KYC enhancement programme. Risk costs increased, but remained below ING’s through-the-cycle average. Based on the Stage 3 ratio and the total outstandings as earmarked ‘at risk’ quality of the loan book improved in 2019. ING’s full-year underlying return on equity declined to 9.4 percent, from 11.2 percent in 2018. The CET1 ratio remained strong at 14.6 percent, despite our having already taken part of the expected supervisory impact on risk-weighted assets in the fourth quarter
Earning the primary relationship is a strategic priority for ING as it leads to deeper relationships, greater customer satisfaction and, ultimately, customers choosing us for more of their financial needs. In Retail Banking we define primary customers as those with multiple active ING products, at least one of which is a current account where they deposit a regular income such as a salary. For
ING has a global fintech network that helps orchestrate local scouting efforts and provides input on whether a partnership should be of a local or global nature. Often, partnerships allow innovative banking services to be brought to market quicker than if one of the partners had tried to do that alone. Investing in promising companies that are transforming banking is an important part of our innovation approach.
In Germany, the virtual assistant pING answers questions on products, services and generic FAQs. In 2019, pING conducted over 10 million customer sessions, with more than 80 percent of questions answered.
We promise customers we’ll keep getting better. One way is by simplifying and standardising end-to-end processes. Some processes are internal, while others directly impact the customer.
“The ValueX project gives institutional clients access to asset classes that have high entry barriers, with a particular focus on the environmental, social and governance (ESG)
Banks are operating in a fast-changing environment marked by new competitors, new customer expectations, increased regulation and higher capital requirements. At the same time, persistently low interest rates put pressure on our savings business model. We are finding new ways to be relevant to our customers.
Through ING Ventures, we are continuing to invest in fintechs, focusing on collaborations that support our strategy of creating a differentiating customer experience. In 2019, we made a further multi-million euro investment in Spanish-based fintech Fintonic. Fintonic is the leading finance app in Spain. It provides financing and savings solutions that help users manage their personal finances more effectively.
Our cutting-edge AI tool Katana – named as an Innovator 2019 by Global Finance magazine – helps to improve decision-making in bond trading. In 4Q, Katana was spun out into an independent
MineHub completed development of its platform in October 2019, and it is now live. MineHub’s first release offers comprehensive functionality that enables miners to capture mineral production and digital contracts with buyers, streamlining post-trade operations (including document flow), financing and logistics.
Europe’s leading high-speed rail passenger operator, and Itochu, a Japanese trading company, as well as a sustainability-linked loan for Chinese-owned trading firm COFCO. ING also closed its first sustainability improvement loan in the US, structured by ING’s sustainable finance Americas team.
As a result of our financial empowerment activities, 25.9 million people (67 percent of our customer base) felt financially empowered in 2019 Ⓐ. In 2018, this was 25 million or 65 percent. Our ambition for 2022 is for 32 million customers to feel financially empowered by ING.
Operating expenses declined 0.1 percent to €1,609 million, mainly due to lower staff-related expenses stemming from the transformation programmes, partly offset by higher regulatory costs and KYC-related expenses.
Each and every one of ING’s more than 56,000 employees has a responsibility to live up to the
This includes a learning module to familiarise new starters with our activities and help them understand their own sustainability profile. More than 7,000 colleagues completed this module in 2019. In addition, colleagues around the world took part in social impact days, investing time with
To ensure the prudent use of data, there are local and global Data Ethics Councils to help manage data-related dilemmas and ensure our decisions are aligned with the values and behaviours in
The Non-Financial Information and the Four Specific Topics need to be read and understood together with the reporting criteria. ING Group is solely responsible for selecting and applying these reporting criteria, taking into account applicable law and regulations related to reporting.
Our responsibility is to plan and perform our review and audit engagement in a manner that allows us to obtain sufficient and appropriate assurance evidence for our conclusion and opinion.
Additionally, our audit of the Four Specific Topics included, on top of the above, among others the following procedures: - Identifying and assessing the risks of material misstatement of the Four Specific Topics, including being misleading or unbalanced, whether due to fraud or error, designing and performing assurance procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from errors, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Supervisory Board Knowledge Days, we had a number of educational sessions on specific topics and made visits to ING’s operations throughout the year. We all valued these activities and they contributed to a better insight into topics that are important to ING. They also give us a valuable opportunity to interact directly with senior managers and employees across the organisation.
The Supervisory Board, Executive Board and Management Board Banking also discussed ING’s internal KYC governance and processes. Improvements were identified that are now being implemented. The aforementioned boards reconfirmed their commitment to ensure ING fulfils its gatekeeper role, complies with applicable regulatory requirements and continue taking the necessary actions to strengthen compliance risk management and culture throughout the organisation.
The Supervisory Board self-assessment was also on the agenda. Last year’s action points were addressed during the year, covering: (1) increased efforts to improve stakeholder management, by means of for example having participated in several roadshows and sector round tables, and foremost through the stakeholder dialogue that was initiated in view of the upcoming new proposed remuneration policies for the Executive Board and Supervisory Board; (2) an improved balance between the focus on performance management and compliance, through renewed reports and dashboards that include priorities, milestones and metrics; (3) more in-depth educational sessions, with a clear balance between the focus on risk, KYC and compliance
Shares not included in the Securities Giro Transfer system (Wet Giraal Effectenverkeer system) are transferred by means of a deed of transfer between the transferor and the transferee. To become effective, ING Group has to acknowledge the transfer, unless ING Group itself is a party to the transfer. The Articles of Association do not restrict the transfer of ordinary shares, whereas the transfer of cumulative preference shares is subject to prior approval of the Executive Board. ING
ING Group participated in 12 industry conferences during 2019. In total, there were approximately 850 meetings (including conference calls) with institutional investors and/or analysts during 2019.
Banking Network from 2007 to 2010, head of Network Management for Retail Banking Direct &
▪ refrain from supporting one interest without regard to the other interests involved.
Board as far as legally permitted against direct financial losses in connection with claims from third parties lodged or threatened to be lodged against them by virtue of their service as a member of the Supervisory Board.
In view of their experience and the valuable contribution that former members of the Executive
Board of ING Group and vice-chairman of the Management Board Banking of ING Bank N.V. On the basis of the NYSE listing standards, all members of the Supervisory Board are independent.
Transactions by members of the Supervisory Board in these shares are subject to the ING
Technology Management GmbH. The ECB has authorised Hermann-Josef Lamberti to hold a third non-executive position i.e. in deviation of the maximum of two provided for in section 91 of CRD IV.
H.W.P.M.A. (Herna) Verhagen (Born 1966, Dutch nationality, female; appointed in 2019, term expires in 2023)
Treadway Commission (‘COSO’) in Internal Reporting – Integrated Framework (2013 Framework).
Executive Board members have a commission contract for an indefinite period. ING has the option to terminate if they are not reappointed by shareholders at the AGM or if their membership of the board is terminated. There is a three-month notice period for individual board members and a sixmonth period for ING. During this time the board member continues to work and remains eligible for all agreed remuneration components.
Executive Board members with regard to the amount and structure of their own remuneration, including the aspects mentioned above.
In line with the Dutch Corporate Governance Code, ING determines the internal ratio of remuneration for Executive Board members and a representative reference group. Deemed most relevant for this ratio is the total direct compensation of the CEO compared to the average total direct compensation of all ING employees. On this basis, the internal ratio in 2019 was 1:31. For the sake of transparency we also calculated the ratio of the total direct compensation of the other
Although ING continues to outperform our peers in most areas, there was a decline in the 2019 results.
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 his successor. Thus the emoluments reflect the period from
December 2019 including those awarded prior to their appointment to the Executive Board.
The Supervisory Board remuneration levels for 2019, similar to 2018, are shown below: Annual fees in euros 2019
ING's purpose. The Supervisory Board strives to have a diverse composition with regards to gender, ethnicity, nationality and generation. The Supervisory Board remuneration policy therefore aims to
Netherlands: Jaap van Amsterdam (vice secretary), Mariana Gomez de la Villa, Sofiane Maktouf,
Risk reporting provides senior and local management with information needed to manage risks.
can take mitigating measures or adjustments to the dynamic plan can be made.
Also, the rules on the subordination of Minimum Requirement for own funds and Eligible Liabilities
Our approach continues to evolve as we develop a better understanding of climate risk and we start to embed climate risk within our risk management process. ING has a Risk Identification and
Actual country limits are set by means of country instruments, which are reviewed monthly and updated when needed. For countries with elevated levels of geopolitical or severe economic cycle risk, monitoring is performed on a more frequent basis with strict pipeline and exposure management.
The ESR policy framework includes standards and best practice guidance for ESR-sensitive sectors.
systems with internally developed models based on data that is either manually or automatically fed. Under certain conditions, the outcome of a manually fed model can be challenged through a rating appeal process. Risk ratings for non-performing loans (NPL) (20-22) are set by the global or regional credit restructuring department. For securitisation portfolios, the external ratings of the tranche in which ING has invested are leading.
The credit quality of the ING portfolio improved overall. For consumer lending past due but performing, the portfolio decreased by EUR 1.1 billion mainly in Retail portfolio in Belgium &
▪ There is doubt as to the borrower’s ability to generate stable and sufficient cash flows to service its debt.
ING’s loan portfolio is under constant review. Loans with past due financial obligations of more than 90 days are reclassified as non-performing. For commercial lending portfolios, there generally are reasons for declaring a loan non-performing prior to being 90 days past due. These reasons include, but are not limited to, ING’s assessment of the customer’s perceived inability to meet its financial obligations, or the customer filing for bankruptcy or bankruptcy protection.
Transfer into 12-month ECL (Stage 1) 12,856 30 -12,579 -253 -277 -23 -246
The commercial activities can result in linear interest rate risk, for example, when re-pricing tenors of assets differ from those of liabilities. Also, interest rate risk can arise from customer behaviour depending on the nature of the underlying product characteristics. Customer behaviour risk is defined as the potential future value loss due to deviations in the actual behaviour of clients versus the modelled behaviour towards the embedded options in commercial products. General sources of customer behaviour risk include the state of the economy, competition, changes in regulation, legislation and tax regime, and developments in the housing market. Since these risk factors cannot be (fully) mitigated, ING holds capital to be able to absorb possible losses as a result of changed customer behaviour.
Board, a fundamental review and reform of the major interest rates benchmarks has been undertaken. For the Eurozone, this led to a reform of the EURIBOR benchmark rate and development of €STR as the recommended new nearly risk free rate to replace EONIA. For LIBOR
Wholesale Banking (mainly Financial Markets) as this is the only business line within ING where trading activities take place. Trading activities include facilitation of client business and market making. FI-FM Risk is responsible for the development and implementation of trading risk policies and risk measurement methodologies, and for reporting and monitoring risk exposures against approved trading limits. FI-FM Risk also reviews trading mandates and limits, and performs the gatekeeper role in the product review process. The management of market risk in trading portfolios is performed at various organisational levels. The FI-FM Risk Management Framework defines policies and procedures for the overall management of trading books. Trading activity is systematically reviewed and positions against the mandates are assessed jointly by the first and second lines of defence.
3 Incremental risk charge -IRC (higher of values a and b) 1,278 102 767 61
The second line of defence Financial Risk function is responsible for developing and maintaining
The LCR compares the volume of available high quality liquid assets (HQLA) to net outflows
Contingent F&L risks are addressed in the contingency funding plan whose focus is on early warning indicators as well as organisation and planning of liquidity management in times of stress.
who intend to deceitfully or unlawfully benefit themselves or others; ▪ Unauthorised activity risk is the risk of financial loss, regulatory sanctions or reputational damage due to employees performing outside the normal course of their business, intentionally giving unauthorised approvals or overstepping their authority; ▪ Personal and physical security risk is the risk of financial loss, regulatory sanctions or reputational damage due to criminal and environmental threats that might endanger the security or safety of
Controls and monitoring continue to be embedded in the organisation as part of the overall internal control framework and are continuously re-assessed against existing and new threats. The identification and monitoring of new threat actors and campaigns relevant to ING also informs this process as does the closer alignment between IT security and fraud teams. In addition, ING
ING has introduced measures to strengthen the Compliance Risk Management function. These measures are being implemented as part of a multi-year, global compliance strategy and transformation programme The programme encompasses the whole compliance function and aims at enhancing global steering and oversight by the compliance function.
▪ In September 2019, ING partnered with four other Dutch banks to explore options to jointly monitor payment transactions. Transaction Monitoring Netherlands (TMNL) is part of a broader cooperation with the private sector, government agencies, regulators and law enforcement to harmonise efforts to fight financial crime and strengthen the resilience of the financial system as a whole, both on a national and European level. We also work with the
Following on from that, workstreams were set up with senior managers and a number of interventions were initiated with the aim of changing high-risk behavioural patterns. Another behavioural risk assessment was conducted at ING in Belgium in the fourth quarter of 2019. We will start a dialogue in 2020 to dive into the outcomes and root causes of the behavioural patterns observed.
Mandated by the MBB and chaired by the CRO of ING, the MoRMC meets monthly.
Data collection is the process of defining and collecting data that meets the defined data quality requirements for model development. The process includes the definition of the data needed, assessment of data availability and quality, assumptions and limitations, as well as the gathering of the data needed for the analyses, impact study and testing during the model development process.
The objective of the model approval stage is approval for use. The model owner submits the model for formal consent by the internal approver before being deployed and used. The
Additional notes to the consolidated financial statements 36 Pension and other post-employment benefits 328 38 Fair value of assets and liabilities 335 39 Derivatives and hedge accounting 351 40 Assets by contractual maturity 359 41 Liabilities by maturity 361 42 Assets not freely disposable 363 43 Transfer of financial assets 363 44 Offsetting financial assets and liabilities 364 45 Contingent liabilities and commitments 369 47 Consolidated companies and businesses acquired and divested 373 48 Principal subsidiaries, investments in associates and joint ventures 374
Remeasurement of the net defined benefit asset/liability 36 58 6 –29
Employee stock option and share plans 28 13 41 0 41
Taxation paid –2,345 –1,602 –1,691 – Securities at amortised cost 13,001 18,709 n/a
The right-of-use asset is included in the statement of financial position line-item ‘Property and equipment’, the lease liability is included in the statement of financial position line-item ‘Other liabilities’. Refer to Note 9 ‘Property and equipment’ and Note 17 ‘Other liabilities’.
ING applies an additional ‘Funding Valuation Adjustment’ (FVA) to the uncollateralised derivatives based on the market price of funding liquidity.
Interest income and expense from financial instruments classified at fair value through profit or loss is recognised in Interest income using the effective interest method (where applicable). The remaining changes in fair value of such instruments are recognised in Valuation results and net trading income in the statement of profit or loss. Dividend income from equity instruments classified at fair value through profit or loss is generally recognised in ‘Valuation results and net trading income’ in the statement of profit or loss when the dividend has been declared.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in the associates and joint ventures. Unrealised losses are also eliminated unless they provide evidence of an impairment of the asset transferred.
ING Group consults with legal experts. Even taking into consideration legal experts’ advice, the probability of an outflow of economic benefits can still be uncertain and the amount provisioned can remain sensitive to the assumptions used which may have a broad range of outcomes.
Share-based payment expenses are recognised as a staff expense over the vesting period. A
ING considers valuations from third party experts in determining the fair values of the property in own use.
Gross carrying amount as at 31 December 1,503 135 69 1,707
146 million. The amounts included in Other provisions are based on best estimates with regard to amounts and timing of cash flows required to settle the obligation.
Costs payable relate to costs attributable to 2019, which will be paid in subsequent periods.
More than 2 years but less than 3 years 3,041 1,587
More than 3 years but less than 4 years 1,541 1,234
In 2019 ING Groep N.V. issued two Perpetual additional Tier 1 Contingent Convertible Capital
In 2019, the unrealised revaluations of EUR 137 million are due to the revaluation of shares in Bank of Beijing EUR 35 million and shares in EquensWorldLine EUR 101 million. The EUR -472 million transfer of revaluation reserve to retained earnings is mainly related to the sale of shares in Kotak
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Investment income > 24
As per 31 December 2019, total options outstanding consists of 1,733,349 options (2018: 3,754,976; 2017: 10,156,219) relating to equity-settled share-based payment arrangements and 622,994 options (2018: 1,368,877; 2017: 4,985,761) relating to cash-settled share-based payment arrangements.
Net change in Trading assets and Trading liabilities –2,568 9,910 –11,187
Treasury bills and other eligible bills included in AFS investments n/a n/a 386
Additional notes to the Consolidated financial statements 36 Pension and other post-employment benefits
Unused tax losses carried forward not recognised as a deferred tax asset 922 1,010
The table above include a breakdown of certain net deferred tax asset positions by jurisdiction for which the utilisation of the deferred tax asset is dependent on future taxable profits in excess of the profits arising from the reversal of existing taxable temporary differences whilst the related entities have incurred losses in either the current or the preceding year.
(for which current market information about similar assets to use as observable, corroborated data
In 2019 there were no significant transfers between level 1 and 2 and no significant changes in valuation techniques.
In 2019 the amounts reported on the line reclassifications relate to syndicated loans reclassed
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Fair value of assets and liabilities > 38 components of these structures may be sensitive to unobservable inputs, but the overall sensitivity is by design not significant.
If ING had used input values from the upper and lower bound of this range of reasonably possible alternative input values when valuing these instruments as of 31 December 2019, then the impact would have been higher or lower as indicated below. The purpose of this disclosure is to present the possible impact of a change of unobservable inputs in the fair value of financial instruments where unobservable inputs are significant to the valuation.
Credit (Debt securities, Loans, structured notes, credit derivatives) 10 39 0
Gross carrying value of derivatives used for cash flow hedge accounting
Coupon interest due on financial liabilities4 842 659 1,719 5,626 3,839 287 12,971 1 Includes liabilities on demand.
District Court issued a decision dismissing all claims against ING Group and ING Capital Markets LLC, but leaving ING Bank, together with several other banks, in the case, and directing plaintiffs to file an amended complaint consistent with the Court's rulings. In October 2018, plaintiffs filed such amended complaint, which asserts claims against a number of defendants but none against ING
Pillar II capital requirements. In the event that ING Group breaches the MDA level, ING may face restrictions on dividend payments, AT1 instruments coupons and bonus payments.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Subsequent events > 14
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. 400
— 4.4% of profit before taxation from continuing operations (2018: 4.4%).
Our audit procedures included an evaluation of the design, implementation as well as the operating effectiveness of internal controls relevant to mitigate these risks and substantive audit procedures, including detailed testing of high risk journal entries and evaluation of management bias. These procedures are among others related to the Loan Loss Provision and suspense accounts. In determining the audit procedures, we used the Company’s evaluation in relation to fraud risk management (prevention, detections and response), including the set-up of ethical standards to create a culture of honesty.
Because ING is a multinational banking and financial services corporation, with a global presence and serving around 38.4 million customers, corporate clients and financial institutions in over 40 countries, ING’s business, results and financial condition may be significantly impacted by turmoil and volatility in the worldwide financial markets or in the particular geographic areas in which we operate. In Retail Banking, our products include savings, payments, investments, loans and mortgages in most of our retail markets. In Wholesale Banking, we provide specialised lending, tailored corporate finance, debt and equity market solutions, payments & cash management and trade and treasury services. As a result, negative developments in financial markets and/or regions in which we operate have in the past had and may in the future have a material adverse impact on our business, results and financial condition, including as a result of the potential consequences listed below.
Risks related to changes in laws of general application, litigation, enforcement proceedings and investigations
Changes in tax laws (including case law) could increase our taxes and our effective tax rates and could materially impact our tax receivables and liabilities as well as deferred tax assets and deferred tax liabilities, which could have a material adverse effect on our business, results and financial condition. Changes in tax laws could also make certain ING products less attractive, which could have adverse consequences for our businesses and results. Because of the geographic spread of its business, ING may be subject to tax audits, investigations and procedures in numerous jurisdictions at any point in time. Although we believe that we have adequately provided for all our tax positions, the ultimate resolution of these audits, investigations and procedures may result in liabilities which are different from the amounts recognized.
Energy policy in practice in EUR million in lending O/S 2019 2018 Y/Y change
▪ We will continue to monitor and report our progress towards aligning our portfolio with the Paris Climate
RSPO certification; ▪ The View – a Wholesale Banking engagement platform on sustainable finance; ▪ An overview of sectors where we may engage clients on sustainability; ▪ Approach and results from human rights engagements with clients – p.13-33 of our Human Rights Update 2019; An overview of sustainable finance products and services is available online; ▪ Client case studies cited in Our business chapter.
▪ We’ll procure 100 percent renewable electricity for all ING buildings where we have management control worldwide by 2020.
By granting land tenure and providing agricultural training to local communities, trees are kept standing, drawing down carbon from the atmosphere and protecting the area’s rich biodiversity.
in tonnes 1 Residual waste is the difference between total and recycled waste. The data quality in 2019 improved and we recorded a significant increase in residual waste in Romania.
The support of the EU ensures that the project will be in line with EU human rights standards.