The impact of the coronavirus pandemic and ING’s response is described in various chapters throughout this report. This includes in ‘World around us’ (general socio-economic impact); ‘Our strategy’ (impact on ING); ‘Our business’ (support for customers); ‘Our people’ (support for employees); ‘How we make a difference’ (support for communities); ‘Our performance’; and in the Risk management section.
It aims to give all our stakeholders a balanced and complete overview of our activities and our ability to create and sustain value. We welcome their reactions and views, which can be emailed to communication@ing.com.
(DMA). This report also follows the Sustainability Accounting Standards Board (SASB) codified standards for commercial banks. Our GRI and SASB disclosures are indexed in the Non-financial appendix.
3 Of resilient net profit, which is defined as net profit adjusted for significant items not linked to the normal course of business.
The cost/income ratio increased to 63.2% from 56.6% in 2019, as expenses rose 7.7% (mainly due
Excluding regulatory costs and these incidental items, the 2020 cost/income ratio was 52.5%.
2 For a description of ING’s Climate Finance and Social Impact Finance, see www.ing.com/Sustainability/Sustainable-business/How-we-measure.htm.
We have reached out pro-actively to many of our clients, staying closely connected and having regular conversations to see how they're doing and to understand how their business models are holding up to the new challenges they’re facing. We’ve been there to advise and support, and have also provided a tangible helping hand through payment holidays totalling €19.4 billion to around 196,000 customers, as well as giving prudent financial support to business customers facing liquidity issues.
However, we continue to comply with the European Central Bank’s recommendations on shareholder distributions, and in line with these we paid an interim cash dividend of €0.12 per share after publishing our 4Q2020 results. Further distributions are intended after end-September 2021, as per the current
And with safety of our customers paramount, we empowered them to do their banking and payments at a distance with our digital and contactless solutions. Mobile card payment volumes more than doubled compared to 2019, and 40 percent of active customers only interact with us using the mobile app.
Customers seem to appreciate the ING experience, with ING ranked as the number one bank in six of our 14 retail countries and a top-three position in 12 countries, as measured by the Net
I could rely on the support and guidance of our Supervisory Board and my colleagues in the
As in the eurozone, economic performance in Poland was heavily influenced by lockdown measures, the introduction of job protection schemes and increased public expenditure. Uncertainty about domestic factors and the economic recovery held back private investment, as in most other European countries. The central bank of Poland reduced the benchmark interest rate to 0.1% and purchased assets in the secondary market to improve banks’ liquidity.
When employees are confronted with unethical or illegal behaviour, they’re encouraged to speak to the person involved, to their own direct manager or to their manager one level up. They can also reach out to HR or their local compliance officer. And if they are unsure, they can consult an ING
Material topics: innovation, digitalisation and interconnectivity, customer privacy, culture, ethics and integrity
Netherlands. In risk management we built more topic detection models for the early warning signals
This underpinned our decision in 2020 to stop Maggie as a programme. Launched in 2016 to integrate our product offering and provide a standardised easy, personal and smart digital experience for customers in four Challengers markets, Maggie delivered various customer experience building blocks and sales and services journeys.
As well as helping customers and communities navigate the effects of the coronavirus crisis, we believe the two areas where we can have the biggest impact are climate change and financial health. We believe we can act as a catalyst for positive change in these areas through our financing decisions, by sharing our knowledge and through our innovation skills.
Innovation capabilities to offer customers new and complementary services that go beyond banking, such as in the area of financial health
Climate action steering our financing to meet the well-below two-degree goal of the Paris
ING colleagues are encouraged to contribute proactively to a more sustainable world. In 2020, this included a global activation on climate-related topics in 19 countries and the introduction of a series of global webinars on core themes relating to our sustainability direction and progress. These were attended by hundreds of colleagues from across the bank. In addition, colleagues around the world took part in social impact days, helping their communities respond to the pandemic. We now have a growing network of sustainability ambassadors in 14 countries and this continued to expand with the launch in November 2020 of a digital ambassador training programme.
• AdviceRobo, which uses behavioural data to predict credit risk (advicerobo.com)
Where applicable, we report these to the relevant authorities. Over the years, and especially after 2017, we have discontinued a number of customer relationships that were not in line with our policies or risk profile. Read more in ‘Risk management’.
Cristina Cignoli is a director at Diversified Corporates in New York
Market trends like the shift to mobile and online banking confirm ING’s mobile-first digital approach. Building on this, we adapted our processes and service models to make banking safer, easier and always accessible to customers in a time of social distancing, and put measures in place to help them deal with the impact of the coronavirus pandemic on their finances.
Retail organisation under one management team with shared global priorities aimed at harmonising customer engagement and selected products on cross-border platforms. Read more in ‘Achieving our business goals’ below.
We can introduce new and complementary services through platforms. Shopping services can use our scale to provide better deals or cashbacks to customers. The DealWise shopping platform gathers cashback deals and discounts in one place. Users can save on their daily spending while merchants gain insights that help them better understand, acquire, develop and maintain customers. It is now available in Romania, with plans to enter Germany next.
The report’s Climate Alignment Dashboard tracks our performance, showing the CO2 intensity per sector of our portfolio compared to the market and the relevant climate scenario. The portfolios for power generation, shipping, cement and steel are ‘on track’ for climate alignment, while residential real estate, automotive and aviation are ‘close to being on track’. For the remaining two sectors we cannot yet benchmark our performance. For upstream oil and gas this is because the 2019 portfolio is our starting point and we will need to see movement relative to the scenario pathway, starting next year, before indicator status can be given. For commercial real estate we still lack complete and up-todate market data.
CO2 emissions; ZES is moving it a step closer towards the Paris Agreement goals.
A significant part of our loan book consists of residential mortgages, and houses generally account for about 22 percent of direct and indirect CO2 emissions in the EU. We’re working with clients to improve the energy consumption of the houses we finance as a way of achieving our Paris alignment goals. Our long-term vision is to have an energy-positive mortgage portfolio by 2050. This means that the houses in our portfolio will collectively generate more energy than they consume.
“It was emotionally challenging hearing about the problems many of our customers were facing”
Operating expenses rose by €26 million, or 1.2 percent, to €2,236 million from €2,210 million in 2019, of which €65 million was caused by higher regulatory costs. Expenses excluding regulatory costs declined 1.9 percent as the impact of CLA salary increases, higher IT expenses as well as provisions related to redundancies and customer claims, were more than offset by lower external staff costs and lower marketing and travel expenses.
Operating expenses rose by €128 million, of which €43 million was due to a goodwill impairment related to an acquisition in the past by ING Belgium and €40 million related to restructuring costs recorded in the fourth quarter of 2020. The remaining increase was mainly due to higher regulatory costs and IT expenses.
Total income declined by €248 million to €3,261 million in 2020, of which €230 million related to an impairment on ING’s equity stake in TMB. Excluding this impairment, total income decreased by €18 million, or -0.5 percent. Net interest income was down 1.0 percent to €2,760 million, reflecting margin pressure on savings and current accounts, largely offset by higher interest results from lending products and Treasury. Net customer lending (adjusted for currency effects and Treasury) grew by €2.6 billion in 2020, with growth in all countries, except Italy. The net inflow in customer deposits, also adjusted for currency impacts and Treasury, was €11.9 billion, with largest increases in Poland and
Spain. Net fee and commission income declined 2.6 percent to €412 million, largely due to a decline in
To further promote inclusion, ING has more than 20 employee networks and employee-led diversity initiatives. The Lioness network, for instance, is in five countries and aims to help women realise their ambitions. Other networks focus on race and nationality, cultural diversity, employees with a disability,
The IDP framework enables employees to identify actions to improve their performance in a current role, think ahead about the skills and experiences they might need for a next role, or even beyond that for a role outside ING. The IDP is available in all countries and over a third of all employees have put a plan in place.
Our people offer gives guidance to our global people practices, while supporting our Think Forward strategy. It replaces the previous ‘employer value proposition’ and forms the basis of our employer brand.
The Executive Board’s Responsibilities for the Non-Financial Information and the Four Specific Topics
The risks listed below are defined as existing and emerging risks that may have a potentially significant impact on our financial position or our business model. They may have a material impact on the reputation of the company, introduce volatility in future operational results, or impact ING’s medium and long-term strategy including the ability to pay dividends, maintain appropriate levels of capital or meet liquidity and funding targets. An emerging risk is defined as a risk that has the potential to have a significant negative effect on our performance, but whose impact on the organisation is currently more difficult to assess than other risk factors that are not identified as emerging risks.
Trade and Cooperation" Agreement (the “TCA”). The financial services provisions of the TCA are very limited. UK-based financial services providers lost EU passporting rights from 1 January 2021 and EU-
ING builds on its cybercrime resilience through its dedicated Cyber Crime Expertise and Response
ING Bank) and a Supervisory Board (SB); both tiers play an important role in managing and monitoring the risk management framework.
Behavioural risk is an increasingly important risk area for ING and across the financial industry. It arises when behavioural patterns are at the root of financial and non-financial risks in the organisation.
Banking (MBB) and senior management to form an opinion on the adequacy of internal risk management and control systems for the risks ING faces while pursuing its strategy.
In December 2017, revisions to Basel III were formally announced by the Basel Committee. These revisions to Basel III establish new prudential rules for banks, including a revision to the standardised approach to credit risk, the introduction of a capital floor based on standardised approaches, the use of internal models, limitation of options for modelling operating risks, and new rules for the establishment of risk-weighted items and unused credit lines at the banks. Such revisions have a long implementation phase and are not yet fully transposed into EU regulation. The revisions are commonly referred to as
ultimately supports this strategy and contributes thereby to the continuity of ING Group, ING Bank and all its business units.
Contingency Capital & Funding Plan and the Recovery Plan and assessed potential additional mitigating actions to counter this very specific crisis.
The Capital Adequacy Statement (CAS) is ING Group’s quarterly assessment of its capital adequacy and takes into account different elements with respect to its capital position. The degree to which ING’s capital position is considered to be adequate depends on a variety of internal and external drivers: • Current supervisory requirements and (expected) requirements going forward; • Current internal requirements and (expected) requirements going forward; • Coherence of the available capital with the (realisation of) strategic plans; and
incorporated pandemic specific scenarios for the stress tests to gain insight into the potential effects of Covid-19 on the credit risk in the portfolios.
In 2020, ING established a Credit Risk Control Unit (CRCU), which is part of the Financial Risk department, with the main objective to contribute to compliant and continuously improving rating systems.
ratings and slightly increasing in A rating class. Substandard grade decreased to 0.7% from 0.9%, while
NPL grade slightly increased (0.7%). Poland and Spain also showed rating distributions improvement, as in both investment grade share increased (central banks and mortgages). Substandard grade remained stable at 0.6% for Poland and 0.3% for Spain, as for NPL grade, it was stable at 2.2% for
(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 below tables show the values of different covers and the VTL split between performing and nonperforming loans.
ING’s loan portfolio is under constant review. Loans to obligors that are considered more than 90 days past due on material exposure are reclassified as non-performing. For commercial lending portfolios, there generally are reasons for declaring a loan non-performing prior to the obligor 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 lifetime ECL not credit impaired (Stage 2) -39,093 -76 39,601 651 -509 -57 0 518
3 At the end of December 2020, the stock of provisions included provisions for loans and advances to central banks (€3 million), loans and advances to banks (€23 million), financial assets at FVOCI (€14 million), securities at amortised cost (€17 million), provisions for loans and advances to customers (€ 5,779 million) and provisions for contingent liabilities (credit replacements) recorded under Provisions (€17 million).
Uncertainty around the base case is high as new cases of Covid-19 remain high in many countries and restrictions to mobility have been tightened again, increasing the risk that the economic recovery falls back. There is also uncertainty around the degree to which government support schemes will continue to limit the increase in unemployment. And while there is positive news about the efficacy of a vaccine, many logistical and production challenges lie ahead.
threshold bandings, which determines the appropriate staging and ECL. Stage 2 is triggered when either a threshold for absolute change in lifetime PD or relative change in lifetime PD is hit. The thresholds for the absolute change in lifetime PD vary between 75bps for Retail portfolios, 100bps for
The following sections elaborate on the various elements of the risk management framework for: ▪ Market risk economic capital (trading and banking books); ▪ Market risks in banking books; and
NII-at-Risk banking books per business - year one (*) in EUR million 2020 2019
GBP LIBOR with SOFR and SONIA respectively when these LIBOR rates cease to exist. This process is at different stages, and is progressing at different speeds, across several major currencies.
EURIBOR after 1 January 2020 for both existing and new contracts. ING expects that EURIBOR will continue to exist as a benchmark rate for the foreseeable future. In addition, the Working Group on
JPY LIBOR 60,592 1. For cross currency swaps all legs of the swap are included that are linked to a main IBOR that is significant to ING Group.
ING Group also has exposure to interest rate benchmark reform in respect of its cash collateral balances across some of its Credit Support Annex agreements. This exposure is not included within the table above.
The Phase 2 amendments to IFRS relating mainly to accounting for changes in the basis for determining the contractual cash flows of financial assets and liabilities due to the IBOR reform and impact on hedge accounting when an existing benchmark rate is reformed or replaced with an alternative risk free rate. The Phase 2 amendments are effective for annual reporting periods beginning on or after 1 January 2021, with early application permitted. ING did not early adopt Phase 2 amendments in 2020. Refer to section 1.4.2 of Note 1 ‘Basis of preparation and accounting policies’ of the financial statements.
ING’s strategy is to keep the target CET1 ratio within a certain range when FX rates fluctuate, while limiting volatility in the profit and loss account due to this CET1 hedging. Therefore, hedge accounting is applied to the largest extent possible. Taking this into account, the CET1 ratio hedge can be achieved by deliberately taking foreign currency positions equal to certain target positions, such that the target
ING reviews the liquidity horizons regularly based on a structured assessment of the time it takes to liquidate the positions in the trading portfolio.
Netherlands 50 United Kingdom 72 1 Basis Point Value (BPV) measures the impact on value of a 1 basis point increase in interest rates. The figures include commodity risk in banking books.
The increase in ‘Interbank’ funding type is related to ING's participation in the TLTRO III.
▪ The Covid-19 pandemic has also had material implications for our clients and peers to continually meet the environmental and social requirements of the EPs. ING participated in the development of a guidance note to provide practical guidelines for both Equator Principle financial institutions and clients on how to manage Covid-19 related risks to EP compliance.
General concerns over the potential impact of insider threats continues to increase. However the impact of external instances or trends remain limited in the financial industry where collaboration within the sector is improving.
In January 2013 the Basel Committee on Banking Supervision published the Principles for Effective Risk
Compliance is tasked with instructing, advising, challenging and having oversight of the first line of defence in their management of compliance risks as well as raising awareness (via training and communication), influencing and stimulating a sound compliance risk culture. The scope of the compliance risks is outlined in the ING Compliance Risk Charter.
has direct access to the Risk Committee of the Supervisory Board. The CCO and the chairman of the
▪ customer tax compliance, covering customer tax integrity (CTI), FATCA, CRS, mandatory disclosure requirements (MDR)
We have also established a financial economic crime Covid-19 taskforce within ING aimed at identifying potential criminal schemes and assessing if the coronavirus pandemic influenced payment patterns or created new channels for money laundering. The taskforce worked with other parts of the bank to protect customers from fraud and further strengthen cybersecurity, during the pandemic. It also identified and analysed new behavioural patterns of customers in the Netherlands, which resulted in new cases of unusual transactions being reported. These findings are used to determine if similar patterns exist in other ING countries.
The 5th AML Directive was implemented in the Dutch Anti-Money Laundering and Anti-Terrorist
The OECD has also introduced two additional new measures to tackle global tax avoidance/evasion: ▪ Mandatory Disclosure Rules for Addressing CRS Avoidance Arrangements and Opaque Offshore
In February 2020, ING launched a new global Code of Conduct, clarifying the link between the existing
ING applies an explicit risk appetite statement regarding business risk, focusing on earnings stability and diversification of the business mix. Avoiding putting all eggs in one basket reduces the risk that volumes and/or margins will suddenly drop due to unexpected changes in the business environment for certain markets and products. Furthermore, the underlying risk types (expense risk, volume-margin risk, and net fee and commission income risk) are mitigated and managed differently. Expense risk is monitored and managed via the financial performance of the bank and the local units, whereby the reported expense numbers are compared on a quarterly basis with the projected cost/income ratio.
ING’s risk culture and the priority to further strengthen our global anti-money laundering and know your customer activities were also key attention areas. Managing non-financial risk is as important as managing financial risk and we continued to work hard to deliver on our commitment to ensure ING is a safe, secure and compliant bank. This includes through the global KYC enhancement programme, which comprises structural improvements in compliance policies, tooling, monitoring governance, knowledge and behaviour. In December 2020, the Court of Appeal in The Hague upheld the Dutch prosecutor’s decision to enter into a settlement agreement with ING in September 2018, relating to shortcomings in the execution of policies to prevent financial economic crime at ING Netherlands. We welcome the ruling but regret the decision to order the prosecution of our former CEO, which goes against the assessment of the public prosecutors that their investigations found no grounds for a case against ING employees or former employees.
After a successful, career-long tenure at ING, Ralph Hamers announced that he would step down as chief executive officer on 30 June 2020. Ralph was the architect of ING’s digital strategy and we are very grateful for his inspiration and leadership over the past seven years.
Stakeholder engagement is important for you and the Supervisory Board. How did you engage with ING’s various stakeholders during the pandemic?
The Covid-19 crisis, ING’s strategic priorities, the various succession processes, and other topics on the
Permanent education including business visits is important for the members of the Supervisory Board as part of their continuous learning, aimed at maintaining their ING-related knowledge and expertise and expanding these where necessary. Educational activities help to keep the Supervisory Board up-todate with and gain in-depth insight into the global and local economic, financial and political landscape and increase its understanding of and engagement with ING’s business operations and stakeholders.
Board included: • an increased focus on ING’s longer-term strategic ambition and the external/competitive landscape, with AML/compliance/regulatory matters as an integral part of this and increased execution focus; • further strengthening the boards’ succession pipelines and the depth and diversity of bench strength, that at least safeguards adequate knowledge and experience of potential suitable candidates in banking, operations/digital and regulation; • continuation of building and maintaining trust with all stakeholders, including a thorough understanding of their needs and what drives them; • expanding on professional challenge and advice towards the organisation to enable more clearly set expectations on prioritisation and milestones.
During a mid-year evaluation, the Supervisory Board reviewed progress on the action points. From this it was concluded that ample progress had been made in respect of all priorities. In the second half of the year the Supervisory Board, together with the Executive Board and Management Board Banking agreed to apply and follow the same approach, process and design over 2020, including continued alignment between the respective boards.
Supervisory Board, taking into account stakeholder consultation feedback. The proposed policies were input for the 2020 Annual General Meeting, resulting in the general meeting approving said policies. For further details, see the Remuneration report in this Annual Report.
retired from the Supervisory Board as per the end of the 2020 Annual General Meeting. From that same date, Mike Rees took over the role of vice-chairman of the Supervisory Board and Margarete
Colombás became effective per 1 October 2020 and he became a member of the Risk Committee and the Audit Committee. In addition, Margarete Haase and Hans Wijers became members of the
The Nomination and Corporate Governance Committee and the Supervisory Board will continue to strive for an adequate and balanced composition of the Supervisory Board when selecting and nominating new members for appointment, taking into account ING’s diversity policy and other factors. Read more in the Corporate governance chapter on the composition of the Supervisory Board committees at year-end 2020.
Committee and Remuneration Committee are composed entirely of members of the Supervisory
Executive Board obtains financial products and services, other than loans, which are provided by ING
Member of the Management Board of the Dutch Banking Association (Nederlandse Vereniging van
Tanate Phutrakul is responsible for ING’s financial departments, Group Treasury (including capital management activities), Investor Relations, Group Research and Regulatory and International Affairs.
The Supervisory Board of ING shall consist of a mix of persons with executive experience, preferably gained in the banking sector, experience in corporate governance of large stock-listed companies and experience in the political and social environment in which such companies operate. In the selection of
The appointment of Margarete Haase in 2017 as Supervisory Board member became effective as per 1
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. and non-executive director of
Chairman of the Curatorium VU Amsterdam “Risk Management for Financial Institutions”
ING has a process in place where, under the supervision and with the participation of the CEO and CFO, the effectiveness of internal control over financial reporting is evaluated, based on the criteria of the
Management section, combine various financial and non-financial risk disciplines into a single converged approach and provide the businesses with an overview on their risks and the way these are managed.
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: • the report of the Executive Board in the ING Group Annual report 2020 provides sufficient insights into the effectiveness of the internal risk management and control systems; • those systems provide reasonable assurance that the ING Group Annual report 2020 does not contain material inaccuracies; • based on the current state of affairs, it is justified that the ING Group Annual report 2020 is prepared on a going concern basis; and
In what was a challenging year for ING, one of the biggest factors influencing our business was Covid-19. First and foremost, it’s a human tragedy that has affected the lives, jobs and wellbeing of people everywhere, including our customers and employees.
In line with ING’s commitment to increase transparency and accountability, this year we provide insight into the organisational as well as the personal performance objectives of the Executive Board members. Among other things we aim to clarify the performance metrics used for awarding variable remuneration, how targets are set, how achievements are measured, and the important role risk management plays in influencing remuneration, including the pre- and post award risk assessment.
In addition, we set out the remuneration approach that applies to all employees. We explain more about how remuneration works within ING. This includes the performance management process and its link to remuneration, as well as the measures we have in place to mitigate risk.
Čortan is the same as for the previous CRO and in line with the 2020 EB remuneration policy. The targets for 2021 are set in anticipation of her CRO role as the Supervisory Board will propose to shareholders to appoint her as member of the Executive Board and CRO of ING Group at the AGM in
2 Ralph Hamers stepped down from the Executive Board on 30 June 2020; Tanate Phutrakul was appointed to the Executive
The table on the next page shows the link between directors’ remuneration (Executive Board and
ING Group Annual Report 2020 230 2020 Executive Board performance assessment & reward process
(automotive, power generation, residential real estate, commercial real estate, and cement)
Executive Board members’ performance against the objectives in their scorecards, as outlined in the previous section. The Remuneration Committee also consulted the Risk Committee and took into consideration its feedback on risk and compliance matters. In addition to the modifier as stated above, there was no reasoning to apply any individual risk mitigating measures in accordance with ING’s
2 Shares granted to Tanate Phutrakul (March 2016 to March 2019) and Steven van Rijswijk (March 2017 to March 2018) were awarded for their performance in positions prior to their Executive Board appointment.
The pandemic did not result in any adjustment of the target areas compared to 2020. Therefore, for 2021 the following target areas will be taken into account: Financial
Amount in euros (rounded figures) Remuneration VAT Remuneration VAT Remuneration VAT
We aim to reward for success and avoid rewarding for failure. That is why ING’s remuneration approach is strongly linked to a robust and transparent performance management process. Outcomes of performance evaluations (including collective and individual risk assessments) provide input for remuneration. As not all employees are eligible for variable remuneration there is not necessarily a link to financial performance. In the Netherlands, for example the vast majority of the employees do not receive any variable remuneration.
ING applies measures to mitigate risk relating to variable remuneration. Our global remuneration policy takes into consideration risk, capital, liquidity and the likelihood and timing of earnings. Measures include pre-award and post-award risk assessments of variable remuneration.
In determining the overall size of the variable remuneration pool, a multi-layered, consistent and bankwide approach for risk tests and adjustments is applied to the process, based on an assessment by the
Additional risk requirements apply to Identified Staff who are considered risk takers in accordance with
In 2020, the COR focused on a number of issues related to working from home. In response to a COR
Financial assets at fair value through other comprehensive income 5 35,895 34,468 Deferred tax liabilities 37 584 695
Consolidated statement of changes in equity For the years ended 31 December in EUR million
Net change in fair value of equity instruments at fair value through other comprehensive income -399 62 -337 2 -335
Total comprehensive income net of tax -1,666 2,505 839 133 973
Realised and unrealised revaluations property in own use 49 9 58 -0 58
‘Financial instruments: Disclosures’ are included in the ‘Risk management’ section of the Annual
Similar facilities are offered by ING in other countries, mainly in Belgium and Poland. ING Belgium provided in 2020 loans under the state guarantee scheme GS1 which establishes risk sharing between banks and the government. It applies to new loans to non-financial companies, SME and self-employed persons under certain conditions. ING Bank Poland signed an agreement with BGK
The preparation of the consolidated financial statements requires management to make judgements in the process of applying its accounting policies and to use estimates and assumptions. The estimates and assumptions affect the reported amounts of the assets and liabilities and the amounts of the contingent assets and contingent liabilities at the balance sheet date, as well as reported income and expenses for the year. The actual outcome may differ from these estimates.
ING Group updated this definition also for IFRS 9 purposes. From an accounting perspective, this represents a change in accounting estimate that is applied prospectively. This change had no material impact on ING’s expectation for credit losses, but impacted the classification of assets mainly between Stage 2 and Stage 3 resulting in an increase in Stage 3 assets (and mostly a decrease of Stage 2 assets) of approximately EUR 1 billion at the time of updating the definition.
ING Group views ‘reasonable expectation’ in case of TLTRO funding as a high hurdle. This is the moment when it becomes highly probable, i.e. the probability of meeting the lending targets is substantially greater than the probability that it will not. As a result, if interest income is recognised during the period based on the expectation of meeting the targets, there should be only a limited possibility that the interest may need to be reversed in future periods.
Changes in these estimations may lead to changes in the amount of interest recognized on
Subsequently, except for financial assets and financial liabilities measured at amortised cost, all the other financial assets and liabilities are measured at fair value.
Additionally, derivatives valued at fair value are adjusted for credit risk by a BVA. The BVA is of a bilateral nature as both the credit risk on the counterparty (CVA) as well as the credit risk on ING
For hedges of the benchmark component of interest rate risk affected by the reform, the separately identifiable requirement only needs to be demonstrated at the inception of such hedging relationships (including macro hedges).
ING Group also relies on a number of qualitative indicators to identify and assess SICR. These include: ▪ Forbearance status; ▪ Watch List status. Loans on the Watch List are individually assessed for Stage 2 classification; ▪ Intensive care management; ▪ Substandard Internal rating; and
POCI assets are financial assets that are credit-impaired on initial recognition. Impairment on a POCI
ING Group Annual Report 2020 274 consolidation. Such a subsidiary may be presented as a held for sale disposal group if certain conditions are met.
Accounting policies of associates and joint ventures have been changed where necessary to ensure consistency with the policies adopted by ING Group.
ING Group assesses at each reporting period, whether there is an indication that an intangible asset may be impaired. Irrespective of whether there is an indication of impairment, intangible assets with an indefinite useful life, including goodwill acquired in a business combination, and intangible assets not yet available for use, are tested annually for impairment. Goodwill is allocated to groups of CGUs
Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.
Fees and commissions are generally recognised as the service is provided. Loan commitment fees for loans that are likely to be drawn down are deferred (together with related direct costs) and recognised as an adjustment to the effective interest rate on the loan. Loan syndication fees are recognised as income when the syndication has been completed and ING Group has retained no part of the loan package for itself or has retained a part at the same effective interest rate as the other participants. Commission and fees arising from negotiating, or participating in the negotiation of, a transaction for a third party – such as the arrangement of the acquisition of shares or other securities or the purchase or sale of businesses – are recognised on completion of the underlying transaction. Portfolio and other management advisory and service fees are recognised based on the applicable service contracts as the service is provided. Asset management fees related to investment funds and investment contract fees are recognised on a pro-rata basis over the period the service is provided. The same principle is applied for wealth management, financial planning and custody services that are continuously provided over an extended period of time. Fees received and paid between banks for payment services are classified as commission income and expenses.
Reference is made to Note 14 ‘Financial liabilities at fair value through profit or loss’ for information on trading liabilities.
None of the equity securities are individually significant for ING Group.
EUR 880 million. The transaction, for a stake of 3.07%, concluded the divestment process and was the main driver for the ‘disposal’ line in 2019.
Loans guaranteed by credit institutions 305 206 4,896 3,569 5,201 3,775
is the lessor. These finance lease receivables are part of loans secured by mortgages. Interest income in 2020 on Finance lease receivables amounts to EUR 229 million (2019: EUR 251 million).
The recoverable amounts of the unimpaired CGUs are sensitive to the above key assumptions.
(observation period 2), respectively. In case lending growth targets are not met, the interest rate during the special interest periods can in a worst case scenario be at 50 basis points below the average
ING Group Annual Report 2020 296 14 Financial liabilities at fair value through profit or loss
In 2020, the addition to the reorganisation provision is mainly attributable to refocusing of our activities in Wholesale Banking and decision on the Maggie project, as well as additional restructuring costs in Retail Benelux and Other Challengers & Growth Markets. These initiatives are implemented over a period of several years and the estimate of the reorganisation provisions is inherently uncertain.
The addition to the reorganisation provision in 2019 is mainly related to ING’s closure of branches in the Netherlands and updates in existing reorganisation provisions following the digital transformation programmes of ING Bank.
In 2020, ING Groep N.V. issued 3.9 million ordinary shares (2019: 5.0 million ordinary shares, 2018: 5.9 million). These issues were made in order to fund obligations arising from share-based employee incentive programmes.
In 2020, a cash dividend of nil (2019: EUR 2,650 million and 2018: EUR 2,607 million) was paid to the shareholders of ING Group.
The following equity components cannot be freely distributed: Revaluation reserves, Net defined benefit asset/liability remeasurement reserve, Currency translation reserve, Share of associates and joint ventures reserve and Other reserves including the part related to the former Stichting Regio Bank and the former Stichting Vakbondsspaarbank SPN.
ING Group Annual Report 2020 306 21 Net fee and commission income
Foreign exchange transactions results include gains and losses from spot and forward contracts, options, futures, and translated foreign currency assets and liabilities. The result on currency trading is included in foreign exchange transactions results.
Net trading income relates to trading assets and trading liabilities which include assets and liabilities that are classified under IFRS as Trading but are closely related to servicing the needs of the clients of
As at 31 December 2020 the share awards consists of 3,326,457 share awards (2019: 3,346,004; 2018: 5,211,339) relating to equity-settled share-based payment arrangements and 551,762 share awards
In 2018 Other operating expenses - Other included, amongst others, the settlement with the Dutch
Total as included in the statement of financial position: – Loans and advances to banks 25,364 35,136 30,422
Retail Netherlands Income from retail and private banking activities in the Netherlands, including the SME and mid-corporate segments, and the Real Estate Finance portfolio related to Dutch domestic mid-corporates. The main products offered are current and savings accounts, business lending, mortgages and other consumer lending in the Netherlands. (Market Leaders)
Netherlands (recorded under expenses). In 2020, net interest income on the Corporate Line sharply declined, mainly due to lower interest results from foreign currency hedging due to lower interest rate differentials. In 2019, a EUR 119 million gain from the release of a currency translation reserve following the sale of ING’s stake in Kotak Mahindra Bank was included, and the recognition of a EUR 79 million receivable related to the insolvency of a financial institution (both recorded under income). In 2018, the EUR 775 million settlement agreement with the Dutch authorities on regulatory issues was included, as well as a EUR 90 million net result from the former Insurance activities. Furthermore, the
Non-controlling 1. As of 2020 consolidated results of ING Group are based on IFRS as adopted by the European Union (IFRS-EU), and not on underlying results anymore; prior period figures have been adjusted to conform to current year presentation.
ING Group’s business lines operate in seven main geographical areas: the Netherlands, Belgium, Rest of
The higher tax charges in Brazil and the Philippines are mainly caused by the de-recognition of tax benefits for incurred tax losses due to expected insufficient future taxable profits.
The following table presents the models reserves for financial assets and liabilities: Valuation adjustment on financial assets and liabilities
ING for its counterparty. CVA and DVA combinedly are regarded as the Bilateral Valuation Adjustment
CDS spreads are not available, relevant proxy spreads are used. Additionally, wrong-way risk (when exposure to a counterparty is increasing and the credit quality of that counterparty deteriorates) and right-way risk (when exposure to a counterparty is increasing and the credit quality of that counterparty improves) are included in the adjustment
Valuation: Where available, fair values for debt securities are generally based on quoted market prices.
Loans and advances 1,090 1,577 2 Price based Price (%) 0% 0% 101% 104%
Volatility is a measure for variation of the price of a financial instrument or other valuation input over time. Volatility is one of the key inputs in option pricing models. Typically, the higher the volatility, the higher value of the option. Volatility varies by the underlying reference (equity, commodity, foreign currency and interest rates), by strike, and maturity of the option. The minimum level of volatility is 0%
Transfers out of Level 3 –90 –72 0 –528 –88 –138 –53 –755 –214
ING Group uses derivatives for economic hedging purposes to manage its asset and liability portfolios and structural risk positions. The primary objective of ING Group’s hedging activities is to manage the risks which arises from structural imbalances in the duration and other profiles of its assets and liabilities. The objective of economic hedging is to enter into positions with an opposite risk profile to an identified risk exposure to reduce that exposure. The main risks which are being hedged are interest rate risk and foreign currency exchange rate risk. These risks are primarily hedged with interest rate swaps, cross currency swaps and foreign exchange forwards/swaps.
ING Group’s fair value hedges principally consist of interest rate swaps that are used to protect against changes in the fair value of fixed-rate instruments due to movements in market interest rates. ING
–Market risk’. ING Group’s exposure to interest rate risk is disclosed in paragraph ‘Interest rate risk in banking book’.
The following table shows the cash flow hedge accounting impact on profit or loss and comprehensive income:
 Derivative liabilities are included on a net basis if cash flows are settled net. For other derivative liabilities the contractual gross cash flow payable is included.
Liabilities and off-balance sheet commitments by maturity 2019 Less than 1 month 1 1–3 month 3–12 months 1–5 years Over 5 years
Loans and advances to customers that have been pledged as collateral for Debt securities in issue and for liquidity purposes, amount in The Netherlands to EUR 67,067 million (2019: EUR 45,530 million), in
The financial assets received as collateral that can be sold or repledged in absence of default by the owner of the collateral consists of securities obtained through reverse repurchase transactions and securities borrowing transactions.
These transactions are generally conducted under standard market terms for most repurchase transactions and the recipient of the collateral has unrestricted right to sell or repledge it, provided that the collateral (or equivalent collateral) is returned to the counterparty at term.
Trading and Non-trading Derivatives 76,129 -57,665 18,464 10,511 7,817 137 5,076 23,540
Guarantees relate both to credit and non-credit substitute guarantees. Credit substitute guarantees are guarantees given by ING Group in respect of credit granted to customers by a third party. Many of them are expected to expire without being drawn on and therefore do not necessarily represent future cash outflows.
(10) of the by-laws of this fund, where ING Bank N.V. indemnifies the Association of German Banks
Criminal proceedings regarding cash company financing: In June 2017, a Belgian criminal court ruled that ING Luxembourg assisted third parties in 2000 to commit a tax fraud in the context of the purchase of the shares of a cash company. The court convicted ING Luxembourg, among others, and ordered ING to pay a penal fine of EUR 120,000 (suspended for half of the total amount). The court also ordered ING Luxembourg jointly and severally with other parties, to pay EUR 31.48 million (together with any interest payable under applicable law) to the bankruptcy trustee of the cash company. In July 2017, ING Luxembourg filed an appeal against this judgment. A settlement with all the civil parties involved was reached in mid-2018. However, this settlement does not apply to the criminal conviction of ING Luxembourg. In January 2020, the Court of Appeal of Antwerp reformed the first judgment: ING
Imtech claim: In January 2018, ING Bank received a claim from Stichting ImtechClaim.nl and Imtech
ING Group originated various securitisations, as at 31 December 2020, these consisted of approximately EUR 66 billion (2019: EUR 57 billion) of senior and subordinated notes, of which approximately EUR 2 billion (2019: EUR 4 billion) were issued externally. The underlying exposures are residential mortgages and SME loans. Apart from the third party funding, these securitisations did not impact ING Group’s Consolidated statement of financial position and profit or loss.
Balances outstanding with key management personnel were as follows: Loans and advances to key management personnel
Adverse planning and stress testing, which reflect the outcomes of the annual risk assessment, are integral components of ING’s risk and capital management framework. It allows us to (i) identify and assess potential vulnerabilities in our businesses, business model, portfolios or operating environment; (ii) understand the sensitivities of the core assumptions used in our strategic and capital plans; and (iii)
Parent company statement of changes in equity for the years ended 31 December in EUR million
The Parent company financial statements of ING Groep N.V. are prepared in accordance with the financial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code. In accordance with subsection 8 of section 362, Book 2 of the Dutch Civil Code, the recognition and measurement principles applied in these Parent company financial statements are the same as those applied in the
The Share of participating interests reserve includes the following components: Reserve for nondistributable retained earnings of participating interests of EUR 3,246 million (2019: EUR 3,189 million),
> 12 Result from Group companies and participating interests after taxation
Report on the audit of the financial statements 2020 included in the annual report
In view of restrictions on the movement of people across borders, and also within significantly affected countries, we have considered making changes to the planned audit approach to evaluate the component auditors’ communications and the adequacy of their work. Due to the aforementioned restrictions, visiting components was not practicable in the current environment. As a result, we have requested those component auditors to provide us with access to audit workpapers to perform these evaluations, subject to local law and regulations. In addition, due to the inability to arrange in-person meetings with such component auditors, we have increased the use of alternative methods of communication with them, including through written instructions, exchange of e-mails and virtual meetings.
— We evaluated the identification of significant increase in credit risk in loans by challenging the scope of management’s criteria used in staging assessments, the thresholds applied within each criterion, and the ability of staging criteria to identify SICR prior to loans being credit impaired.
IT audit specialists assessed the reliability and continuity of the IT environment when relevant for the scope of our audit of the financial statements. We examined the framework of governance over ING Group’s IT organisations, the IT general controls, and application controls.
For the period to which our statutory audit relates, in addition to this audit we have provided agreed-upon procedures and assurance engagements to ING Groep N.V. or its controlled undertakings. These services were rendered for the benefit of external users, largely driven by regulatory compliance.
• Discontinuation of or changes to ‘benchmark’ indices may negatively affect our business, results and financial condition.
• Changes in laws and/or regulations governing financial services or financial institutions or the application of such laws and/or regulations may increase our operating costs and limit our activities.
Risks related to litigation, enforcement proceedings and investigations and to changes in tax laws
Pillar 2 Requirements. Several countries also released or reduced countercyclical buffers (CCyB). The
Within the financial services industry, the severe distress or default of any one institution (including sovereigns and central counterparties (CCPs)) could lead to defaults by, or the severe distress of, other market participants. While prudential regulation may reduce the probability of a default by a major financial institution, the actual occurrence of such a default could have a material adverse impact on
government. US Treasury securities and other US government-linked securities are key assets on the balance sheets of many financial institutions and are widely used as collateral by financial institutions
Secured Overnight Financing Rate (commonly referred to as ‘SOFR’) as an alternative to USD LIBOR, and the limited extension announced by the IBA has eased the timeline for the transition of existing contracts referencing USD LIBOR. For EURIBOR, the Working Group on Euro Risk-Free Rates is continuing its work on developing recommended fallback rates based on the “euro short-term rate” (€STR). €STR is being published and is now widely used, and calculation of the EONIA benchmark described above has been modified to refer to the €STR benchmark until the EONIA benchmark is discontinued.
The potential discontinuation of interest rate benchmarks or any other benchmark, or changes in the methodology or manner of administration of any benchmark, could result in a number of risks for the
Group, its customers, and the financial services industry more widely. These risks include legal risks in relation to changes required to documentation for new and existing transactions. The Group may also be exposed to operational risks or incur additional costs due to the potential requirement to adapt IT
Market conditions, including those observed over the past few years, and the application of IFRS 9 may increase the risk of loans being impaired and have a negative effect on our results and financial condition.
We are subject to detailed banking laws and financial regulation in the jurisdictions in which we conduct business. Regulation of the industries in which we operate is becoming increasingly more extensive and complex, while also attracting supervisory scrutiny. Compliance with applicable and new laws and regulations is resources-intensive, and may materially increase our operating costs.
Our revenues and profitability and those of our industry have been and will continue to be impacted by requirements relating to capital, additional loss-absorbing capacity, leverage, minimum liquidity and long-term funding levels, requirements related to resolution and recovery planning, derivatives clearing and margin rules and levels of regulatory oversight, as well as limitations on which and, if permitted, how certain business activities may be carried out by financial institutions.
EU and the UK, which could materially increase ING’s compliance costs and have a material adverse effect on ING’s business, results and financial condition.
ING Capital Markets LLC is also expected to register with the SEC as a security-based swap dealer pursuant to Dodd-Frank and SEC regulations enacted thereunder effective 1 November 2021. SEC
ING Group Annual Report 2020 409 restrictions and requirements, could also result in reduced market liquidity, which could in turn increase market volatility and the risks and costs of hedging and other trading activities.
ING experienced DDoS attacks in Turkey and Belgium. However, to date ING has not experienced a material loss of money or data due to cybercrime.
We may also be subject to claims made by third parties for (1) patent, trademark or copyright infringement, (2) breach of copyright, trademark or licence usage rights, or (3) misappropriation of trade secrets. Any such claims and any resulting litigation could result in significant expense and liability for damages. If we were found to have infringed or misappropriated a third-party patent or other intellectual property right, we could in some circumstances be enjoined from providing certain products or services to our customers or from utilizing and benefiting from certain methods, processes, copyrights, trademarks, trade secrets or licences. Alternatively, we could be required to enter into costly licensing arrangements with third parties or to implement a costly workaround. Any of these scenarios could have a material adverse effect on our business and results and could restrict our ability to pursue future business opportunities.
Hedging strategies involve transaction costs and other costs, and if we terminate a hedging arrangement, we may also be required to pay additional costs, such as transaction fees or breakage costs. There have been periods in the past, and it is likely that there will be periods in the future, during which we have incurred or may incur losses on transactions, possibly significant, after taking into account our hedging strategies. Further, the nature and timing of our hedging transactions could actually increase our risk and losses. Hedging instruments we use to manage product and other risks might not perform as intended or expected, which could result in higher (un)realised losses, such as credit value adjustment risks or unexpected P&L effects, and unanticipated cash needs to collateralise or settle such transactions. Adverse market conditions can limit the availability and increase the costs of hedging instruments, and such costs may not be recovered in the pricing of the underlying products being hedged. In addition, hedging counterparties may fail to perform their obligations, resulting in unhedged exposures and losses on positions that are not collateralised. As such, our hedging strategies and the derivatives that we use or may use may not adequately mitigate or offset the risks they intend to cover, and our hedging transactions may result in losses.
shares in certain jurisdictions, however, may not be entitled to exercise such rights unless the rights and the related shares are registered or qualified for sale under the relevant legislation or regulatory framework. Holders of ING shares in these jurisdictions may suffer dilution of their shareholding should they not be permitted to, or otherwise chose not to, participate in future equity offerings with subscription rights.
Thermal coal category in EUR million in lending O/S 2020 2019 Y/Y change
Or explain why actions could not be implemented / needed to be changed and how your bank is adapting its plan to meet its set target.
▪ ING.COM->Sustainability->The world around us- >Reporting->2020 Terra progress report; Please provide your bank’s conclusion/statement if it has fulfilled the requirements regarding Progress on Implementing Targets
▪ We will reduce our global residual waste by 26 percent by year-end 2022 (base year 2014).
Financial statements and other information for the financial year 2020 in their original language