics track to our graduate programme, the International Talent Programme. To ensure that
Specifically, the CoE for financial crime and regtech provided multiple products, helping to improve risk mitigation including: ▪ Detection of smurfing cases in Turkey.
In Turkey, the chatbot INGo answers questions on loans, cards, accounts savings, currencies and insurance products via Facebook Messenger, the mobile app and the website. INGo also helps with applying for a loan. In 2019, INGo took part in over 4.5 million customer sessions, with 89 million lira worth of approved loans done via a credit advisor in the chatbot.
Robotic Process Automation (RPA) uses robotic software scripts to digitalise manual activities. In 2019, an additional 100 robots were added to the 1,200 in operation in 2018. Of the robots added in 2019, around one-third were put to work on KYC processes.
ING’s Global Process Management (GPM) department was established in 2016 to improve the customer experience. It does this by introducing a single, global approach to improving end-to-end processes and a common way to manage those processes and standardise across business units.
Another example is our partnership with AXA. The insurance products ING offers customers via its banking app were developed using the unified design system. Touchpoint is also available to third parties via ING’s Developer Portal. From here they can connect to our common PSD2 functionalities and shared APIs in 17 countries, a vital facilitator for open banking. We’re currently using Touchpoint in Europe and parts of Asia, with the intention to make it available everywhere in the coming years. In this fast-moving world where competition is fierce, we need to bring new innovations and functionalities to our customers much faster. Touchpoint has a crucial role in this. I’m very proud of what we have achieved so far as Touchpoint is helping ING to become one digital platform.”
segment,” says Dirkjan Ochtman, tech lead for the project. “Think of loans in large renewable energy, infrastructure or commercial real estate projects. Currently, the process for trading these assets is complex and inefficient, large ticket sizes making it difficult for investors to participate. Plus, investors are expected to have in-depth expertise and knowledge. Our goal is for this to enhance the customer experience for mid-market institutional investors.
DLT will also give investors easy access to asset documentation, allowing them to familiarise themselves with the assets’ key indicators before investing in them.
Our Market Leaders are Belgium, the Netherlands and Luxembourg. These are mature businesses where we have strong positions in retail and wholesale banking. We’re investing in digital leadership to deliver a uniform customer experience with one customer interaction platform and a harmonised business model.
Here we’re aiming for a full retail and wholesale relationship, digitally distributed through low-cost retail platforms. We also aim to use our direct-banking experience to grow consumer and SME
Turkey. In these markets we’re investing to achieve sustainable franchises and will focus on digital leadership by converging to a mobile-first model and prioritising innovation. Our newest Growth
With a local presence in more than 40 countries, ours is a sector-focused client business providing corporate clients and financial institutions with advisory value propositions, such as specialised lending, tailored corporate finance and debt and equity market solutions. We also serve their daily banking needs with payments and cash management, trade and treasury services.
Banking, a primary client is an active client with lending and daily banking products, and at least one extra product generating recurring revenues over the last 12 months.
One of the ways we measure our progress is the Net Promoter Score (NPS), which measures customer satisfaction and loyalty (whether they would recommend ING to others). The score is calculated as the difference between the percentage of promoters (who rate ING as 9 or 10 out of 10) and detractors (those scoring ING below a 6). Our aim is to achieve a number one NPS ranking in all our retail markets, with a 10-point lead over our main competitors. Based on a rolling average of our NPS scores in 2019, ING ranked number one in seven out of our 14 retail markets Ⓐ.
NPS growth for Platinum clients decreased year on year but the NPS of all the other segments increased. Overall level of satisfaction went up from 8.4 to 8.5. We now have NPS scores from WB
Dutch data centres NLDC (DWS's infrastructure business acquired NLDC from Dutch telco KPN in 2019), and The Datacenter Group (TDCG) group. By advising DWS, ING enabled it to make its maiden investment in the telecom infrastructure sector and created the largest player in the Dutch market. In the food and agribusiness sector, ING coordinated the largest-ever sustainability improvement loan in commodity trading for China’s multinational leading food and agri company,
COFCO International. The $2.1 billion loan links COFCO International’s interest rate to its sustainability performance and rating. And in the sustainable finance space, ING added another first to its growing sustainable finance deal portfolio in Asia/Pacific. We provided a subsidiary of
Platforms empower customers by providing them with a range of primary needs in one place.
Through frequent user interactions, platforms also generate large amounts of data. By mastering data skills, platforms get to know their customers and their needs increasingly well, enhancing the platform’s value, and that of its users.
ING has different faces in different markets and different banking interfaces, each with its own look and feel. By uniting our platforms, processes and products we can provide a consistent customer experience in every country. This is driven by a growing desire for similar online experiences in an increasingly digital world.
Awards in the UK. We extended the app with Yolt Pay, a new feature that enables users to move money between their accounts and make payments to friends and family from supported banks.
We’ve invested in Flowcast, a tool we hope to use to benefit Wholesale Banking clients The fintech start-up uses machine learning algorithms to improve the credit decision process. Its predictive models reduce risk and unlock credit to businesses. The investment is a boost to ING’s AI
Targeting six of our Challengers markets, the partnership aims to provide insurance products and related services through a central digital insurance platform. We launched seven products in four countries: Italy, Australia, Germany and France, and grew the team in our central Paris office, working closely with all our markets. The first product, instant travel insurance through a mobile phone, was launched in Italy. Geo-localised travel insurance can be activated with just a few clicks on a smartphone from the airport or country of destination.
In Australia, we widened our digital insurance portfolio by adding motor and travel insurance to our existing home insurance offer. The motor insurance coverage has been particularly successful with more than 1,000 new customers a week now covered following its launch in May 2019. And in
Punten, a shopping platform for customers in the Netherlands to increase loyalty and drive digital interactions, is also partnering with trusted A-brands. In 2019, 1.1 million products were sold, delivering a turnover of €31 million.
In the fourth quarter, ING launched real-estate marketplace Scoperty across Germany, a joint venture with Pricehubble and Sprengnetter, which aims to bring transparency to the German housing market. Based on high-quality data and machine learning, the Munich-based proptech company aims to show all 40 million properties in Germany and to connect potential buyers and sellers. Scoperty was initially piloted in Nuremberg with more than 100,000 properties, before expanding nationwide by the end of 2019. More transparency in the German residential housing market can mean a broader offering of properties for consumers. The team is working on prequalifying potential homeowners by aligning with Interhyp’s mortgage process. Interhyp is ING’s independent mortgage brokerage platform in Germany and Austria. For sellers and real-estate brokers this pre-qualification has important value in their choice of accepting offers from buyers. As part of the network effect, pre-qualified buyers may even benefit from three days access to new
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Our business home listings. Interhyp, which offers access to 500 mortgage lenders, had a record year in 2019, with €24.5 billion in new residential mortgages, and 9.0 percent market share in Germany.
More examples of how we’re providing a differentiating customer experience come from Poland, where Wholesale Banking clients can now sign credit documentation electronically, and Belgium, where customers are able to begin the mortgage process online.
Australia, Austria, Belgium, France, Germany, Italy, Poland, and Spain. And we topped the rankings on both trust and digital services.
We are making progress strengthening our global KYC organisation and activities throughout ING.
ING continues to work on the global KYC enhancement programme, which emphasises regulatory compliance as the key priority. This is a sizeable operation as we have activities in over 40 countries and have more than 38 million customers. The programme encompasses all client segments in all
Read more on KYC in the ‘Developments in risk and capital management’ chapter.
London-based company called Katana Labs, with backing from ING Ventures and other investors.
Wholesale Banking clients were able to initiate and receive instant payments in Hungary as of July 2019. Instant payments are now processed within five seconds, with a maximum amount of HUF
ING is considered an industry leader in the distributed ledger technology (DLT) space. In 2019,
We also teamed up with commodity companies and financial institutions to launch Forcefield, a blockchain-based inventory management system that makes post-trade commodity transaction processing cheaper, safer, and more efficient. It manages commodities throughout their entire supply chain life cycle and reduces the risks and costs of handling physical inventory.
USC will cut out intermediaries, reduce exchange-rate risks, making the payments and settlements process faster and lowering transaction costs.
In Q4, blockchain-based trade finance platform Contour, co-founded by ING Ventures, launched in
We strive at all times to protect customer data and privacy in line with the new European regulations. Customers’ needs and expectations are changing rapidly and companies have no option but to embrace this shift and adapt. At the same time, open banking requires banks to rethink traditional products and services, and go beyond traditional banking territory in creating new customer experiences.
We’ve chosen a strategic approach towards the revised Payments Services Directive (PSD2) and open banking. PSD2 is a step forward in delivering our platform strategy. It opens ING up to collaborate with third party providers who can innovate with us to offer our customers more options in how they manage their money and make payments online. We’ve implemented PSD2 in all 17 countries that fall under PSD2 legislation. This helps us to become a global platform bank, scalable, open and borderless, with one user experience, one API (application programming interface) solution and one developer portal to efficiently and seamlessly connect and interact with customers and partners.
APIs are essential for enabling digital businesses, as they are the de facto standard for integration and co-creation with our partners. With open banking, we are laying the foundation for the bank of the future. We provide the key capabilities that allow ING to open up by establishing secure, scalable, compliant and uniform connectivity with external parties via APIs.
We are digitalising more processes to make them convenient and time-saving for customers. For example, in 2019, with Apple Pay, we enhanced the experience of our mobile app users in the
Netherlands, Germany, Romania and Spain. In Germany and Poland, we now offer features that help customers to better manage their money by notifying them of upcoming payments, similar to the ‘Kijk Vooruit’ feature in the Netherlands. We also made Google Pay available in Germany and
Turkey, Poland, Spain, Romania, Belgium, the Netherlands, Italy, Austria and Luxembourg.
No matter how big or small, businesses everywhere are increasingly digitalised and expect their bank to be connected and integrated into their world. They want digital solutions that are smart, personal and easy. To meet these needs and deliver an exceptional experience for these
This includes enabling merchants in Turkey to accept payments more easily via their smartphones rather than expensive point-of-sale terminals; an online banking platform that gives businesses a single access point to all their financial products and services; and instant loans for entrepreneurs in
Germany through our acquisition of fintech Lendico. In November 2019, new loan utilisation increased from €1 million to €14.4 million.
For the remaining four in scope, fossil fuels, shipping, aviation and steel, we provided an update on progress to date, initiatives and next steps. Quantitative results for these four sectors are expected to be disclosed in 2020.
International Energy Agency and inform us what needs to shift, by how much and by when. This is where financing comes in – and ING can have an impact.
The client data underlying the Terra approach is obtained from global databases that track public and private asset level and company data worldwide in the sectors in scope. This is easier for clients, as they are not required to provide any additional data themselves.
In December 2018, the global banks BBVA, BNP Paribas, Société Générale, and Standard Chartered joined ING in making the Katowice Commitment to align their loan portfolios with global climate goals using a similar approach. We have also personally and individually engaged with more than 40 banks interested in the work ING is doing and the positive results are visible.
ING is considered one of the pioneers in sustainable finance, having introduced the first sustainability ESG-linked loan and a made-to-measure sustainability improvement loan. In 2019,
ING continued to shape this sector and open up new markets by developing sustainability improvement concepts and financial products.
In the second quarter, we announced the world’s first sustainability improvement derivative (SID)
ING was also the sole green structuring advisor for the Norwegian bank SR-Boligkreditt’s €500 million first green covered bond, helping to draft a green bond framework that stipulates investments in green buildings, renewable energy and clean transportation.
Belgium, we also offer a consumer loan with a reduced interest rate to help customers pay for green refurbishments.
To take sustainable finance further in the business we have set up regional sustainable finance teams in the Americas and Asia to support our clients in these regions.
Our efforts in this area are being recognised. In 2019, we were ranked as ‘climate action leader’ by the leading global environmental disclosure platform CDP for the fifth year.
We believe that the right information at the right time can help people make better financial decisions. For example: ▪ In the Netherlands the ’Kijk Vooruit’ forecasting tool gives customers an overview of their planned and predicted transactions, allowing them to gain more control over their finances.
▪ In Australia, Everyday Roundup makes saving money and paying off your home loan easier and more convenient for customers in Australia. ING customers saved AUD 81 million via 70 million transactions by having ERU enabled on almost 300.000 accounts. The average saving was AUD
▪ Also globally, hundreds of ING colleagues took part in Global Money Week, volunteering in classrooms across the Netherlands, Spain, Czech Republic, Luxembourg, Philippines, and Turkey to teach young people about money management.
Nederlandse Schuldhulproute, along with several other banks and the Dutch Banking
▪ In Romania, we supported Banometru to help adults with financial difficulties to access financial planning and counselling.
Community Hub promotes these activities through the TFI community and network.
The underlying result before tax decreased 6.4 percent to €4,744 million in 2019, due mainly to higher expenses and increased risk costs. Underlying income was 0.3 percent higher, driven by higher income in most of the Retail Challengers & Growth Markets (supported by strong commercial growth and an increased retail customer base) and Retail Belgium.
Underlying operating expenses rose 3.2 percent compared with 2018. The increase was mainly due to higher KYC-related costs, increased regulatory expenses, higher salaries and continued investments in business growth, partly offset by cost savings. The underlying cost/income ratio was 57.1 percent in 2019, compared with 55.5 percent in 2018.
Treasury-related products) grew by €2.0 billion in 2019, equally divided over mortgages and other lending. Net growth in customer deposits (excluding Treasury) was €8.4 billion in 2019. Net fee and commission income rose by €10 million, or 1.5 percent, primarily due to higher daily banking fees.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Our business compares with a net release of €41 million 2018, which included releases in both mortgages and business lending.
Risk costs were €-53 million, or -6 basis points of average customer lending, compared with €-27 million in 2018. The net release in 2019 mainly related to model updates for mortgages, while the net release in 2018 included a significant release in the consumer lending portfolio.
Retail Other’s underlying result before tax increased 0.3 percent to €935 million in 2019, from €932 million in 2018. This was mainly due to higher income, partly offset by increased expenses and higher risk costs.
ING Bank’s stake in TMB due to one-offs. Net interest income rose 3.6 percent to €2,787 million, reflecting volume growth in lending and customer deposits, and a stable total interest margin. This increase was offset by accounting asymmetry in Treasury with an offset in other income. The net production in customer lending (excluding currency effects and Treasury) was €7.8 billion, with increases mainly in Spain, Poland and Australia, while Turkey and Italy declined. Net customer deposits grew by €6.9 billion in 2019, with the largest increases in Poland, Spain and Australia. Net commission and fee income increased 7.1 percent to €423 million driven by increases in most countries, but declined in Spain and Turkey. Investment and other income rose by €68 million, mainly due to the aforementioned accounting asymmetry in Treasury and a higher dividend from
Bank of Beijing, partly offset by a lower profit from TMB.
Operating expenses increased by €177 million, or 8.7 percent, to €2,210 million. This increase was in addition to higher regulatory costs and legal provisions, mainly due to higher expenses to support business growth and the implementation of bank-wide regulatory programmes, including
The full-year 2019 results for Wholesale Banking show that conditions were challenging in our markets. The net result declined to €1,352 million from €1,877 million in 2018. There were no special items excluded from the underlying results in both years. The underlying result before tax dropped 27.6 percent to €1,830 million, down from €2,529 million in 2018. The decline reflects elevated risk costs (compared with a relatively low level a year ago), lower revenues mainly in
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Our business due to investments in KYC enhancement and innovation, while 2018 included a release from a legal provision.
Total underlying income of Wholesale Banking fell 3.8 percent to €5,298 million compared with 2018, mainly reflecting lower revenues in Financial Markets, Lending and Treasury-related revenues, while 2018 included the aforementioned loss on the intended sale of an Italian lease runoff portfolio. In 2019, the net core lending book (adjusted for currency impacts and excluding
“Digital is at the core of our branches, so we’ve fully equipped them to meet today’s digital needs. This is the way we want to differentiate ourselves: a digital bank with a great human touch. I’m proud that we’ve introduced the concept in seven countries, giving them the same look, feel and service model. All of ING's branches will adopt this new, home-style concept. In the future, we need to focus on how a physical space can benefit customers, considering that we’re moving into a platform business that brings services together in one place.
It is our policy not to ignore, tolerate or excuse any behaviour that is not in line with our Orange
(the process to know our customers and verify their integrity) and Risk training and tailor it to our specific business needs. We further embedded the Orange Code dilemma model in existing decision-making processes and trained experts to support the organisation to put it into practice. In addition, new employees undergo a series of e-learnings on topics such as money laundering, compliance, dealing with dilemmas, data risk and integrity in practice. We also rolled out a new elearning module to all employees on data protection in 1Q 2020.
We encourage people to speak up when they encounter unacceptable behaviour in the workplace, also anonymously. Read more about our Whistleblower policy on our corporate website.
In 2019, we created a global code of conduct that builds on the Orange Code and gives employees worldwide concrete examples of how to put the ING values into practice. It was introduced in the first quarter of 2020. This is in addition to the local codes of conduct in place in various countries. In the Netherlands, all our employees are also required to take the Banker’s Oath, committing to maintaining high standards of ethical behaviour. On 31 December 2019, 98 percent of Dutch-based employees were covered by the oath.
personal purpose and their career goals, we plan to introduce individual development plans on a global level starting in 2020.
To make sure our employees are equipped to do their best to help ING achieve its ambitions and have the opportunity to share their views, we strive to create a continuous dialogue with our people using an innovative approach called continuous listening, with specific measurements linked to business performance.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Our people
These outcomes are a clear message from employees that the Management Board takes very seriously. Action plans are being developed in the business lines and on a local level and will be monitored throughout the coming year.
ING’s Think Forward Leadership Programme (TFLP) aims to develop greater leaders and better managers who can engage staff and enhance team performance. Introduced for senior leaders in 2017, it was extended later that year to people managers globally as the TFL Experience (TFLE), a four-day programme with follow-up learning activities. The first phase of the programmes focused on self-awareness, collaboration and personal ownership. Phase 2, launched for TFLP in 2018, focused on high sustainable performance, talent management and performance transparency. It will be extended to the TFLE in 2020. A total of 4,100 leaders and managers have so far participated in TFLP and TFLE. This includes almost all top-level management and around 80 percent of people managers.
In line with our digital ambitions, we are piloting a learning platform where our people continuously upgrade their skills and learn new ones in a virtual environment. The objective is to make learning more accessible and to share the knowledge that already exists in our organisation by enabling specialist colleagues to recommend learning and development solutions to others. Through technology and digitalisation we can bring standardisation and greater efficiency and better target our learning to develop key skills and capabilities. It’s all part of our switch from traditional classroom trainings that take place a few times during the year to continuous on-the-job learning.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Our people is increasing demand within the financial sector for people with competencies to strengthen compliance with regulatory demands, particularly in areas such as Risk and Compliance.
Among other things, we further facilitated targeted cross-border sourcing via the global site to find suitable candidates for more difficult-to-fill profiles. In October, we joined the ‘Kickstart AI’ initiative with four other Dutch multinationals, which is aimed at attracting highly skilled artificial intelligence professionals to the Netherlands.
At the same time, ING is continuously looking for ways to improve operational processes. This could mean digitalising or automating processes, restructuring activities to meet our business requirements, transferring certain activities to shared services centres, or outsourcing others to third parties. In some instances this could lead to certain jobs changing, relocating or becoming redundant. These decisions are made with care and consideration and with a full risk-assessment process.
ING. To facilitate this we have a variety of local schemes in place, such as a comprehensive social plan and mobility centre in the Netherlands.
To improve the way HR serves the business we are developing our people analytics capabilities to deliver people services that are more data-driven and objective. We use data to boost business performance and monitor employee-related risk, such as engagement. There is an existing focus on creating a differentiating employee experience, building management capability and innovation. Naturally, our employees expect us to keep their data safe and comply with data privacy rules (GDPR). ING’s employee privacy statement, which was introduced in 2018, empowers our people to take control of their own data. To further enhance employee awareness of data protection we rolled out a global e-learning module in 1Q 2020.
In 2019, we unveiled a new design for our office spaces to encourage collaboration, flexibility and teamwork, in line with ING’s one Way of Working. Our new building in Amsterdam, which opened in
▪ In Germany, ‘Leading WellbeING’ trains leaders to support and enhance wellbeing in their teams.
ING’s diversity manifesto, ‘Success through difference’, applies to all employees worldwide. It explains what diversity means to ING, why it is important, and what employees can do to promote diversity. There are more than 20 employee networks globally that bring together like-minded people within ING who want to advance our diversity and inclusion efforts in areas such as cultural diversity, for LGBT employees, for women and for employees with a disability.
To showcase the diversity of people within ING and help everyone to feel included, whatever their background, culture, experience, religion or sexual orientation, we ran a global diversity and inclusion week in June 2019. All employees globally were invited to get involved in more than 150 activities across ING.
We continued to work with the countries and business lines to refine and implement their plans to work towards the 70 percent principle, which gives managers a basis for building mixed teams around appropriate dimensions of diversity. It strives for a 30 percent difference in team make-up.
Like many other financial organisations, getting the right mix of people remains a challenge in parts of the business and there is more to be done to redress imbalances that still exist. ING is committed to making progress in this area. We promote equal remuneration for male and female
Looking at succession, 41 percent of the high-potential graduates that joined the 2019
When looking at board composition we look at diversity in a broad sense, striving for factors such as nationality, gender, age, education and work background. We have a Diversity & Competence matrix, which provides a clear overview of the aspects of diversity in our Management Board. See the ‘Corporate governance’ section for more information.
Nations’ Global Compact Women Empowerment Principles and we support the UN Standards for
ING is recognised worldwide as a top employer, also among IT professionals. Our achievements in
Managing risk is at the core of ING’s business. Financial risks include credit risk, for example when we offer loans, market risk through our trading and banking book positions, and liquidity or funding risk through financial management.
Non-financial risks are those associated with IT and cybersecurity, our daily operations (e.g. fraud and money laundering), compliance, adhering to socially-acceptable ethical norms and reputational issues.
On the financial risk side, in 2019 our credit risk costs increased, but remained below our throughthe -cycle average. During the year, supervisory model impact (largely related to the European
See ‘Note 52 Capital management’ in the ‘Consolidated Financial statements’ for more information.
ING’s Risk Appetite Framework, which is complemented by the Non-Financial Risk Framework, provides a single coordinated approach and gives the business an overview of the various risks ING
To help our customers be more sustainable, environmental and social risk (ESR) assessments are integrated into our due diligence processes. We have an ESR framework that helps us make transparent choices about how, where and who we do business with. In 2019, this framework was renewed, based on input from customers, peers, NGOs and our own experts. For more information about ESR see the ‘Risk management’ section.
In an increasingly open and connected environment we have to be ever more vigilant about data protection, data privacy and IT security. Regulations like the new European Payments Services
Wholesale Banking we have developed a platform that uses advanced analytics to analyse transactions as part of the know your customer (KYC) process. It collects and connects data about payments, lending and financing to provide insights that would not normally be readily available.
Fighting financial crime is a challenge affecting the entire financial services industry. ING
cooperates with other banks, law enforcement and regulators at national and European levels to strengthen the resilience of the financial system. This includes working with the Dutch central bank
(DNB) and the Dutch Banking Association (NVB) to harmonise efforts to fight financial economic crime, as well as participating in public-private partnerships such as with the Dutch Financial
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 banks that serve other financial institutions to be more effective in their KYC efforts. In September 2019, ING and four other Dutch banks announced the ambition to set up a joint organisation to monitor payment transactions.
The structural solutions that the KYC enhancement programme focuses on are divided into five pillars: ▪ Policies: Develop and roll out a global KYC policy, global KYC risk appetite statements, and customer and maturity assessments.
▪ Monitoring: Translate risk assessment outcomes into scenarios and alert definitions that can be applied to transaction monitoring.
See the ‘Risk management’ section for more information about the global KYC enhancement programme and ING’s progress in each of these pillars. The main developments for 2019 are highlighted in the graphic below.
ING faces the risk of compliance failures, especially in areas where regulations are unclear, subject to multiple interpretations, in conflict with each other, or where regulators revise their guidance.
While we are vigilant in our efforts to comply with applicable laws and regulations, it remains a significant operational challenge to meet all the requirements within the regulatory timelines.
People with the necessary knowledge and skills are scarce and implementing the necessary processes and procedures has significant implications for IT systems and data.
Tax policies, procedures and a tax control framework have been implemented to support management in mitigating potential tax risks in a prudent manner. Internal monitoring, control and reporting of tax-related risks take place on a continuous basis with regular reporting to various stakeholders. For 404/SOX purposes (section 404 of the Sarbanes-Oxley Act), an ‘effectiveness of
Compliance, KYC and Risk training and tailor it to our specific business needs. A Risk Academy has been set up for people working in Risk, with the aim of eventually bringing this training to a broader audience.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Composition of the Executive Board and Management Board Banking
ING Group’s approach to sustainability is shaped by our specific skills and expertise as a financial company, our vision of the future and the expectations of our stakeholders. Reviews of our performance by sustainability research and rating agencies help us to improve our strategy and policies. ING’s scores and rankings in key sustainability benchmarks show our progress as follows.
Benelux 120 Constituent Constituent Constituent 1 The 2019 ESG Risk Rating reflects a new methodology which does not compare with the previously reported ESG Ratings which Sustainalytics has decided to discontinue.
Important dates in 2020 28 April 2020 Annual General Meeting 30 April Ex-date for final dividend 2019 (Euronext Amsterdam)
4 May Record date for final dividend 2019 entitlement (Euronext Amsterdam)*
8 May Publication results 1Q2020 11 May Payment date final dividend (Euronext Amsterdam)*
11 August Record date for interim dividend 2020 entitlement (Euronext Amsterdam)
All dates are provisional * Only if any dividend is paid
The contents of ING’s integrated annual reports are compiled with active input from business experts, vetted by senior managers, and discussed and approved annually by members of the
All financial data in this report is collected in line with annual accounting standards. The nonfinancial performance data published in this report covers five key topics: sustainable business, customers, human capital, environment and community investment. We extract or derive data on sustainability-related business activities, customers and human capital from our business systems, in line with the data in our financial statements. Data on the topics environment and community investment is collected through an online data management system. The centralised data processing team at ING Group validates and processes the environmental data from our operations worldwide in collaboration with an independent, third-party consultancy.
(KPMG). KPMG has reviewed, and provided a limited level of assurance, on the non-financial information in the Report of the Executive Board as defined in the infographic in the World Around
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > About this report
We performed our review on the Non-financial Information and our audit on the Four Specific Topics in accordance with Dutch law, including Dutch Standard 3000A ’Assurance-opdrachten anders dan opdrachten tot controle of beoordeling van historische financiële informatie (attest-opdrachten)’ (assurance engagements other than audits or reviews of historical financial information (attestation engagements)). Our responsibilities in this regard are further described in the ‘Auditor’s responsibilities’ section of our report.
ING Group is the parent company of a group of entities. The Non-financial Information and the Four Specific Topics incorporate the consolidated information of this group of entities to the extent as specified in section ‘About this report’. Our group assurance procedures consisted of both assurance procedures at ING corporate level and at country level. Our selection of countries in scope of our assurance procedures is primarily based on the country’s individual contribution to the consolidated information.
The Key Assurance Matter of our review and audit is the matter that, in our professional judgement, was of most significance in our review of the Non-Financial Information and our audit of the Four Specific Topics. We have communicated the Key Assurance Matter to the Supervisory Board. The Key Assurance Matter is not a comprehensive reflection of all matters discussed.
This matter was addressed in the context of our audit of the Four Specific Topics as a whole and we do not provide a separate opinion on this Key Assurance Matter.
The references to external sources or websites in the Non-Financial Information are not part of the Non-Financial Information as reviewed by us. We therefore do not provide assurance on this information.
The Supervisory Board is responsible for overseeing the reporting process of ING Group.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Independent auditor’s assurance report
We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the review and audit, and significant findings that we identify during our review and audit.
Think Forward strategy, and in particular the ambition to become a go-to financial services platform offering customers a uniform experience based on a mobile-first approach. In 2019, ING
At the same time, we also realise that we’re on a journey, and that means making adjustments when circumstances require it. In 2019, that included applying lessons learned in the approach to combining operations in ‘Unite be+nl’, as well as adjusting innovation and transformation priorities in order to free up resources needed to focus on our know your customer (KYC) and anti-money laundering (AML) enhancement programmes. This had an impact on the progress of Think Forward priorities.
Supervisory Board in 2019 2019 was an intensive year for the Supervisory Board members, who committed a lot of time to fulfilling their responsibilities. Supervising an international bank like ING is becoming more and more complex and as a result more time consuming. We’ve extended the length and number of our meetings and also of committee meetings. We also travelled to various ING countries and visited local ING operations.
A high level of engagement is essential to fulfill the role that society wants us as the Supervisory
Board to play. I’m grateful to my Supervisory colleagues for their commitment and the investment of their time, without which this engagement would not be possible.
The Remuneration Committee also put a great deal of work into the preparation of the proposed update to ING’s corporate board remuneration policies as required by the new Shareholders’ Rights
and the Supervisory Board’s members had with various stakeholders. A dialogue that is deepening and broadening. As the pace of change in the world increases and ING’s role in society transforms, we’ll continue to intensify these dialogues, especially on complex and sensitive matters.
The Supervisory Board also spent time reflecting on longer-term succession planning for the
‘what’ and the ‘how’. We believe this also better aligns with developments among external stakeholders’ and their expectations.
I very much regret to see Ralph leave. On behalf of the ING Supervisory Board, I want to thank him for all his contributions to ING in his 29 years of dedicated service. Ralph has done an exemplary job in preparing our bank for the future with the Think Forward strategy. His vision and customer focus have been an inspiration throughout the seven years he served as CEO. In that time he has transformed ING into a leading digital bank, and put ING on the path to becoming the go-to financial platform for customers. He has created value for all stakeholders and played a leading role in driving sustainability efforts in the financial industry.
Together with my Supervisory Board colleagues I am now in the process of identifying and nominating a suitable successor. Further announcements on the succession process will be made if and when appropriate.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Chairman’s statement
On behalf of all my colleagues, I want to thank all our ING employees worldwide for their efforts to put into practice ING’s purpose to empower people to stay a step ahead in life and in business.
We value the contributions of all employees and hope we can count on you in the future. Your loyalty and engagement are essential in building the ING of tomorrow.
The Supervisory Board met 10 times in 2019. On average, 95 percent of the Supervisory Board members were present at the meetings. This attendance rate illustrates that the members of the
Besides the topics mentioned in the introduction of this report, the Supervisory Board also focused on the progress and delivery of the various transformation initiatives and how these relate to external developments in areas such as the regulatory domain, to ensure the right priorities continue to be set, with the appropriate allocation of resources. Also discussed were the anticipated impact of the low interest rate environment, model risk, Basel IV, IFRS 16, SRD II and several topical regulatory themes with a global ING scope such as ICAAP, compliance, IT, sourcing, and suitability requirements for boards and key function holders. Furthermore, the Supervisory Board discussed the financing of the company in accordance with our capital and liquidity adequacy in line with our annually updated Risk Appetite Framework, dividend capacity and ongoing supervisory developments.
At the 2019 Annual General Meeting (AGM), a majority of our shareholders voted not to discharge the (former) members of the Executive Board and Supervisory Board from their potential liability against the company for their duties performed for the 2018 financial year– the year in which the settlement agreement with Dutch authorities had a significant negative impact on ING. As clearly stated at the 2019 AGM, and in all other communication with shareholders and investors before and since the meeting, ING fully understands the dissatisfaction expressed through this vote and takes this matter very seriously.
The Supervisory Board, together with the Executive Board, regarded the rejection of the discharge as a clear signal and firm encouragement to continue the know your customer (KYC) enhancement programme that was already launched in 2017. This programme is designed to ensure that ING
Ahead of the 2019 AGM, ING had interactions with large institutional shareholders, Dutch shareholder interest groups and proxy voting advisors. During these engagements—which ING
In August 2019, the Executive Board and Supervisory Board published a letter expressing their understanding of the shareholder vote against discharge and detailing the actions ING has undertaken with respect to the global KYC enhancement programme. This letter was published in the General Meeting section on www.ing.com and was proactively distributed to the investment community.
3 Additional RemCo meetings took place in 2019 because of increased attention to the board remuneration policies, among others in view of SRD II.
SB and EB remuneration policy The Supervisory Board intends to submit proposed new remuneration policies for the Executive
throughout the bank. More broadly, ING has launched a bank-wide KYC enhancement programme, the progress of which is being monitored by and discussed between the Supervisory Board, management and the relevant supervisors.
As part of the aforementioned programme and also part of the Permanent Education session on
The annual Supervisory Board Knowledge Days, which took place in Amsterdam on 17 and 18
January 2019, were combined with regular Supervisory Board meetings and focused on compliance, AML/KYC, innovation and digitalisation, also including the concept of open banking.
Throughout the year, a number of other educational sessions on specific topics were organised for and at the request of the Supervisory Board. For 2019 a balance was sought between sessions focused on Compliance/KYC and other relevant topics, the latter including among others: the impact of low interest rates and mitigating measures, how to manage ING’s reputation and brand, the platform business model, model risk management challenges, ICAAP, pricing and valuation adjustments to trading books, ING’s credit rating in relation to the risk appetite framework, risk management of innovation, information security and anti-fraud, the Organisational Health Index, talent management and talent-to-value, and performance management and remuneration practices.
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 management in dedicated speed-meet sessions. Such interaction contributes to a better mutual understanding and alignment on what matters most to ING, both for its employees and for the
Supervisory Board. As in previous years, the Supervisory Board will continue this practice.
Management Board Banking. In general ING is progressing well on the delivery of structural savings, despite the impact of an increase in programmes to comply with key regulatory requirements.
Our plans to become a go-to platform for customers’ financial needs, to participate on others’
Strategy Day. The Supervisory Board acknowledges it is important to take into account the duty of care towards those stakeholders of the bank who may be impacted by the transition.
At the Annual General Meeting held on 23 April 2019 ING’s proposal to pay a final dividend of €0.68 per share over the previous reporting year was approved. The proposal was based on ING being ahead of prevailing fully-loaded (capital) requirements and being well positioned for future regulatory uncertainties.
The Supervisory Board approved the annual review of the risk appetite framework that reflects recent changes in regulatory requirements. Per standard practice, the Supervisory Board was informed in detail throughout the year of the potential financial and non-financial risks for ING, including updates on upcoming regulatory changes (such as Basel IV) and political and economic developments in various countries and regions, and discussed how these could best be mitigated.
(inclusive) by the 2015 Annual General Meeting. The 2019 Annual General Meeting reappointed
KPMG, in its role as ING’s external auditor, audited ING’s 2019 accounts and financial statements. As part of the standard procedures, KPMG declared itself independent from ING, in compliance with applicable rules and regulations. Based on the Audit Committee proposal, the Supervisory Board supported the audit plans of the internal and external auditor, the latter including the scope and materiality of the external audit. There has been a significant increase in regulatory reporting since the start of ECB supervision. Reporting timelines are strict and the granularity of the data being requested has increased. In addition, local requirements need to be met. ING aims to safeguard data quality and all reporting processes so these remain up to standard.
As in previous years, the Supervisory Board also conducted its annual self-assessment over this reporting year, facilitated by an independent external party and with input from several executives who regularly interact with the Supervisory Board and attend Supervisory Board meetings. The selfassessment has been made more comprehensive by specifically addressing the ‘what’ (roles and responsibilities) and the ‘how’ (culture and behaviour). We believe this also better aligns with developments among external stakeholders’ and their expectations.
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 challenge and support the Executive Board and the Management Board Banking to enable more clearly set expectations on prioritisation and milestones.
Committee held separate sessions with the external auditor, the general manager of the internal audit department, the CFO and the Group Controller. He also met with various senior managers.
Board and the Supervisory Board and the Variable Remuneration Accrual Model, which was introduced in 2018 (see also ‘Remuneration Committee meetings’ in this section).
The Nomination and Corporate Governance Committee discussed the medium- to longer-term succession planning for the Executive Board (including the new CFO), the Management Board
Banking (including the new Head of Market Leaders) and the Supervisory Board. With regard to
Board composition, taking into account the evolving role of supervisory boards in general.
Finding suitable candidates remains challenging, as numerous requirements must be met to enhance the composition of the Supervisory Board including regulatory requirements, diversity, banking and other industry knowledge, outside positions, independence, no conflicts of interest, availability, etc. Diversity-related aspects that are being taken into account, include the minimum and optimal size of a supervisory board and how to arrive at an appropriate balance in its representation of regions, age, gender, and financial and generalist expertise. The Nomination and
In 2019, the Remuneration Committee met 10 times. On average, 97 percent of the members were present at the scheduled meetings. Regular and additional meeting have taken place in view of the development of the proposed remuneration policies for the Executive Board and Supervisory Board and the related stakeholder engagement plan.
The Remuneration Committee, where necessary with input and advice from the Risk Committee following strengthened risk management governance, reviewed the predefined thresholds above which the pool for variable remuneration may be unlocked for those eligible. The committee discussed the variable remuneration pool and reviewed the performance assessment for the
In view of the new SRD II requirements, which will become effective as per 1 January 2020, the
Regulations Framework was updated as part of an annual review, including the Variable
At the Annual General Meeting on 23 April 2019, Mariana Gheorghe was reappointed as Supervisory
Annual General Meeting and he then also became a member of the Risk Committee. Herna
After seven years of dedicated service, Robert Reibestein, also chairman of the Risk Committee and a member of the Audit Committee and the Remuneration Committee, decided in 4Q 2019 to step down from the Supervisory Board per 1 January 2020, because of persistent personal health issues.
On 7 February 2019 Tanate Phutrakul was appointed as CFO and member of the Management
Information as at 31 December 2019. Please note the following: the competencies included in this matrix represent a non-exhaustive overview of the competencies of ING’s corporate board members that they already had before joining ING and/or developed during their position(s) at ING. The purpose of this matrix is to provide ING’s stakeholders with an overview on the main competencies ING considers to be the most relevant for its stakeholders. As ING’s situation, markets and environment are subject to continuous change, the contents of the matrix is subject to change as well. Furthermore, for the appointments of new corporate board members, all relevant competencies are also shared with the DNB/ECB based on their Suitability Matrix to assess the collective competence of members of the members of the management/supervisory body.
Management Board Banking for their hard work in 2019. Important milestones were the further steps taken towards creating an open banking platform for customers, further digitalising our offering and other innovative achievements such as the integration of Apple Pay for our retail customers. The Supervisory Board would also like to thank all ING employees for their contribution in realising these achievements and for continuing to serve the interests of customers, shareholders and other stakeholders of ING. The Supervisory Board is fully aware that ING is still going through a challenging period with economic crime and regulatory programmes, and would therefore also like to thank everyone for their efforts to regain the trust of our customers and other stakeholders.
More information can be found in the ‘Corporate governance’ chapter and the ‘Remuneration report’ chapter, which are deemed to be incorporated by reference here.
Governance Code effective as from 1 January 2017, by ING Groep
ING’s application of the Dutch Corporate Governance Code is described in the 2019 publication ING’s application of the Dutch Corporate Governance Code, available on the website of ING Group. This is to be read in conjunction with this chapter and is deemed to be incorporated into this chapter.
▪ NYSE listing standards generally require that a majority of board members be ‘independent’ as determined under the NYSE listing standards. Under the Corporate Governance Code, all members of the supervisory board, with the exception of not more than one person, should be
▪ NYSE listing standards require that, when a member of the audit committee of a US company serves on four or more audit committees of public companies, the company should disclose
Articles of Association are amended. For reasons of flexibility and to meet the requirement as set forth in the Bank Resolution and Recovery Directive (‘BRRD’) that the amount of authorised share capital should at all times be sufficient to permit the issuance of as many ordinary shares as required for a potential future bail-in, ING Group seeks to set the authorised capital in the Articles of Association at the highest level permitted by law, which is five times the actually issued share capital.
The notification will be recorded in a public register that is held by the Dutch Authority for the
ING Group is not aware of any investors (or potential shareholders) with an interest of three percent or more in ING Group other than those shown in the ‘ING shares’ chapter as per year-end 2019.
In addition, pursuant to Regulation (EU) no. 236/2012 of the European Parliament and the Council on short-selling and certain aspects of credit default swaps, any person who acquires or disposes of
ING Group encourages and recognises the importance of bilateral communication with the investment community. The Investor Relations department actively manages communications with current and potential shareholders, holders of ADRs, bondholders, industry analysts and rating agencies.
ING generally hosts one Investor Relations Day every two to three years. These events are announced in advance on ING Group’s website, and presentation materials are made available in real time on the website. This is in accordance with the applicable regulatory requirements intended to ensure that all shareholders and other market participants have equal and simultaneous access to information that could potentially influence the price of ING Group’s securities. ING Group’s Investor Relations Days can be accessed by means of live webcasts. ING
Board Banking members or divisional management members may also participate in investor meetings. These meetings are not announced in advance, nor can they be followed by webcast or any other means. Information provided during such occasions or in any contacts with the press is limited to what is already publicly available.
Conference presentations and face-to-face meetings with investors and/or analysts took place in 25 different cities across the globe.
The geographical distribution of ING Group’s investor base is diverse: an estimated 38 percent of our shares are held in the United States, 20 percent in the United Kingdom, 10 percent in France, 9 percent in Germany, 3 percent in the Netherlands, 5 percent in Switzerland, 8 percent in Rest of
Proposals to include items on the agenda for a General Meeting that have been adequately substantiated under applicable Dutch law can be made by shareholders representing together at least one per cent of the issued share capital.
Annual General Meeting dedicated web page on the website of ING Group (www.ing.com).
Pursuant to Dutch law, the record date for attending a General Meeting and voting on the proposals at that General Meeting is the 28th day before the day of the General Meeting. Only those who hold shares at the record date are entitled to attend the General Meeting and to exercise other rights related to the General Meeting in question on the basis of their holding at the record date, notwithstanding any subsequent sale or purchase of shares. The record date is published in the notice for the General Meeting. If the shortened convocation of 10 days is applicable (see above, paragraph: ‘Frequency, notice and agenda of General Meetings’), the record date is two days after the convocation date.
(www.ing.com) within one week following the meeting. In accordance with the Dutch Corporate
Shareholders may react to the draft minutes in the following three months, after which the final minutes are adopted by the chairman of the meeting in question and by a shareholder appointed by that meeting. The final minutes are made available on the website of ING Group (www.ing.com).
By exception to the provisions of the Dutch Corporate Governance Code, shareholders will not have the opportunity to react to the minutes of a General Meeting if a notarial report of the meeting is made, as this would be in conflict with laws applicable to such notarial report.
The responsibility for the management of ING Group is vested in the Executive Board collectively.
ING Group aims to have an adequate and balanced composition of its Executive Board. The
Details of the remuneration of members of the Executive Board, including shares granted to them, together with additional information, are provided in the ‘Remuneration report’ chapter.
ING Group subsidiaries in the ordinary course of their business on terms that apply to all employees. In connection with the aforementioned, the term loans does not include financial products in which the granting of credit is of a subordinated nature, e.g. credit cards and overdrafts in current account, because of a lack of materiality.
Legal, Corporate Strategy, Corporate HR, CoE Comms & Brand Experience and Corporate Audit
CRO on 1 August 2017. He is also a member and CRO of the Management Board Banking. Before becoming a member of the Executive Board, he was global head of Client Coverage within ING
Wholesale Banking. Steven van Rijswijk joined ING in 1995 in the Corporate Finance team holding various positions in the areas of Mergers & Acquisitions and Equity Markets. He holds a master’s degree in business economics from Erasmus University Rotterdam (the Netherlands).
Annual General Meeting on 23 April 2019. As announced on 20 February 2020, Ralph Hamers will step down as chief executive officer of ING Groep N.V. and ING Bank N.V. as of 30 June 2020. He will join UBS on 1 September 2020 and will become group chief executive officer per 1 November 2020.
In line with Dutch company law, the Articles of Association, the Dutch Corporate Governance Code as well as the Charter of the Supervisory Board, all members of the Supervisory Board are required to: ▪ act in accordance with the interests of ING Group and the business connected with it, taking into account the relevant interests of all stakeholders of ING Group; ▪ perform their duties without mandate and independent of any interest in the business of ING
Charter of the Supervisory Board, are subject to approval of the Supervisory Board.
Board can make to the Supervisory Board, it has been decided, taking into account the size of the
After a former member of the Executive Board has been appointed to the Supervisory Board, this member may also be appointed to one of the Supervisory Board’s committees. However,
strives to have at least 30 percent of the seats held by women, and at least 30 percent of the seats by men. These guidelines that relate to the composition of the Supervisory Board, are laid down in the Supervisory Board Profile. Based on this profile, the Supervisory Board is responsible for selecting and nominating candidates for appointment or reappointment to the Supervisory Board.
Under special circumstances the Supervisory Board may, with explanation, deviate from this general rule, for instance to maintain a balanced composition of the Supervisory Board and/or to preserve valuable expertise and experience. The retirement schedule is available on the website of
CRD IV restricts the total number of supervisory board positions or non-executive directorships with commercial organisations that may be held by a Supervisory Board member to four, or to two, if the Supervisory Board member also has an executive board position. The European Central Bank may, under special circumstances, permit a Supervisory Board member to fulfil an additional supervisory board position or non-executive directorship. Positions with, inter alia, subsidiaries or qualified holdings are not taken into account in the application of these restrictions. Such positions may not conflict with the interests of ING Group. It is the responsibility of the individual member of the Supervisory Board and the Supervisory Board collectively to ensure that the directorship duties are performed properly and are not affected by any other positions that the individual may hold outside ING Group.
On 31 December 2019, the Supervisory Board had four permanent committees: the Risk
Sarbanes-Oxley Act of 2002. Eric Boyer de la Giroday is a financial expert as defined in the Dutch
Corporate Governance Committee were: Hans Wijers (chairman), Mariana Gheorghe and Herna
Remuneration and share ownership Remuneration of the members of the Supervisory Board is determined by the General Meeting and is not dependent on the results of ING Group. Details of remuneration are provided in the
Remuneration report on page 133. Members of the Supervisory Board are permitted to hold shares in the share capital of ING Group for long-term investment purposes. Details are given on page 133.
Professor of governance, institutions and internationalisation at Erasmus University Rotterdam (the
Foundation, chairman of the Board of Maatschappelijke Alliantie (the Netherlands) and chairman of the Board of Noaber Foundation.
Strategic Vitality Ltd and non-executive chairman of Athla Capital Management Ltd.
Member of the Supervisory Board of Stichting World Wildlife Fund (the Netherlands) and member of the advisory committee of Forward.one.
PostNL N.V. and non-executive Board member and chairwoman of the Nomination Committee of
ING has a process in place where, under the supervision and with the participation of the CEO and
The contracts entered into with the members of the Executive Board provide for severance payments that become due upon termination of the applicable Executive Board member’s contract, including if termination occurs in connection with a public bid as defined in section 5:70 of the Dutch Financial Supervision Act. For purposes of calculating the amounts due, it is not relevant
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Corporate Governance whether or not termination of the employment or commission contract is related to a public bid.
Executive Board’s strategy. In addition ING has a process in place where, under the supervision and with the participation of the CEO and CFO, ING assess the effectiveness of internal control over financial reporting, based on the criteria of the Committee of Sponsoring Organisations of the
Executive Board has made an assessment of the effectiveness of the ING Groep N.V.’s internal control and risk management systems. Based on this assessment, the Executive Board states that during the year under review: Dutch Corporate Governance Code Statement by Executive Board
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Dutch Corporate Governance Code Statement by Executive Board
We're committed to conducting our business with integrity, and regulatory compliance remains the priority for 2019 and beyond.
In 2019 the board of ING Continuity Foundation (the ‘Board’) held two meetings, on 27
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. 132
As required by section 5:25c paragraph 2(c) of the Dutch Financial Supervision Act, each of the signatories hereby confirms that to the best of his knowledge: ▪ the ING Groep N.V. 2019 financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of ING Groep N.V. and the enterprises included in the consolidation taken as a whole; and the ING Groep N.V. 2019 Annual Report gives a true and fair view of the position at the balance sheet date, the development and performance of the business during the financial year 2019 of ING Groep N.V. and the enterprises included in the consolidation taken as a whole, together with a description of the principal risks ING Groep N.V. is being confronted with.
Overall, the Supervisory Board has concluded that the Executive Board members did well to deliver our results in 2019. 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 primary customers, ongoing execution of the
Commission’s non-binding draft guidelines for disclosure. We intend to update our 2020 remuneration report to reflect the final guidelines, which we expect will have been published by then, also taking into account the advisory vote of shareholders regarding this 2019 remuneration report.
Board highly appreciate the participation of stakeholders and the meaningful insights they provided.
Subject to approval by shareholders at the next AGM, the new remuneration policies for Executive
This part of the Remuneration Report explains how the 2019 EB Remuneration Policy and the current SB Remuneration was implemented during 2019. This part is the Remuneration Report as referred to in the Dutch Act implementing Shareholder Rights Directive II (SRD II). This Remuneration
Report will be presented to the 2020 AGM for an advisory vote. In the Remuneration Report 2020 an explanation will be included on how the result thereof has been taken into account. Also the requirements for the report prepared by the Supervisory Board as stated in the Dutch Corporate
Supervisory Board member Robert Reibestein, announced his early resignation effective 1 January 2020 because of persistent personal health issues.
The current remuneration policy for the Executive Board was adopted by shareholders at the AGM
▪ 11 May 2015 to lower the maximum variable remuneration in line with legal requirements and specify that variable remuneration for the Executive Board be paid fully in shares
▪ 8 May 2017 to extend the deferral period of the variable remuneration from three to five years.
For 2019, the remuneration policy for the Executive Board remained unchanged. Shareholders will be asked to vote on a revised Executive Board remuneration policy at the 2020 AGM, which is a binding vote. For further information on the revised policy, we refer to the Chairman’s letter on page 133.
Supervisory Board. In line with the 2019 Executive Board Remuneration Policy, the Executive
Board’s total direct compensation for 2019 was compared to a peer group EURO STOXX 50 companies. The total direct compensation under the 2019 Executive Board Remuneration Policy is below the median of the EURO STOXX 50. This approach is in line with the requirements laid down in the Dutch Banking Code.
Variable remuneration is paid fully in shares. Forty percent of the variable remuneration is paid upfront and 60% is deferred. For all shares awarded to Executive Board members (in their capacity as board members) there is a minimum retention period of five years from the date of conditional grant and one year from the vesting date. Vesting of any deferred variable remuneration is not subject to performance and can only be adjusted in case of an ex-post risk measure as described in the Risk adjustments paragraph or if an Executive Board member leaves ING. This award approach aligns remuneration with creating long-term value for ING.
Remuneration Policy and cover the following aspects: remuneration structure, the amount of the fixed and variable remuneration components, the performance criteria used, scenario analyses that are carried out and, if and when considered appropriate, the pay ratios within the company and its affiliated enterprises. The Remuneration Committee takes note of the views of individual
1 Koos Timmermans was an EB member until 6 February 2019; Steven van Rijswijk was appointed to the EB on 8 May 2017; Tanate Phutrakul was appointed to the EB immediately following the 23 April 2019 AGM. As Ralph Hamers has been an EB
member for the full years 2017-2019, the full remuneration is presented and no pro-rata method has been applied.
Furthermore, the relative performance of the company is presented on three different metrics over the last five years. The metrics consist of: ▪ Retail primary customers
Finally, we present the development of the remuneration on average (per employee). For this number the same data has been used as to determine the internal ratio. Since the internal ratio was disclosed by ING as of 2017, we only have three years of data available.
Eric Boyer de la Giroday 108 0% 1.9% -7% 23.9% 73.6%
Retail primary relationships (in mln) 13.3 7% 10% 9% 14% 9%
2 Variable remuneration of the Executive Board is included in the year in which the performance has been delivered. Thus prior to the year in which it has been paid out.
4 The decrease in 2018 versus 2017 comparison for the CFO and CRO is fully attributed to the fact that for performance year 2018 no variable remuneration has been awarded while over performance year 2017 variable remuneration was awarded. For the CEO
5 Fixed remuneration for Executive Board members within ING is not linked to company performance but is based on a benchmark exercise and total direct compensation of Executive Board members should stay below the median of the benchmark based on the
As indicated in the remuneration policy, the performance of the Executive Board is assessed on non-financial and financial indicators. The performance indicators assessed for 2019 included the following (overview of combined performance indicators of the Executive Board members): Financial performance indicators
▪ Underlying return on equity (IFRS-EU) → hurdle for variable pay
▪ Operational control: ensuring ING is a safe and compliant bank now and in the future, in line with regulations.
ING is committed to periodically providing the Dutch central bank (DNB) with regular updates on the progress made.
▪ The launch of instant payments in Netherlands and Belgium, enabling money to be available in five seconds to the beneficiary every moment of the day all year round.
KYC and the roll-out of global KYC tools. In sustainability ING remains a leading company, making further progress with the Terra approach by partnering with 30 other banks to steer the lending
3 Koos Timmermans left ING per 7 February 2019 as an Executive Board member. Until 31 August 2019 he received an advisor fee for the period in which he transferred his activities to this successor. Thus the pension costs reflect the period
2 The 2017 emoluments for Koos Timmermans and Steven van Rijswijk reflect the partial year as an Executive Board member.
Long-term incentives to the Executive Board members in previous years are disclosed in the table on page 149.
4 The (partial) holdback (3,657 and 1,702) of the outstanding deferred variable remuneration, is effectuated on these grants.
Share price in euros1 Total value 1 The opening stock price on 31 December 2019.
Executive Board members are encouraged to hold ING shares as a long-term investment to maintain alignment with ING. The table below shows an overview of the shares held by members of the Executive Board on 31 December 2019, 2018 and 2017.
Total value of vested and unvested shares of Executive Board members - 2019
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Remuneration report 2020 Executive Board remuneration
The Supervisory Board decided to increase the base salary of the Executive Board members by 1.5% as of 1 January 2020. This decision was based on reliable indexation reference points, including the Consumer Prices Index 2020 (forecast) in line with the proposed Executive Board
Remuneration Policy 2020. This increase is below the CLA increase in the Netherlands.46
Eric Boyer de la Giroday - - – 113,479 113,479 113,479 2020 Remuneration Supervisory Board
ING’s remuneration principles apply to all staff and are embedded in ING’s Remuneration
The Step Up Performance Management approach consists of three dimensions: ▪ Job: the impact employees have in their daily work on an individual and team level, based on factors such as qualitative job description, dynamic planning and specific selected quantitative priorities.
▪ Orange Code behaviours: how employees do their work and how effective their behaviour is as a professional and colleague. We expect all employees to act in line with ING’s Orange Code.
▪ Stretch Ambitions: at ING, we believe high performance requires stretch and investment (to achieve the stretch). Therefore we ask people to set ambitions beyond their day-to-day role and connect their personal passion, expertise or interest with the long-term success of ING.
Fixed remuneration represents a sufficiently high proportion, in line with the level of expertise and skills, and allows a fully flexible variable remuneration award. In case no variable remuneration is awarded, the compensation level is still sufficient for a decent standard of living. Variable remuneration is performance driven, subject to regulatory caps and prevents excessive risk taking, where applicable.
For Identified Staff (i.e. staff considered to have a material impact on ING’s risk profile), at least 40%
In 2019, the Management Board Banking and the Supervisory Board approved the Variable
The VRAM takes a holistic view of the overall performance of ING across three key dimensions: (i) financial,
Board; ▪ If both the CET1 ratio and RoE are met, the maximum variable remuneration pool is unlocked, as accrued in line with the VRAM; and
The final risk adjustment measure lies in the individual performance assessment itself. An employee’s performance is extensively assessed before variable remuneration is proposed and awarded. Every manager carefully assesses the performance delivered by their individual team members on the basis of pre-agreed performance priorities and in line with the Step Up
Once adopted by the AGM, the new Executive 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 Executive Board remuneration policy, the latter is leading. In the event of proposed changes to the new Executive Board remuneration policy, it will be subject to AGM approval.
Executive Board remuneration policy at least annually, taking into account regulatory requirements, stakeholder views, ING's benchmark position, internal pay ratios and whether policy incentives take into consideration risk, capital, liquidity and the likelihood and timing of earnings.
Following the periodic reviews, the Supervisory Board can propose amendments to the Executive
The Risk Committee will, at least, annually review the remuneration policy and may recommend actions to be taken by the Supervisory Board regarding the establishment of a sound Executive
The Remuneration Committee reviews the individual base salaries of the Executive Board members each year and advises the Supervisory Board on this. Potential future salary increases take into account the factors highlighted above. The Supervisory Board will pro-actively report the base salary development in the Annual Report. If any significant changes to Executive Board base salaries are to be proposed, a stakeholder consultation will be carried out.
With regards to the relevant market for talent, ING increasingly competes with players across sectors and industries. Therefore not only traditional banking competitors are included in the benchmark, but also companies from other industries. This also aligns with the stipulation in the
To drive and reward performance the Executive Board is eligible for annual variable remuneration, in accordance with the applicable regulatory requirements. The amount of variable remuneration is based on actual performance as measured against agreed financial (50%), non-financial (50%) and risk objectives that are consistent with ING's strategy and align with the long-term interests of stakeholders. For the CEO and CFO the applicable performance measures are based on group performance. Under ING's proposed Executive Board remuneration policy, the CRO's performance will be assessed predominantly based on individual functional objectives.
Board is of the opinion that the performance measures for the variable remuneration are commercially sensitive and that it would be detrimental to ING to disclose target details at the start of the relevant performance year. We will disclose according to the SRD disclosure requirements.
Contribution (CDC) pension plan in the same way as all employees working in the Netherlands without a supplementary pension scheme. Furthermore, Executive Board members are eligible for benefits at a level that the Supervisory Board considers appropriate in the context of the executive’s role, specific individual circumstances and benefits offered to the wider workforce and at comparable roles in ING’s peer group.
(AGM) for a maximum period of four years. The appointment may be renewed subject to reelection by shareholders (and in line with ING’s Articles of Association and applicable rules and regulations).
Based on these five guiding principles, the selected peer group for 2020 consists of the following 16 companies. Note the guiding principles are part of the remuneration policy. (The list below only relates to 2020): ABN AMRO Ahold Delhaize BBVA Deutsche Bank
It is important that ING is able to attract members for its Supervisory Board who have the ability, experience, skills, values and behaviours to deliver on the company strategy and goals and support
(i) be clear and easy, (ii) have remuneration levels in line with peers, (iii) enable ING to attract qualified (international) Supervisory Board members and (iv) align remuneration with responsibilities and time spent.
Supervisory Board can propose amendments to the Supervisory Board remuneration policy to the
Board remuneration policy, the Supervisory Board will use an updated benchmark, similar to the benchmark proposed for the Executive Board. This benchmark is periodically determined by the
As a global financial institution with a strong European base, offering banking services, ING is exposed to a variety of risks. We manage these risks through a comprehensive risk management framework that integrates risk management into daily business activities and strategic planning.
This safeguards ING Group’s financial strength by promoting the identification, measurement and control of risks at all levels of the organisation. Taking measured risks is the core of ING’s business.
The second line of defence consists of oversight and specialised functions in risk management and compliance, and includes at least the control functions Risk and Compliance. They (i) have coresponsibility for risk management, through articulating and translating the risk appetite into methodologies and policies to support and monitor business management's control of risk, (ii)
objectively challenge risk management execution and control processes and coordinate the reporting of risks and controls by the first line of defence, (iii) advise management on risk management and compliance and have decision-making power in relation to business activities that are judged to present unacceptable risks to ING and (iv) can set minimum requirements in terms of quality and quantity of global resourcing in the risk management and compliance functions.
The next graph illustrates the different key senior management level committees in place in the risk governance structure.
▪ The SB is responsible for supervising EB and MBB policy, the general course of affairs of ING Group,
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Risk Management as well as the structure and effective operation of the internal risk management and control systems.
As a member of the EB and the MBB, the CRO is responsible for ensuring that risk management issues are heard and discussed at the highest level. The CRO steers a risk organisation both at head-office and business-unit levels, which participates in commercial decision-making, bringing countervailing power to keep the agreed risk profile within the risk tolerance. The CRO reports to the
Over the past years, banks have been faced with regulatory and public pressure with regard to their risk management policies, processes, and systems. A raft of new requirements and regulations has been introduced and implemented. To address these internal and external (market and regulatory)
The organisation chart illustrates the reporting lines in 2019 for the risk organisation: Risk policies, procedures and standards
The principal role of the independent ICF gatekeeper function is that of a quality assurance role and to provide advice for approval to the SB, EB, MBB and NFRC Bank. The ICF gatekeeper challenges the alignment of the internal control documents with the agreed methodology and taxonomy and verifies that the process of development and communication of internal control documents is executed in adherence to the process as described below. The ICF gatekeeper is the guardian of the
The reputation and integrity of ING’s organisation are core elements to operate successfully in the financial world. ING’s risk culture promotes awareness of collectively shared values, ideas and goals, but also of potential threats and aligns the individual performance objectives with the short- and long-term strategy. ING therefore aims to make risk responsibilities transparent within the different levels of the organisation and to hold every employee accountable for his/her actions.
We also introduced a new global learning model in 2019 to further professionalise Compliance, KYC
The complexity of this type of risk is less tangible compared to other risk areas. It is about how decisions are made, how people communicate and whether they can take ownership. Behaviour is motivated by formal and informal drivers. Examples of formal drivers are the processes ING applies and how its governance is structured. Informal drivers are less tangible, such as group dynamics or underlying beliefs that influence behaviour.
Behavioural risk assessments identify, analyse and mitigate high-risk behaviours within ING and provide management with specific direction on how to change these behaviours. They focus on the effectiveness of groups rather than individuals, the role of leadership and on less visible aspects such as team dynamics and unwritten social norms. The goal is to understand and systematically assess what drives undesired habits at ING. The BRM model of behavioural risk will be used as the standard across ING to signal behavioural risks going forward.
Behavioural risk assessments were also carried out in Belgium and the interventions based on these outcomes will be implemented in 2020. The BRM team will continue to assess behavioural risk, focusing predominantly on KYC.
Employees are invited to participate in ‘nudge labs’ where they work together to identify small behavioural changes that can have a positive impact on processes and collaboration.
Given the crucial role of leaders in creating the right conditions for employees, interventions are first initiated at leadership level. These include leadership labs, which address topics such as
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Risk Management statements into a single coordinated approach to provide the business with a clear overview of the relevant risks and the tools to manage them. This view allows the Executive Board (EB), the
The suite of risk appetite statements serve as inputs for the quarterly planning process as well as for the establishment of key performance indicators and targets for senior management.
à-vis its limits on a regular basis to senior management committees. The Quarterly Risk Update reflecting the exposure of ING against the risk appetite targets is submitted quarterly to the EB and the MBB and to the (Risk Committee of the) SB. Moreover, every quarter the financial plan is checked for potential limit breaches within a 1 year horizon, where in the strategic dialog the MBB
Capital Requirements Regulation and Directive (CRR/CRD), the Bank Recovery and Resolution
Basel NSFR standard but including adjustments with regard to pass-through models and covered bonds issuance. Further, the EBA obtained a mandate to investigate how to incorporate environmental, social, and governance (ESG) risks into the supervisory process and what the prudential treatment of assets associated with environmental or social objectives should look like.
In December 2017, the Basel III revisions were formally announced by the Basel Committee on
Banking Supervision (BCBS). These new prudential rules for banks consist of a revision to the standardised approach to credit risk, the introduction of a capital floor based on standardised approaches, the use of internal models, the limitation of options for modelling operating risks, and new rules for the establishment of risk-weighted items and unused credit lines at the banks. In
Although ING has activities in the UK through the Wholesale Banking (WB) business line, no material asset quality deterioration following the Brexit decision has taken place.
In 2019, we initiated a programme (the Model Paradigm Shift) to improve the availability and quality of our data, model governance and processes, further strengthening our risk modelling and data capabilities to give ING a competitive advantage.
ING builds on its cybercrime resilience through its dedicated Cybercrime Expertise and Response
Team, further enhancing the control environment to protect, detect and respond to e-banking fraud, DDoS and targeted attacks. Controls and monitoring continue to be embedded in the organisation as part of the overall internal control framework and are continuously re-assessed against existing and new threats. The identification and monitoring of new threat actors and campaigns relevant to ING also informs this process as does the closer alignment between IT
The persistence of a low interest rate environment in Europe, where central banks held their rates at very low and even negative levels in most countries, continued to negatively impact short-term as well as long-term market rates. This is posing a challenge for banks to maintain positive income in the form of net interest income from traditional savings activities.
The amount of business processes that is sourced to third-parties increased significantly over the years. Most notable is our (internal) sourcing in Poland, the Philippines and Slovakia but also
Shifts in societal expectations on climate change and developments in climate science are driving new initiatives and policy updates within the bank to address this threat. For example, we’ve set ambitious targets to reduce financing for coal power generation to close to zero by 2025, and no longer provide financing to new clients whose business is over 50 percent reliant on coal-fired power. By the end of 2025, we will not finance any clients in the utilities sector who are more than five percent reliant on coal. In addition, we are steering our loan portfolio to meet the well-below two degrees goal of the Paris Climate Accord. In 2019, we published our first progress report on
UNEP FI TCFD Phase 2 to develop transition and physical risk assessment models in 2019.
In order to get an understanding of our company’s exposure to climate risk, we have started with the analysis of climate-affected sectors as outlined in the report ‘Recommendations of the Task
Credit risk is the risk of loss from the default and/or credit rating deterioration of clients. Credit risks arise in ING's lending, financial markets and investment activities. The credit risk section provides information on how ING measures, monitors and manages credit risk and gives an insight into the portfolio from a credit risk perspective.
Credit risk uses the following risk categories to differentiate between the different types of credit risk: ▪ Lending risk: is the risk that the client (counterparty, corporate or individual) does not pay the principal, interest or fees on a loan when they are due, or on demand for letters of credit (LCs)
▪ Investment risk: is the credit default and risk rating migration risk that is associated with ING’s investments in bonds, commercial paper, equities, securitisations, and other similar publicly traded securities. This can be viewed as the potential loss that ING may incur as a result of holding a position in underlying securities whose Issuer's credit quality deteriorates or defaults.
▪ Money market (MM) risk: arises when ING places short-term deposits with a counterparty in order to manage excess liquidity. In the event of a counterparty default, ING may lose the deposit placed.
▪ Settlement risk: is the risk that arises when there is an exchange of value (funds or instruments)
for the same value date or different value dates and receipt is not verified or expected until after
Lending risk -Cash and balances with central banks Note 2 Cash and balances with central banks -Loans and advances to banks Note 3 Loans and advances to banks -Loans and advances to customers Note 4 Financial assets at fair value through profit or loss -Off-balance sheet items e.g. obligations under financial guarantees and letters of credit and undrawn credit facilities Note 5 Financial assets at fair value through other comprehensive income
Credit risk appetite is the maximum level of credit risk ING is willing to accept for growth and value creation. The credit risk appetite is linked to the overall bank-wide risk appetite framework. The credit risk appetite is expressed in quantitative and qualitative measures. Having a credit risk appetite achieves: ▪ Clarity about the credit risks that ING is prepared to assume, target setting and prudent risk management; ▪ Consistent communication to different stakeholders; ▪ Guidelines on how to align reporting and monitoring tools with the organisational structure and strategy; and
▪ Alignment of business strategies and key performance indicators of business units with ING’s credit risk appetite through dynamic planning.
(or group of countries). In order to manage the maximum country event loss ING is willing to accept, boundaries are approved by the Supervisory Board ensure ING’s consolidated 3-year average result before tax can absorb an estimated country event loss due to a country risk occurrence. The estimated level is correlated to the risk rating assigned to a given country.
▪ Product approvals: The product approval and review process (PARP) assesses and manages risks associated with the introduction of new or modified products. It ensures that sound due diligence is performed by relevant stakeholders and the relevant risks (credit, operational, compliance, etc.) are addressed appropriately.
▪ Credit approval process: The purpose of the credit approval process is that individual transactions and the risk associated with these transactions are assessed on a name-by-name basis. For each type of client there is a dedicated process with credit risk managers specialised along the business lines of ING. The credit approval process is supported by a risk rating system and exposure monitoring system. Risk ratings are used to indicate a client’s creditworthiness which translates into a probability of default. This is used as input to determine the maximum risk appetite that ING has for a given type of client (reference benchmark). The determination of the delegated authority (the amount that can be approved at various levels of the organisation)
is a function of the risk rating of the client and ING’s credit risk exposure on the client.
The next table gives insight into the ESR policies that are part of the Framework and where they are applied.
Food, beverages & personal care 3.2% ● ● ● ● ● ● ● ● ●
The ESR policy framework is incorporated in ING’s KYC policy framework, meaning the ESR client assessment is part of client on-boarding and review. The ESR framework minimum requirements are also included in ING’s procurement policy and apply to the screening of suppliers of ING’s procurement activities.
New restrictions in the updated framework include arctic offshore oil and gas exploration and production, white phosphorus, asbestos and small arms and light weapons for private individuals.
We have a zero-tolerance policy for some of the restrictions, such as with companies involved in the production of cluster munitions. For others, we try to refrain as much as possible from any form of involvement, whether directly or indirectly. The new framework also affects companies with both controversial and non-controversial activities.
Business Conduct Regarding Human Rights. In 2018, we published our first human rights report in which we disclosed our saliency process and the human rights salient to ING – child labour, forced labour and land-related community issues. In 2019, we published an update focused on our role as a corporate lender and the outcome of an exercise where we proactively engaged with 29 clients in human rights.
UN Guiding Principles on Business and Human Rights into the policies and practices of banks.
Netherlands, to discuss the role and leverage of the private sector in this important area.
Within ING, internal Basel compliant models are used to determine probability of default (PD), exposure at default (EAD) and loss given default (LGD) for regulatory and economic capital purposes. These models also form the basis of ING’s IFRS 9 loan loss provisioning (see ‘IFRS 9 models’ below). Bank-wide, ING has implemented around 100 credit risk models, for regulatory capital, economic capital and loan loss provisioning purposes.
ING’s PD rating models are based on a 1-22 scale (1=highest rating; 22=lowest rating) referred to as the ‘Master scale’, which roughly corresponds to the rating grades that are assigned by external rating agencies, such as Standard & Poor’s, Moody’s and Fitch. For example, an ING rating of 1 corresponds to an S&P/Fitch rating of AAA and a Moody’s rating of Aaa; an ING rating of 2 corresponds to an S&P/Fitch rating of AA+ and a Moody’s rating of Aa1, and so on.
Under Pillar 1, ING uses the Current Exposure Method (Mark to Market method), which is a standard approach prescribed by the regulation. There are no exposures under the advanced, Internal Model
The acceptance, maintenance, measurement, management and reporting of credit risks at all levels of ING is executed through single, common credit risk data standards using shared credit risk tools that support standardised and transparent credit risk practices. ING has chosen to develop credit risk tools centrally. The philosophy is to use a single source of data, in an integrated approach that includes ING policy, the regulatory environment in which we operate, and the daily processes that are active throughout the Group. Disciplined application in these three areas is essential for achieving high data quality standards. The customer-centric data model conforms to the three core business needs of ING: ▪ To monitor the risks we undertake; ▪ To be compliant with our internal and external obligations; and
ING’s credit exposure is mainly related to lending to individuals and businesses followed by investments in bonds and securitised assets. Loans to individuals are mainly mortgage loans secured by residential property. Loans (including guarantees issued) to businesses are often collateralised, but may be unsecured based on the internal analysis of the borrower’s creditworthiness. Bonds in the investment portfolio are generally unsecured, but predominantly consist of bonds issued by central governments and EU and/or OECD based financial institutions.
Secured bonds, such as mortgage-backed securities and asset-backed securities are secured by the underlying diversified pool of assets (commercial or residential mortgages, car loans and/or other assets) held by the securities issuer. The last major credit risk source involves pre-settlement (PS)
With respect to the rating distribution within the Business lines, in Wholesale Banking AAA-rated assets increased driven by the reserve deposit to Banque Centrale du Luxembourg and bond exposure to the Federal Government of the United States of America. Wholesale A rating class increased as a result of outstanding to Bank of Japan and large corporate customers in the US, Asia and the Netherlands. Reduced concentration in the BB rating class was mainly seen in real estate exposure.
The rating distribution for Retail Benelux improved mostly driven by improved risk profile of Dutch residential mortgages shifting from rating classes BB to BBB, driven by historically low unemployment rate and continuing increase of the NVM House price index, improving LTV’s.
The industry composition within Retail is concentrated in private individuals with 71% for Retail
Benelux and 78% for Retail Challengers & Growth. In C&G, mortgage volume increased, primarily in
Estate (Italy and the Benelux), Services (France and Belgium), and General Industries (US and the
The portfolio analysis per geographical area re-emphasizes the international distribution of the ING
The higher exposure in the Americas was mainly driven by bond exposures to the US central government. In Asia, the concentration of outstanding slightly increased, with noticeable growth in exposure to Japan and Singapore, partly off-set by reduced exposures in China and Republic of
Switzerland (EUR 12,016 million), Turkey (EUR 11,383 million), Romania (EUR 7,473 million) and
Within ING, there are two distinct forms of covers. First, where the asset has been pledged to ING as collateral or security ING has the right to liquidate it should the customer is unable to fulfil its financial obligation. As such, the proceeds can be applied towards full or partial compensation of the customer's outstanding exposure. This may be tangible (such as cash, securities, receivables, inventory, plant and machinery, and mortgages on real estate properties) or intangible (such as patents, trademarks, contract rights and licenses). Second, where there is a third-party obligation, indemnification or undertaking (either by contract and/or by law) ING has the right to claim from that third party an amount, if the customer fails on its obligations. The most common examples are guarantees (such as parent guarantees and export credit insurances), letters of comfort or thirdparty pledged mortgages.
The valuation method also depends on the type of covers. For asset collateral, the valuation sources can be the customer’s balance sheet (e.g. inventory, machinery and equipment), nominal value (e.g. cash and receivables), market value (e.g. securities and commodities), independent valuations (commercial real estate) and market indices (residential real estate). For third-party obligations, the valuation is based on the value that is attributed to the contract between ING and that third party.
The cover values are presented for the total portfolio of ING, both the performing and nonperforming portfolio. Our definition of non-performing is explained in detail in the Credit restructuring section (below). For additional insight, a breakdown of ING’s portfolio by industry and geography is provided.
Exposures are categorised into different Value to Loan (VTL) buckets that give insight in the level of collateralisation of ING’s portfolio. VTL is calculated as the cover value divided by the outstandings at the balance sheet date. The cover values are indexed where appropriate and exclude any cost of liquidation. Covers can either be valid for all or some of a borrower’s exposures or particular outstandings, the latter being the most common. For the purpose of aggregation, overcollateralisation is ignored in the total overview and VTL coverage of more than 100% is reported as
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Credit risk fully covered. For VTL coverage in the tables for Dutch mortgages, consumer lending and business lending, each cover is subsequently assigned to one of the six defined VTL buckets: no cover, >0%
Total Lending, Investment and Money Market 780,465 695,037 22,679 112,128 297,590 31.2% 15.8% 52.9%
The consumer lending portfolio accounts for 38.6% of ING’s total outstanding, primarily consisting of residential mortgage loans and other consumer lending loans, which mainly comprise term loans, revolvers and personal loans to consumers. As a result, most of the collateral consists of mortgages. The mortgage values are collected in an internal central database and in most cases external data is used to index the market value (e.g. mortgage values for the Netherlands are updated on a quarterly basis using the NVM house price index).
Germany (25.0%), Belgium and Luxembourg (13.6%) and Australia (10.7%). Given the size of the
Dutch mortgage portfolio, the valuation methodology to determine the cover values for Dutch residential mortgages is provided below.
When a mortgage loan is granted in the Netherlands, the policy dictates maximum loan to market value (LTMV) for an existing property and for construction property financing of 100 percent.
Brokers), VastgoedPRO (Association of Real Estate Professionals) or NVR (Nederlandse Vereniging van Rentmeesters).
Cover values including guarantees received – Consumer lending portfolio - 2019
1 ‘Others’ comprises industries with outstandings lower than EUR 10 billion.
Collateral Guarantees Other covers No Cover >0% - 25% >25%-50% >50% - 75% >75% - <100% ≥ 100%
of which Total Non-performing 7,543 3,578 266 2,676 4,447 28.7% 3.8% 4.9% 9.1% 15.7% 37.7%
Broken down by industry, the largest increase in outstanding is attributable to Non-Bank Financial
The largest increases in outstanding in absolute figures were seen in Germany (21.1%) and Asia
(7.6%). The increase in Germany (EUR 3.2 billion) was primarily due to increases in term loans, regulatory reserve deposits and nostro accounts. As these deposits and nostro accounts are not collateralised, this increase had only a small impact on total cover amounts.
Following higher credit risk levels seen as a result of the financial crisis and economic downturn, credit quality has been improving since 2014 and this trend continued in 2019.
Luxembourg, from EUR 1.9 billion to EUR 0.9 billion. For non-performing assets, an increase was observed mainly in Belgium & Luxembourg for Retail portfolio (EUR 0.4 billion) and Wholesale
Banking portfolio (EUR 0.3 billion), and the United Kingdom WB (EUR 0.3 billion). This increase was partially offset by the decrease in non-performing exposures in Netherlands Retail (EUR 0.4 billion)
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Credit risk
▪ Significant fraud (affecting the company’s ability to service its debt).
Further, Wholesale Banking has an individual name approach, using Early Warnings indicators to signal possible future issues in debt service.
Past due for 61–90 days 408 1 Wholesale aging analysis only available as of 2019
Aging analysis (past due but performing): Consumer lending portfolio by geographic area, outstandings1
Global Credit Restructuring (GCR) is the dedicated and independent department that deals with non-performing loans and loans that hold a reasonable probability that ING will end up with a loss, if no specific action is taken. GCR deals with accounts or portfolios requiring an active approach, which may include renegotiation of terms & conditions and business or financial restructuring. The loans are managed by GCR or by units in the various regions and business units.
▪ Recovery: A client is classified as in Recovery when ING and/or the client concludes that the client’s financial situation cannot be restored and a decision is made to end the (credit)
Europe America Asia Australia Africa 2019 2018 1 Economic sectors not specified in above overview are grouped in Other.
The non-performing portfolio increased slightly during 2019. The increase was mainly visible in
For ING retail units, clear criteria have been established to determine whether a client is eligible for forbearance process. Specific approval mandates are in place to approve the measures, as well as procedures to manage, monitor and report the forbearance activities.
All exposures are eligible for forbearance measures, i.e. both performing (Risk Ratings 1-19) and non-performing (Risk Ratings 20-22) exposures. ING uses specific criteria to move forborne exposures from non-performing to performing or to remove the forbearance statuses that are consistent with the corresponding EBA standards. An exposure is reported as forborne for a minimum of two years. An additional one year probation period is observed for forborne exposures that move from non-performing back to performing.
& Logistics and General Industries. Together they accounted for 58% of the total Wholesale
Back in 2018, the main concentration was witnessed in Natural Resources, Real Estate and
(2018: 49%) of the total Retail Banking forborne assets and 39% (2018: 44%) of the non-performing forborne assets.
(ECL) of IFRS 9, which is designed to be forward-looking. The IFRS 9 impairment requirements are applicable to on-balance sheet financial assets measured at amortised cost or fair value through other comprehensive income (FVOCI), such as loans, debt securities and lease receivables, as well as off-balance sheet items such as undrawn loan commitments, certain financial guarantees, and undrawn committed revolving credit facilities. These financial instruments are divided into three groups, depending on the stage of credit quality deterioration.
The table above provides a reconciliation by stage of the gross carrying/nominal amount and allowances for loans and advances to banks and customers, including loan commitments and financial guarantees. The transfers of financial instruments represents the impact of stage transfers upon the gross carrying/nominal amount and associated allowance for ECL. This includes the net remeasurement of ECL arising from stage transfers, for example, moving from a 12-month
The following table shows the reconciliations from the opening to the closing balance of the loan loss provisions in 2018.
Transfer into lifetime ECL not credit impaired (Stage 2) -62 501 -56 383
The introduction of IFRS 9, with its inherent complexities and potential impact on the carrying amounts of our assets and liabilities, represents a key source of estimation uncertainty. In particular, the Group’s reportable ECL numbers are most sensitive to the forward-looking macroeconomic forecasts used as model inputs, the probability-weights applied to each of the three scenarios, and the criteria for identifying a significant increase in credit risk. As such, these crucial components require consultation and management judgement, and are subject to extensive governance.
Economics’ Global Economic Model (OEGEM) is then used to complement the consensus with consistent projections for variables for which there are no consensus estimates available (most notably House Price Index (HPI) and unemployment), and to ensure general consistency of the scenarios.
The Group’s consensus view of the baseline scenario suggests economic growth will level off over the initial (three year) forecast period, as the pace of expansion in the main advanced economies and emerging markets is expected to wane. For the eurozone, as output gaps close and monetary policy begins to normalise, growth is expected to decline. For the US, the near-term outlook is still positive. The Group continues to monitor the potential escalation of an international trade conflict, and the likely outcome of any Brexit deal, which, at present remains unclear.
Based on the above two sources of estimation uncertainty, analysis on the sensitivity of key forward-looking macroeconomic inputs used in the ECL collective-assessment modelling process and the probability-weights applied to each of the three scenarios is presented below. The countries included in the analysis are the Group’s most significant geographic regions, in terms of both gross contribution to reportable ECL, and sensitivity of ECL to forward-looking macroeconomics. Accordingly, the Group considers these portfolios to present the most significant risk of resulting in a material adjustment to the carrying amount of financial assets within the next financial year. The Group also observes that, in general, the Wholesale business is more sensitive to the impact of forward-looking macroeconomic scenarios.
PD is hit. The thresholds for the absolute change in lifetime PD vary between 75bps for Retail portfolios, 100bp for Wholesale and 250bps for SMEs, based on the characteristics of the specific portfolio. The threshold for the relative change in LT PD are inversely correlated with the PD at origination; the higher the PD at origination, the lower the threshold. Despite this, the relative threshold is punitive for Investment grade assets while the absolute threshold primarily affects
Embedded options, e.g. the prepayment option and offered rate option in mortgages in the banking books, result in non-linear interest rate risk in the banking books. The embedded options are economically hedged using a delta-hedging methodology, leaving the mortgage portfolio exposed to convexity risk, volatility risk and model risk. For the calculation of economic capital for this non-linear interest rate risk, ING performs a Monte Carlo simulation.
▪ Wholesale Banking loans typically do not experience interest rate prepayment behavior as they are hedged from an interest rate risk perspective and therefore do not contain significant fixed rate convexity risk.
(unexpected) customer behaviour risk with the commercial business. Risk measurement and the risk transfer process take place on a monthly basis, but more often if deemed necessary, for instance in volatile markets.
Banking Book were made: ▪ Review of the risk appetite for Interest Rate Risk for the Banking Book; ▪ Annual review of the interest rates scenarios used for calculating NII-a-Risk and NPV-at-Risk; and
The change in NII-at-Risk is mainly visible for Retail Banking Benelux and Retail Challengers &
Growth Markets. This is driven by the savings model updates for market developments in ING
Only a mismatch from the target investment profile results in NPV-at-Risk.
USD LIBOR, EUR LIBOR, EURIBOR, EONIA, CHF LIBOR and JPY LIBOR.
Historical Value at Risk is used based on historical series of last year’s FX rates. It measures the drop in the CET1 ratio from the target based on historical FX rates. Based on these time series and with a probability of 10%, the drop in the CET1 ratio would be 0.09%.
Revaluation reserve equity securities at fair value through other comprehensive income
Real Estate is a run-off business consisting of Real Estate Development and Real Estate Investment
The Financial Markets Risk Committee (FMRC) is the market risk committee that, within the risk appetite set by ALCO Bank, sets market risk limits both on an aggregated level and on a desk level, and approves new products. FI-FM Risk advises both FMRC and ALCO Bank on the market risk appetite of trading activities.
HVaR also takes into account market data movements for specific moves in e.g. the underlying issuer of securities. A single model that diversifies general and specific risk is used. In general, a full revaluation approach is applied, and for a limited number of linear trading positions and risk factors in commodity and equity risk classes a sensitivity-based approach is applied. The potential impact of historical market movements on today’s portfolio is estimated, based on equally weighted observed market movements of the previous year (260 days). When simulating potential movements in risk factors, depending on the risk factor type, either an absolute or a relative shift is used. The data used in the computations is updated daily. ING uses HVaR with a one-day horizon for internal risk measurement, management control, and backtesting, and HVaR with a ten-day horizon for determining regulatory capital. To compute HVaR with a ten-day horizon the one day risk factor shifts are scaled by the square root of ten and then used as an input for the revaluation.
HVaR has some limitations: HVaR uses historical data to forecast future price behaviour, but future price behaviour could differ substantially from past behaviour. Moreover, the use of a one-day holding period (or ten days for regulatory capital calculations) assumes that all positions in the portfolio can be liquidated or hedged in one day. In periods of illiquidity or market events, this assumption may not hold. Also, the use of a 99% confidence level means that HVaR does not take into account any losses that occur beyond this confidence level.
Although HVaR models estimate potential future trading results, estimates are based on historical market data. In a backtest, the actual daily trading result (excluding fees and commissions) is compared with the one-day HVaR. In addition to using actual results for backtesting, ING also uses hypothetical results, which exclude the effects of intraday trading, fees, and commissions. When an actual or a hypothetical loss exceeds the HVaR, an ‘outlier’ occurs. Based on ING’s one-sided confidence level of 99%, an outlier is expected once in every 100 business days. In 2019, there were five actual outliers i.e. occurrences of actual loss and four hypothetical outliers i.e. occurrences of hypothetical loss, when the daily trading loss exceeded the daily consolidated HVaR of ING. The outliers were driven by interest rates market moves mainly related to quantitative easing. ING
reports the backtesting results on a quarterly basis to the ECB.
The Stressed HVaR (SVaR) is intended to replicate the HVaR calculation that would be generated on the bank’s current portfolio with inputs calibrated to the historical data from a continuous 12month period of significant financial stress relevant to the bank’s portfolio. To calculate SVaR, ING
Unsecuritised trading positions of ING, which are subject to specific interest rate risk included in the internal model approach for market risk regulatory capital, are in scope of the IRC model. By model choice, equity is excluded from the model. For the calculation of IRC, ING performs a Monte-Carlo simulation based on a Gaussian copula model. The asset correlations used in the Gaussian copula model are determined using the IRB correlation formula. The rating change is simulated for all issuers over the different liquidity horizons (i.e. time required to liquidate the position or hedge all significant risks) within one year. Movements across different rating categories and probabilities of default are governed by a credit-rating transition matrix. An external transition matrix is obtained from Standard & Poor’s (S&P). The financial impact is then determined for the simulated migration to default, or for the simulated migration to a different rating category, based on LGD or credit spread changes, respectively.
HVaR and Event Risk limits are the most important limits to control the trading portfolios.
The following chart shows the development of the overnight HVaR under a 99% confidence level and a one-day horizon versus actual and hypothetical daily trading profits and losses. In calculation of the hypothetical daily profit and loss, the trading position is kept constant and only the market movement is taken into account. The overnight HVaR is presented for the ING trading portfolio from 1 CVA risk is not included in VaR.
Minimum Maximum Average Year end amounts in millions of 1 For calculation of HVaR per risk class the full valuation is performed according to HVaR methodology using a set of scenario changes for the risk factors for the particular risk class, while risk factors for all other risk classes are kept unchanged.
2 The total HVaR for the columns Minimum and Maximum cannot be calculated by taking the sum of the individual components since the minimum/maximum observations for both the individual markets as well as for total HVaR may occur on different dates. Therefore, diversification is not calculated for the minimum and maximum categories.
Capital requirem ents 1 VaR (higher of values a and b) 1,261 101 1,394 112
(a) Previous day's VaR (Article 365(1) (VaRt-1)) 404 32 529 42
Average of the risk number for the correlation trading portfolio over the preceding 12-weeks
A high-level overview of the F&L framework is provided in the next figure.
The EB and MBB, staff departments from the CRO and CFO domain as well as Group Treasury have oversight of and are responsible for managing funding and liquidity risk.
ING distinguishes several key drivers of future liquidity and funding needs: ▪ Refinancing needs resulting from maturing debt and asset growth; ▪ Current and future regulatory requirements; ▪ Risk appetite statements set by ING’s funding and liquidity risk function; ▪ The outcomes of various stress tests; ▪ Ability to distribute and transfer liquidity.
(outflows- inflows) over a 30-day stress scenario defined by the regulator. ING’s liquidity buffer is
The Funding and liquidity stress testing framework is also subject to regular internal validation.
In line with the Advanced Measurement Approach (AMA), the bank has in place a model to define the required level of own funds for operational risk (operational risk capital). This model predicts potential operational risk losses (annually aggregated) by combining a forward-looking and a backward-looking view on operational risk events. The business has a leading role in assessing scenario severities, with the ORM function validating and challenging the results.
(incl. temporary workers, third party contractors, internships and consultants) who intend to deceitfully or unlawfully benefit themselves or others; ▪ External fraud risk is the risk of financial loss, regulatory sanctions or reputational damage due to deliberate abuse of procedures, systems, assets, products and/or services of ING by external parties (clients, potential clients or other third parties, including vendors and outside agencies)
ING recognises that information and underlying data are assets that are key (together with people, processes and IT systems) to further develop its digital profile. Cooperation and mutual agreement on global data management roles and responsibilities in ING are critical success factors to meet this objective. As such ING has embraced multiple data management and governance initiatives triggered by internal and external stakeholders (e.g. Principles for Effective Risk Data Aggregation and Risk Reporting). These principles are embedded in risk data management and enshrined within the Data Governance framework. The framework outlines roles and responsibilities relevant for the risk lifecycle and data quality assurance.
GDPR affords greater protection to individuals and requires more control on data and transparency regarding the use of data by companies. In 2019, ING continued its central programme, initiated in 2016, in a continuing effort to mature our data protection standards in line with GDPR standards.
Compliance risk is defined as the risk of impairment of ING’s integrity, leading to damage to ING’s reputation, legal or regulatory sanctions, or financial loss, due to a failure (or perceived failure) to comply with applicable laws, regulations and standards and the ING Orange Code.
Furthermore, client conduct refers to the compliance risks relating to FATCA, CRS, CTI and US
withholding tax and information reporting regulations; ▪ Personal conduct refers to the compliance risks arising from the conduct of ING employees. The scope includes amongst others personal conduct related conflicts of interest, bribery and corruption, protection of personal data; ▪ Financial services conduct refers to the compliance risks arising from or generated by the conduct of ING when developing product offerings, marketing and/or selling products and services to its clients as well as customer interest and protection; and
In cases where an employee of ING suspects an actual or potential irregularity or misconduct within ING that leads or could lead to a violation of the Orange Code, any ING policy and/or any applicable law, regulation or code, this can be reported anonymously in line with the Whistleblower Policy, via internal or external channels as well as through normal reporting channels.
Public Prosecutor related to an investigation that found serious shortcomings in the execution of
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Compliance risk customer due diligence and transaction monitoring requirements related to fighting financial economic crime, and announced steps to further enhance its management of compliance risks and embed stronger awareness across the whole organisation as part of the KYC enhancement programme.
In 2019, we continued the implementation of the KYC enhancement programme, and had more than 4,000 FTEs working on KYC-related activities globally. In March 2019, ING in Italy took steps to improve its KYC processes and compliance risks in line with the global KYC enhancement programme after the Italian central bank identified shortcomings in anti-money laundering processes. This was based on an inspection conducted from October 2018 to January 2019. In consultation with the Banca d’Italia, ING agreed to refrain from taking on new customers in Italy while further discussions on the enhancement plans took place. ING continued to fully serve existing clients in Italy while working to address the shortcomings and resolve the issues identified.
framework, which helps us make transparent choices about who and what we finance. All customers undergo an initial ESR check as part of the onboarding process. (See
▪ The target adverse media screening tool was rolled out in most locations
This includes risk-based scenarios, with follow-up for handling alerts and reporting suspicious activity.
▪ In 2019, local KYC Committees were established in the countries/regions and business lines to manage and steer all KYC-related activities. These committees are overseen by the global KYC
▪ Internal communication in 2019 reiterated the importance of non-financial risk and compliance.
▪ The first behavioural risk assessments in KYC were carried out in the Netherlands, the
Philippines and the US by ING’s team of behavioural experts. The outcomes were discussed by senior management at ING’s leadership days in March, as well as with the management teams of the countries involved and in Wholesale Banking with the intention of changing behaviours to enhance KYC, starting from the top.
That also accounts for risks deriving from new technologies. As an innovative bank, ING
continuously monitors regulatory developments to make risk assessments and define the banks risk appetite. Regulations on distributed ledger technology and business developments in this area are as rapid and impactful as the accompanying risks.
Prior to the adoption of the 5th AML Directive, European supervisory authorities (ESAs) had previously issued their final guidelines on risk factors, which came into force in June 2018. These guidelines promote a common understanding of the risk-based approach to anti-money laundering/combatting terrorist financing (AML/CFT) and set out how it should be applied in the context of the 4th AML Directive. These guidelines are currently in the process of being updated, in order to support firms’ AML/CFT compliance efforts and enhance the ability of the EU’s financial sector to effectively deter and detect money laundering/terrorist financing. The ESAs published a consultation version of the updated guidelines on 5 February 2020. The final updated guidelines are expected to come into force in the course of 2020. Furthermore, in September 2017, the ESAs issued their final guidelines to prevent the abuse of funds transfers for terrorist financing and money laundering purposes. These guidelines came into force in June 2018.
Under provisions of US tax law commonly referred to as FATCA, non-US financial institutions are required to provide certain information on their US account holders and/or certain US investors to the US Internal Revenue Service (IRS). A 30 percent withholding tax will be imposed on ‘withholdable payments’ made to non-compliant non-US financial institutions. As part of the actions taken to comply with FATCA and other US withholding tax regulations, ING is for example updating and strengthening its withholding compliance programme and reviewing, amending and filing the necessary tax returns and information reports.
These measures are in the process of being implemented in local laws. With regard to the mandatory disclosure rules for EU jurisdictions, this was done via the amendment to Directive 2011/16 (DAC6). See below.
The requirements set out in MiFID II/MiFIR are manifold and impact a large part of our organisation and day-to-day business. In order to ensure compliance with these rules, standard controls were rolled out throughout the ING EU entities. In addition, a framework measuring MiFID compliance risk was implemented in order to stay abreast of any compliance issues that need addressing.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Model risk
▪ the outcome is an estimation, not the 100 percent measured truth; and
the global model inventory tool. It is also responsible for monitoring and reporting the global model risk exposures of ING.
(normally a 3rd LoD), e.g. to support their audits. In that case, both domains (risk or audit service)
Initiation or change: The initiation of the development of a new model or change of an existing model can be triggered by different factors. These may be (i) internal, such as the introduction of a new product that cannot be handled by the existing models, a change in ING’s organisation, financial or commercial strategy or findings and issues by an auditor, validator or based on monitoring; or (ii) external, such as innovation/new technology that becomes available (for example the Fintech models), new or upcoming supervisory regulations or ongoing technical developments.
Model development is a structured process that leads to a model that is ready for validation and subsequent use.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Model risk recommendations and validation report prepared by the model validator are key inputs for approval for use.
In the model use stage the model is applied by the users for the specific purpose it was designed for. The model can only be used after formal validation and approval for use of the model.
Periodic validation: During the life time of a model the ongoing validity of the models must be safeguarded. This is done by periodical independent (re)validation that assesses whether the model is still valid for its intended use. There are two types of validation: (1) periodic, such as annual, which is mandatory for regulatory models, or (2) ad hoc, for example triggered by changes in the model, the business or financial instruments etc. The actual frequency of periodic validation depends on the model risk, model type and applicable regulation.
Business Risk for ING has been defined as the exposure to value loss due to fluctuations in volumes/margins as well as expenses. It is the risk inherent to strategy decisions and internal efficiency. Business risk capital is calculated via the variance-covariance methodology for expense risk, covering the risk that expenses will deviate from the expected expenses over the horizon of the relevant activities. This risk primarily relates to inability of adjusting expenses when that is needed.
Notes to the consolidated financial statements 1 Basis of preparation and accounting policies 261
Notes to the consolidated statement of financial position 2 Cash and balances with central banks 288 3 Loans and advances to banks 288 4 Financial assets at fair value through profit or loss 288 5 Financial assets at fair value through other comprehensive income 290 6 Securities at amortised cost 291 7 Loans and advances to customers 292 8 Investments in associates and joint ventures 293 9 Property and equipment 294 12 Assets and liabilities held for sale 298 13 Deposits from banks 298 15 Financial liabilities at fair value through profit or loss 299 18 Debt securities in issue 302
Notes to the consolidated statement of profit or loss 21 Net interest income 309 22 Net fee and commission income 310 23 Valuation results and net trading income 310 25 Result on disposal of group companies 312 28 Other operating expenses 315 29 Earnings per ordinary share 317 30 Dividend per ordinary share 317
Cash and balances with central banks 2 53,202 49,987 Deposits from banks 13 34,826 37,330
Loans and advances to banks 3 35,136 30,422 Customer deposits 14 574,433 555,812
Financial assets at fair value through other comprehensive income 5 34,468 31,223 Deferred tax liabilities 37 695 640
Securities at amortised cost 6 46,108 47,276 Provisions 16 688 1,011
2018 amounts in other interest income and other interest expense have been updated to improve consistency and comparability.
Basic earnings per ordinary share from continuing operations 1.23 1.21 1.26
Diluted earnings per ordinary share from continuing operations 1.23 1.21 1.26
Net change in fair value of equity instruments at FVOCI 139 –461 n/a
Net change in fair value of debt instruments at FVOCI –30 –163 n/a
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices in EUR million
Net change in fair value of equity instruments at fair value through other comprehensive income –335 472 137 1 139
Net change in fair value of debt instruments at fair value through other comprehensive income –31 –31 1 –30
Realised and unrealised revaluations property in own use 49 9 58 –0 58
Remeasurement of the net defined benefit asset/liability 36 58 58 58
Share of other comprehensive income of associates and joint ventures and other income 69 –69
Total comprehensive income net of tax 403 5,019 5,422 142 5,564
Changes in the composition of the group and other changes 23 23 –23 –0
Total comprehensive income net of tax –127 4,333 4,206 132 4,337
Remeasurement of the net defined benefit asset/liability 36 –29 –29 –29
Total comprehensive income net of tax –1,529 4,635 3,106 109 3,215
– Addition to loan loss provisions 1,120 656 676 – Held-to-maturity investments n/a n/a 2,675
– Net change in Trading assets and Trading liabilities –2,568 9,910 –11,187 – Loans sold 744 206 1,815
– Other 31 11,752 4,067 –2,454 Cash flows from financing activities
– Available-for-sale investments n/a n/a –21,601 Purchase/sale of treasury shares 1 4 7
– Financial assets at FVOCI –16,270 -10,517 n/a Other financing 2
– Securities at amortised cost –12,268 -17,985 n/a Net cash flow from/(used in) financing activities –4,154 15,983 –3,948
Effect of exchange rate changes on cash and cash equivalents 95 204 260
The table below presents the Interest and dividend received and paid.
International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and the relevant articles of Part 9 of Book 2 of the Dutch Civil Code.
Under the EU carve-out, ING Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging). For further information, reference is made to paragraph 1.6.5
‘Derivatives and hedge accounting’ of Note 1 and Note 39 ‘Derivatives and hedge accounting’.
To improve transparency, reduce duplication and present related information in one place, certain disclosures of the nature and extent of risks related to financial instruments required by IFRS 7 are now included in the ‘Risk management’ section of the Annual Report.
Measurement’ and IFRS 7 ‘Financial Instruments: Disclosures’ in relation to the Interest Rate
The other changes in IFRS that became effective in 2019 did not have a significant impact on ING
The IASB has also issued IFRS 17 ‘Insurance Contracts’. The original effective date of IFRS 17 was 1
Add extension and termination options reasonably certain to be exercised 143
IFRS 16 ‘Leases’ - Accounting policies applied from 1 January 2019
▪ Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise mainly IT-equipment (for example mobile phones or laptops) and small items of office furniture.
The comparative figures presented are accounted for using the previous Standard, IAS 17 ‘Leases’.
Mandatorily at FVPL). ING Group may in some cases, on initial recognition, irrevocably designate a financial asset as classified and measured at FVPL. This is the case where doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise on assets measured at
AC or FVOCI. Fair value movements on trading securities, trading loans and deposits (mainly reverse repo’s) are presented fully within valuation result and net trading income, this also includes interest. The interest arising on financial assets designated as at FVPL is recognised in profit or loss and presented within Interest income or Interest expense in the period in which it arises. The interest arising on a debt instrument that is part of a hedge relationship, but not subject to hedge accounting, is recognised in profit or loss and presented within Interest income or Interest expense in the period in which it arises.
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 initially recognised at fair value and is subsequently measured at the higher of (a) the amount determined in accordance with impairment provisions of IFRS 9 (see section ‘Impairment of financial assets’) and (b) the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with the revenue recognition principle of IFRS 15.
For certain financial assets and liabilities, quoted market prices are not available. For such instruments, fair value is determined using valuation techniques. These range from discounting of cash flows to various valuation models, where relevant pricing factors including the market price of underlying reference instruments, market parameters (volatilities, correlations and credit ratings), and customer behaviour are taken into account. ING maximises the use of market observable inputs and minimises the use of unobservable inputs in determining the fair value. It can be subjective dependent on the significance of the unobservable input to the overall valuation. All valuation techniques used are subject to internal review and approval. Most data used in these valuation techniques are validated on a daily basis when possible.
When a group of financial assets and liabilities are managed on the basis of their net risk exposures, the fair value of a group of financial assets and liabilities are measured on a net portfolio level.
DVA). Own issued debt and structured notes that are designated as measured at FVPL are adjusted for credit risk by means of a DVA. Additionally, derivatives valued at fair value are adjusted for credit risk by a CVA. The CVA is of a bilateral nature as both the credit risk on the counterparty as well as the credit risk on ING are included in the adjustment. All input data that is used in the determination of the CVA is based on market implied data. Additionally, wrong-way risk (when exposure to a counterparty is increasing and the credit quality of that counterparty deteriorates)
Credit risk management disclosures are provided in the Credit risk paragraph ‘Credit risk categories’
Specific policies applicable from 1 January 2019 for hedges directly affected by IBOR reform
ING Group early adopts the amendments as described in paragraph 1.4.1 ‘Changes in IFRS effective in 2019’ of Note 1. The amendments provide temporary reliefs which enable hedge accounting to continue during the period of uncertainty before the replacement of an existing interest rate benchmark with an alternative nearly risk-free interest rate (an ‘RFR’). The following temporary reliefs are part of the amendment: ▪ Highly probable requirement for cash flow hedges
When performing the prospective assessment 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.
The amendments are relevant given that ING Group hedges and applies hedge accounting to benchmark interest rate exposure part of IBOR reform. Hedging instruments and hedged items continue to be indexed by the IBOR benchmark rates. Therefore, there is uncertainty over the timing and the amount of the replacement rate cash flows. ING Group will cease to apply the amendments when this uncertainty is no longer present or when the hedging relationship is discontinued.
Financial assets and financial liabilities are offset, and the net amount reported, in the statement of financial position when the Group has a current legally enforceable right to set off the recognised amounts and intends to either settle on a net basis or to realise the asset and settle the liability simultaneously. Offsetting is applied to certain interest rate swaps for which the services of a central clearing house are used.
An ECL model is applied to on-balance sheet financial assets accounted for at AC and FVOCI such as loans, debt securities and lease receivables, as well as off-balance sheet items such as undrawn loan commitments, certain financial guarantees, and undrawn committed revolving credit facilities.
Financial instruments that are credit impaired require a life time provision.
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 house prices, commodity prices, and short-term interest rates. Applying market consensus in the baseline scenario ensures unbiased estimates of the expected credit losses.
POCI asset is determined based on lifetime ECL from initial recognition. POCI assets are recognised initially at an amount net of impairments and are measured at AC using a credit-adjusted effective interest rate. In subsequent periods any changes to the estimated lifetime ECL are recognised in profit or loss. Favourable changes are recognised as an impairment gain even if the lifetime ECL at the reporting date is lower than the estimated lifetime ECL at origination.
In certain circumstances ING grants borrowers postponement and/or reduction of loan principal and/or interest payments for a temporary period of time to maximise collection opportunities, and if possible, avoid default, foreclosure, or repossession. When such postponement and/or reduction of loan principal and/or interest payments is executed based on credit concerns it is also referred to as forbearance (refer to the ‘Risk Management’ section of the Annual Report for more details). In such cases, the net present value of the postponement and/or reduction of loan and/or interest payments is taken into account in the determination of the appropriate level of impairment loss. If the forbearance results in a substantial modification of the terms of the loan, the original loan is derecognised and a new loan is recognised at its fair value at the modification date. ING Group determines whether there has been a substantial modification using both quantitative and qualitative factors.
Significant judgements and critical accounting estimates and assumptions: Considerable management judgement is exercised in determining the amount of LLP for financial assets assessed on both a collective and an individual impairment basis. In particular, this judgement requires ING Group to make various assumptions about the risk of default, the subsequent expected loss rates in the event of default, and expected future cash flows. These assumptions are based on a combination of the Group’s past history, existing market conditions and forward-looking estimates at the end of each reporting period. Changes in these assumptions may lead to changes in the LLP over time. Given they are subjective and complex in nature, and because the LLP and the underlying exposures subject to impairment assessment are material, these assumptions are considered critical accounting assumptions. The sensitivity of these
Management will designate a financial asset or a financial liability as such only if this eliminates a measurement inconsistency, if the related assets and liabilities are managed on a fair value basis or classified as an embedded derivative as described below.
Available-for-sale financial assets include available-for-sale debt securities and available-for-sale equity securities. Available-for-sale financial assets are initially recognised at fair value plus transaction costs. For available-for-sale debt securities, the difference between cost and redemption value is amortised. Interest income is recognised using the effective interest method.
▪ The borrower has failed in the repayment of principal, interest, or fees and the payment failure has remained unsolved for a certain period; ▪ The borrower has demonstrated significant financial difficulty, to the extent that it will have a negative impact on the expected future cash flows of the financial asset; ▪ The credit obligation has been restructured for non-commercial reasons. ING Group has granted concessions, for economic or legal reasons relating to the borrower’s financial difficulty, the effect of which is a reduction in the expected future cash flows of the financial asset; and
Such a subsidiary may be presented as a held for sale disposal group if certain conditions are met.
The parties to the agreement must act together to control the entity and therefore exercise the joint control.
The Group’s investment in associates and joint ventures (net of any accumulated impairment loss)
Accounting policies of associates and joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group. The reporting dates of all significant associates and joint ventures are consistent with the reporting date of the Group.
ING Group’s acquisitions are accounted for using the acquisition method of accounting. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued in exchange for control of the acquiree. Goodwill, being the difference between the cost of the acquisition (including assumed debt) and the Group’s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, is capitalised as an intangible asset. Goodwill is only recognised separately on acquisitions. The results of the operations of the acquired companies are included in the statement of profit or loss from the date control is obtained.
Where a business combination is achieved in stages, ING Group’s previously held interests in the assets and liabilities of the acquired entity are remeasured to fair value at the acquisition date (i.e.
The initial accounting shall be completed within a year after acquisition. Adjustments to the fair value as at the date of acquisition of acquired assets and liabilities, that are identified within one year after acquisition are recognised as an adjustment to goodwill; any subsequent adjustment is recognised as income or expense. On disposal of group companies where control is lost, the difference between the sale proceeds and carrying value (including goodwill) and the unrealised results (including the currency translation reserve in equity) is included in the statement of profit or loss.
Property obtained from foreclosures is stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price, less applicable variable selling expenses. Property obtained from foreclosures is included in Other assets - Property development and obtained from foreclosures.
Property developed and under development is included in Other assets – Property development and obtained from foreclosures. Depending on the intention of ING Group after completion of the development, the property is measured as follows: ▪ Intention to sell: at the lower of cost and net realisable value; ▪ Intention to use as a real estate investment: at fair value.
A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of ING Group; or a present obligation that arises from past events but is not recognised because it is either not probable that an outflow of economic benefits will be
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▪ In case of exercised warrants, the exercise date is taken into consideration.
Diluted earnings per share data are computed as if all convertible instruments outstanding at yearend were exercised at the beginning of the period. It is also assumed that ING Group uses the
Reference is made to Note 42 ‘Assets not freely disposable’ for restrictions on Cash balances with central banks.
As at 31 December 2019, Loans include receivables related to securities in reverse repurchase transactions amounting to EUR 8,943 million (2018: EUR 6,686 million) and receivables related to finance lease contracts amounting to EUR 24 million (2018: EUR 51 million). Reference is made to
Note 7 ‘Loans and advances to customers’ for information on finance lease receivables.
Financial assets at fair value through profit or loss includes securities lending and sales and repurchase transactions which were not derecognised, because ING Group continues to be exposed to substantially all risks and rewards of the transferred financial asset. These assets are included in
Trading assets and Financial assets mandatorily measured at fair value through profit or loss.
Trading assets include assets that are classified under IFRS as Trading, but are closely related to servicing the needs of the clients of ING Group. ING offers institutional clients, corporate clients, and governments, products that are traded on the financial markets.
Part of the trading assets are sold subject to repurchase agreements, securities lending and similar agreements comparable to collateralised lending, and continue to be recognised in the consolidated statement of financial position.
As at 31 December 2019, Trading Assets - Loans and receivables include receivables of EUR 11,969 million (2018: EUR 12,939 million) with regard to reverse repurchase transactions.
Reference is made to Note 39 ‘Derivatives and hedge accounting’ for information on derivatives used in hedge accounting.
For strategic equity securities, ING decided to apply the option to irrevocably designate these investments at fair value through other comprehensive income, instead of the IFRS 9 default measurement of fair value through profit or loss.
Following a partial divestment in the fourth quarter of 2018, ING sold its last tranche of shares in
Reference is made to Note 6 ‘Securities at amortised cost’ for details on ING Group’s total exposure to debt securities.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Loans and advances to customers > 7
Loans guaranteed by credit institutions 206 195 3,569 2,901 3,775 3,095
ING Group does not hold any interests in Investments in associates and joint ventures that are individually significant to ING Group. Other investments in associates and joint ventures represents a large number of associates and joint ventures with an individual carrying value of less than EUR
Accumulated impairments of EUR 49 million (2018: EUR 15 million) have been recognised. The values presented in the tables above could differ from the values presented in the individual financial statements of the associates and joint ventures, due to the fact that the individual values have been brought in line with ING Group’s accounting principles. When the fair value of the investment is below cost for a significant amount or prolonged period of time, an impairment test is performed.
The associates and joint ventures of ING are subject to legal and regulatory restrictions regarding the amount of dividends it can pay to ING. These restrictions are for example dependent on the laws in the country of incorporation for declaring dividends or as a result of minimum capital requirements that are imposed by industry regulators in the countries in which the associates and joint ventures operate. In addition, the associates and joint ventures also consider other factors in determining the appropriate levels of equity needed. These factors and limitations include, but are not limited to, rating agency and regulatory views, which can change over time.
Share of results from associates and joint ventures of EUR 82 million (2018: EUR 146 million) as included in the table above, is mainly attributable to results of TMB of EUR 77 million (2018: EUR
(2018: EUR 500 million) had property in own use been valued at cost instead of at fair value.
Net carrying value as at 31 December 307 290 633 589 940 879
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B.V. and 90% of the shares of Makelaarsland B.V. The acquisition of Payvision and Makelaarsland resulted in a recognition of goodwill of respectively EUR 188 million, allocated to Wholesale
Other changes in goodwill of the CGU’s Wholesale Banking and Retail Growth Markets relate to changes in currency exchange rates. Reference is made to Note 47 ‘Consolidated companies and businesses acquired and divested’ for further information on the acquisitions that took place in 2018, 2019 and the goodwill recognised.
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The recoverable amount exceeds the carrying value of the CGUs for 2019 and 2018 and therefore no impairment is required.
Key assumptions in the goodwill impairment test model are the Price-to-Book ratios, level 1 inputs
Disclosures in respect of Net defined benefit assets are provided in Note 36 ‘Pension and other postemployment benefits’.
Other Other relates to various receivables in the normal course of business, amongst others, short term receivables relating to mortgage issuance and other amounts receivable from customers.
In December 2018, ING reached an agreement to sell part of the ING Lease Italy business and classified the this Italian lease business as Assets held for Sale (EUR 1.261 million). In the first 6 months of 2019 customers repaid EUR 100 million on outstanding. The sale of this Italian lease business was completed per 1 July 2019. 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
(TLTRO) of EUR 17.7 billion (2018: EUR 17.7 billion). The TLTRO aims to stimulate lending to the real economy in the Eurozone. The interest rate on the TLTRO’s is fixed over the life of each operation at the benchmark rate of the European Central Bank.
Credit balances on customer accounts 224,022 205,053 1 The prior periods have been updated to improve consistency and comparability.
Savings accounts relate to the balances on savings accounts, savings books, savings deposits, and time deposits of private individuals.
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Amounts to be settled include primarily transactions not settled at the balance sheet date. The nature of these transaction is short term and are expected to settle shortly after the closing date of the balance sheet.
Other relates mainly to balances on margin accounts or amounts payable to customers.
More than 1 year but less than 2 years 10,358 7,766
More than 1 year but less than 2 years 3,126 4,134
(CRD IV eligible) capital for ING Bank N.V. Under IFRS these bonds are classified as liabilities and for regulatory purposes, they are considered capital. Subordinated loans issued by ING Group companies comprise, for the most part, subordinated loans which are subordinated to all current and future liabilities of ING Bank N.V.
Effect of change in accounting policy due to the implementation of IFRS 9 241
In June 2019 ING redeemed USD 1 billion Tier 1 ING Perpetual Hybrid Capital Securities.
In 2019, ING Groep N.V. issued 5.0 million ordinary shares (2018: 5.9 million ordinary shares, 2017: 7.3 million). These issues were made in order to fund obligations arising from share-based employee incentive programmes.
Equity securities at FVOCI Debt instruments at FVOCI AFS and other Cash flow hedge Credit liability Property in own use
Effect of change in accounting policy due to the implementation of
Realised gains/losses transferred to the statement of profit or loss –33 –54 –90
Reference is made to Note 36 ‘Pension and other post-employment benefits’.
Realised gains/losses transferred to the statement of profit or loss is related to the sale of shares in
Kotak Mahindra Bank (EUR -119 million) and the effect of the merger transaction of TMB (EUR -18 million).
Unrealised revaluations relates to changes in the value of hedging instruments that are designated as net investment hedges. The hedging strategy is to hedge the CET1 ratio. The net increase of unrealized revaluations and Exchange rate differences of EUR 102 million is related to several currencies.
In 2019, a cash dividend of EUR 2,650 million (2018: EUR 2,607 million and 2017: EUR 2,564 million)
The par value of these cumulative preference shares is EUR 0.01.
Total interest expense using effective interest rate method 11,291 11,235 n/a
Interest income on financial assets at fair value through profit or loss 1,897 1,795 n/a
Interest income on non-trading derivatives (hedge accounting) n/a n/a 5,690 Interest expense on lease liabilities 25 n/a n/a
Total other interest income 3,107 2,880 n/a Total other interest expense 3,084 2,997 n/a
To further enhance the relevance of the interest disclosures, ING Group changed its separate presentation since 2018 of interest (income and expenses) for trading derivatives, trading securities
Other, mainly consists of commission fees in respect of bank guarantees of EUR 202 million (2018: EUR 207 million; 2017: EUR 209 million), in respect of underwriting syndication loans of EUR 10 million (2018: EUR 4 million; 2017: EUR 52 million), in respect of structured finance fees of EUR 141 million (2018: EUR 129 million; 2017: EUR 136 million), and in respect of collective instruments distributed but not managed by ING of EUR 167 million (2018: EUR 165 million; 2017: EUR 165 million).
All of ING’s net fee and commission income are in scope of IFRS 15 ‘Revenue from Contracts with
Securities trading results includes the results of market making in instruments such as government securities, equity securities, corporate debt securities, money-market instruments, and interest rate derivatives such as swaps, options, futures, and forward contracts. Foreign exchange transactions results include gains and losses from spot and forward contracts, options, futures, and translated foreign currency assets and liabilities. As from current year the other trading results are presented separately in this disclosure. Prior year figures are updated accordingly. Other trading results include the results of trading loans and funds entrusted.
The majority of the risks involved in security and currency trading is economically hedged with derivatives. The securities trading results are partly offset by results on these derivatives. The result of these derivatives is included in Derivatives trading results. The result on currency trading is included in foreign exchange transactions results.
‘Valuation results and net trading income’ include the fair value movements on derivatives (used for both hedge accounting and economically hedging exposures) as well as the changes in the fair value of assets and liabilities included in hedging relationships as hedged items. Reference is made to Note 39 ‘Derivatives and hedge accounting’ for information on derivatives used for hedge accounting.
Realised gains/losses on disposal of Available-for-sale debt securities n/a n/a 64
Realised gains/losses on disposal of Available-for-sale equity securities n/a n/a 48
Realised gains/losses and impairments of Available-for-sale equity securities n/a n/a 42
Impairments and reversals of impairments on investments are presented within Investment income, which is part of Total income.
Furthermore, Other income includes income from subleasing right of use assets and gains or losses from sale and lease back transactions amounting to EUR 5 million as well as income from positive
In 2017 an amount of EUR 121 million is included related to a tax charge at ING Australia Holdings
Group, is to attract, retain and motivate senior executives and staff.
Plan (LSPP), as well as fixed shares. The entitlement to the LSPP share awards is granted conditionally. If the participant remains in employment for an uninterrupted period between the grant date and the vesting date, the entitlement becomes unconditional, with the exception of the upfront shares which are immediately vested upon grant. Additionally, a condition before vesting was applied to performance shares until 2018. As of 2019, this performance condition is no longer applicable. Upfront and deferred shares awarded to the Management Board members of ING Group as well as identified staff, have a retention obligation that must be adhered to upon vesting, a minimum retention of 12 months applies. ING has the authority to apply a hold back to awarded but unvested shares and a claw-back to vested shares.
In addition to the LSPP share awards, ING also pays a number of senior employees fixed shares. The number of shares are determined each month from a cash value that forms part of the employee fixed remuneration. The shares are immediately vested to the employee, but have a minimum holding requirement of two years before the employee can dispose of the shares. The fixed shares are not subject to holdback or clawback.
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N.V., and 2,837 share awards (2018: 80,036; 2017: 104,449) were granted to the Management
10.89 (2018: EUR 13.65; 2017: 13.81). All option rights are vested.
mainly related to the Netherlands, Germany, Belgium, Poland, and Spain and contributions to the
Fees as disclosed in the table above relate to the network of the Group’s auditors and are the amounts related to the respective years, i.e. on an accrual basis. The increase in audit fees 2019 primarily relates to audit activities for the implementation of IFRS 16, new statutory audits and new
In 2018, impairment losses on property development mainly relate to impairments in Spain and
The reversals of impairments on property and equipment in both 2018 and 2017 relate to impairments previously recognised in the statement of profit or loss and mainly include impairments on property in own use that were reversed following the sale process of office buildings.
– Deposits from banks, not payable on demand –2,574 566 6,320
Net cash flow from/(used in) operating activities 13,055 6,915 –5,253 32 Changes in liabilities arising from financing activities
Treasury bills and other eligible bills included in trading assets 0 17 5
Treasury bills and other eligible bills included in FVOCI –0 n/a
Treasury bills and other eligible bills included in securities at AC 43 142 n/a
Not included in cash and cash equivalents: – Deposits from banks –26,307 –28,811 –28,258
Other Challengers Australia, France, Italy, Spain, Portugal, Czech Republic, and UK Legacy and
Other Corporate Line Banking and the run-off portfolio of Real Estate
ING Group evaluates the results of its banking segments using a financial performance measure called underlying result. Underlying result is used to monitor the performance of ING Group at a consolidated level and by segment. The Executive Board and the Management Board Banking consider this measure to be relevant to an understanding of the Group’s financial performance, because it allows investors to understand the primary method used by management to evaluate the Group’s operating performance and make decisions about allocating resources. In addition, ING
Group believes that the presentation of underlying net result helps investors compare its segment performance on a meaningful basis by highlighting result before tax attributable to ongoing operations and the underlying profitability of the segment businesses. Underlying result is derived by excluding from IFRS the following: special items, the impact of divestments and Insurance Other
insurance related activities that are not part of the discontinued operations.
Remove impact of: 1 Net result, after tax and non-controlling interests.
Underlying result before 1 In 2019, the Dutch domestic midcorporates real estate finance portfolio transferred from Wholesale Banking to Retail Banking Netherlands. Comparative figures have been adjusted.
Bulgaria Branch of ING Bank N.V. Wholesale 68 69 70 12 9 9 358 360 268 2 –0 –2
Mexico ING Consulting, S.A. de C.V. Wholesale 8 8 8 1 1 1 2 2 2 –2 –2 –2
India Branch of ING Bank N.V. Wholesale 0 1 1 2 0 1 0 –0
Investment 1 Public subsidies received, as defined in article 89 of the CRD IV, amounts to EUR 0.3 million (2018: EUR 0.5 million; 2017: EUR 0.5 million).
Australia has a very high tax charge due to a tax charge at ING Australia Holdings Ltd related to the years 2007-2013, for which a full reimbursement is expected to be received from NN Group.
Although the impact on net result was nil, this special item affected both the tax and ‘other income’
Austria, China, Singapore and Taiwan all have lower tax charges due to prior year adjustments.
Changes in the fair value of plan assets for the period were as follows: Remeasurements: Return on plan assets excluding amounts included in interest income 274 –143
No plan assets are expected to be returned to ING Group during 2020.
Amounts recognised directly in Other comprehensive income (equity) were as follows: Opening balance –394 –400
The accumulated amount of remeasurements recognised directly in Other comprehensive income
Annual contributions are paid to the funds at a rate necessary to adequately finance the accrued liabilities of the plans calculated in accordance with local legal requirements. Plans in all countries are designed to comply with applicable local regulations governing investments and funding levels.
Financial assets and liabilities at FVPL1 43 11 2 –2 54
– Deferred tax assets 818 841 1 The prior period has been updated to improve consistency and comparability.
More than 1 year but less than 5 years 4 2 17 2
The above mentioned deferred tax of EUR 163 million (2018: EUR 156 million) and the related unused tax losses carried forward exclude the deferred tax liability recorded in the Netherlands with respect to the recapture of previously deducted UK tax losses in the Netherlands for the amount of EUR -102 million (2018: EUR -105 million).
As at 31 December 2019 and 31 December 2018, ING Groep N.V. had no significant temporary differences associated with the parent company’s investments in subsidiaries as any economic benefit from those investments will not be taxable at parent company level.
The effective tax rate of 28.6% in 2019 is higher than the weighted average statutory tax rate. This is mainly caused by a high amount of expenses non-deductible for tax purposes with respect to interest on additional Tier 1 securities and non-deductible bank tax in the Netherlands and regulatory expenses non-deductible for tax purposes in some other European countries.
Belgium, recognised under ‘Impact on deferred tax from change in tax rates’; and
The following table presents the estimated fair values of ING Group’s financial assets and liabilities.
The estimated fair values represent the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Committees (LPC), Global Price Testing and Impairment Committee (GP&IC), Market Data
TMPC is responsible for validating the appropriate models. Local Parameter Committees monitor the appropriateness of (quoted) pricing, any other relevant market info, as well as that of pricing models themselves related to the fair valued positions to which they are applied. LPC executes valuation methodology and processes at a local level. The Market Data Committee approves and reviews all pricing inputs for the calculation of market parameters.
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▪ Bid-Offer adjustments are required to adjust mid-market values to appropriate bid or offer value in order to best represent the exit value, and therefore fair value. It is applicable to financial assets and liabilities that are valued at mid-price initially. In practice this adjustment accounts for the difference in valuation from mid to bid and mid to offer for long and short exposures respectively. In principle assets are valued at the bid prices and liabilities are valued at the offer price. For certain assets or liabilities, where market quoted price is not available, the price within the bid-offer spread that is most representative of fair value is used.
The carrying values of customer deposits with an immediate on demand features approximate their fair values. The fair values of deposits with fixed contractual terms have been estimated based on discounting future cash flows using the interest rates currently applicable to deposits of similar maturities.
The fair values of the financial instruments were determined as follows: Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss - Assets mandatorily at fair value through profit or loss 22 141 40,196 63,601 1,381 1,042 41,600 64,783 - Assets designated as at fair value through profit or loss 203 147 1,628 1,665 1,244 1,075 3,076 2,887
Financial liabilities at fair value through profit or loss - Financial liabilities designated as at fair value through profit or loss 1,081 1,166 46,419 57,305 184 708 47,684 59,179
2 Revaluation recognised in other comprehensive income is included on the line ‘Net change in fair value of debt instruments at fair value through other comprehensive income’.
Amounts recognised in the statement of profit or loss relating to unrealised gains and losses during the year that relates to Level 3 assets and liabilities are included in the line item ‘Valuation results and net trading income’ in the statement of profit or loss.
December 2019 are disclosed above in the table ‘Changes in Level 3 Financial liabilities’.
Of the total amount of financial assets classified as Level 3 as at 31 December 2019 of EUR 4.8 billion (31 December 2018: EUR 5.4 billion), an amount of EUR 2.5 billion (52.6%) (31 December 2018: EUR 3.4 billion, being 63.2%) is based on unadjusted quoted prices in inactive markets. As
Of the total amount of financial liabilities classified as Level 3 as at 31 December 2019 of EUR 0.5 billion (31 December 2018: EUR 0.9 billion), an amount of EUR 0.2 billion (39.3%) (31 December 2018: EUR 0.7 billion, being 82.0%) is based on unadjusted quoted prices in inactive markets. As
The remaining EUR 0.2 billion (31 December 2018: EUR 0.1 billion) of the fair value classified in Level 3 financial liabilities is established using valuation techniques that incorporates certain inputs that are unobservable.
Debt securities 920 807 3 Price based Price (%) 0% 0% 121% 105%
– FX 1 Present value techniques Inflation rate (%) n/a n/a n/a n/a
– Equity 282 317 Present value techniques Credit spread (%) n/a 3.2 n/a 3.2
Valuation techniques and range of unobservable inputs (Level 3) – continued
The fair values of the financial instruments carried at amortised cost in the statement of financial position, but for which fair values are disclosed are determined as follows: Sensitivity analysis of Level 3 instruments
Loans and advances to banks1 728 445 11,469 7,152 20,570 20,742 32,767 28,339