8 The reported system availability for 2018 does not yet include the recent integration of Record Bank in Belgium.
But 2018 was also marked by ING’s settlement with the Dutch authorities in connection with serious shortcomings in the execution of customer due diligence requirements to prevent financial economic crime at ING in the Netherlands in the period investigated (2010-2016). This resulted in a settlement agreement totalling €775 million and the departure of CFO Koos Timmermans.
We’re committed to conducting our business with integrity. Not only because these are the standards that society and stakeholders expect from us, but because this is an integral part of who we are and want to be.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > CEO statement programme to harmonise our digital customer proposition across a number of European markets are important steps toward this goal.
Trust is extremely important in the financial services industry. Trust recovery in the industry stalled in 2018 after increasing for the past five years, according to the Edelman Trust Barometer. Data showed that trust actually declined in 13 out of 28 markets.
We also maintain a strong global cybercrime alliance with the financial industry, law enforcement authorities, governments and internet service providers.
Another way we’re working to create an industry-wide standard is through our membership of the
Broadening and diversifying our lending capabilities to continue to grow client franchises is our fourth strategic enabler. To do so, we are seeking opportunities in Retail, SME and Consumer Lending segments, as well as focusing on
ING is committed to the digitalisation of business processes, to make it easier for customers to do their finances. At the same time, it recognises cybercrime as a major threat in all sorts of areas. For that reason, it is an integral part of our strategy to make customers aware of the risks that are out there. We have special solutions for Wholesale Banking clients, while Retail customers are provided with information via our digital channels and interaction with our apps.
Another innovation born in ING Labs is Vakt, a blockchain-based post-trade management platform for the largest commodity players in the world. Now driven by nine leading energy companies and banks, it aims to eliminate reconciliation and paper-based processes, enhance efficiency and create new trade finance opportunities.
Data is an important asset that helps us improve the customer experience and earn the strategically important primary relationship. We rely on data to 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. We also strive to protect customer data and privacy in line with the new European regulations (see ‘Open banking’ section below).
In November, ING and HSBC conducted a second successful live trade finance transaction on the
Each and every one of our more than 54,000 employees has a responsibility to live up to the
This global e-learning programme dives into dilemmas and issues that employees might face and aims to equip them to take the right decisions. We will revisit the set-up of the programme in 2019.
Although we are going through a sustained period of change, this is a clear message from employees that the Management Board takes very seriously. The survey also shows pockets of real improvement in several business units and a global willingness to go beyond what’s needed to help
ING’s funding consists mainly of retail and corporate deposits, contributing 50% and 21% of the total funding at year-end 2018, respectively. These funding sources provide a relatively stable funding base. The remainder of the required funding is attracted by Group Treasury through longterm and short-term professional funding. Group Treasury manages the professional funding in line with risk appetite, ensuring sufficiently diversified and stable funding.
The heads of ING’s lines of business and their delegates form the first line of defence and have primary accountability for the performance, operations, compliance and effective control of risks affecting their respective businesses. They originate loans, deposits and other products within applicable frameworks and limits, they know our customers and are best positioned to act in both the customers’ and ING’s best interest. The COO is responsible and accountable for proper security and controls on both local and global applications and IT platforms servicing the bank.
26 April2 Record date for final dividend 2018 entitlement (Euronext Amsterdam)
Our stakeholders need both financial and non-financial information to assess our ability to create value in the short, medium and long term. We believe that integrated reporting is the broad-based framework that can help stakeholders make decisions that are forward looking, inclusive and impactful.
ING’s success and will be an important point of attention for my colleagues and me in the years to come.
Furthermore, the Risk Committee’s feedback is also taken into account in discussions regarding
Belgium S.A./N.V. and his former positions as member of the Executive Board of ING Groep N.V. 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 to be regarded as independent.
Mr Breukink 1950 M Dutch • • • • • • •
 the appointment of the external auditor;  an amendment of the Articles of Association, a legal merger or division of ING Group, and winding-up of ING Group, all subject to a proposal made by the Executive Board with approval by the Supervisory Board;  the issuance of shares or rights to subscribe for shares, the restriction or exclusion of pre-emptive rights of shareholders, and delegation of these powers to the Executive Board, subject to a proposal by the Executive Board that has been approved by the Supervisory Board;  the authorisation of a repurchase of outstanding shares and/or a cancellation of shares. In addition, the approval of the General Meeting is required for Executive Board decisions that would be expected to have a material effect on the identity or nature of ING Group or its enterprise.
The organisation, powers and modus operandi of the Executive Board are detailed in the Executive
In accordance with the Dutch Corporate Governance Code, transactions with members of the
(Born 1966, Dutch nationality, male; appointed in 2013, current term expires in 2021)
In accordance with the Dutch Corporate Governance Code, transactions involving members of the
The Audit Committee assists and advises the Supervisory Board in monitoring the integrity of the financial statements of ING Group and ING Bank N.V., in monitoring compliance with legal and regulatory requirements and in monitoring the independence and performance of ING Group’s internal and external auditors. On 31 December 2018, the members of the Audit Committee were: Hermann-Josef Lamberti (chairman), Eric Boyer de la Giroday, Margarete Haase, Robert Reibestein and Hans Wijers.
The appointment of Margarete Haase as supervisory board member became effective as per 1 May 2018 (as decided by the Supervisory Board in January 2018) and per that date Margarete Haase is considered a financial expert as defined by the SEC in its final rules implementing Section 407 of the
The Supervisory Board is assisted by the company secretary Cindy van Eldert-Klep.
Risk management is an enabler of long-term value creation. ING ensures its global remuneration policy is properly correlated with its risk profile and stakeholder interests.
ING supports the sustainable recruitment, engagement and retention of all staff.
Variable remuneration includes both individual and collective variable remuneration such as profit sharing arrangements agreed with relevant trade unions.
The Terra Approach is open source and is shared with other banks and stakeholders interested in adopting this approach.
• Bring remuneration levels in line with peers and with levels adequate to attract qualified
Eric Boyer de la Giroday - 113,385 113,385 113,479 226,864 92,984
Other interest income 2,498 n/a n/a Staff expenses 27 5,420 5,202 5,039
Changes in: – Net change in Loans and advances to/from banks, not available/payable on demand –211 3,194 –1,504 – Property and equipment 17 79 75
Amendments to IAS 1 and IAS 8: Definition of Material (issued on 31 October 2018).
 For financial liabilities designated as at FVPL, the determination of whether presenting the effects of changes in the financial liability’s credit risk in Other Comprehensive Income (OCI)
Incurred but Not Reported (IBNR) 726 Stage 1-12 month ECL 81 438
If there is no reasonable expectation of recovery and/or collectability of amounts due a write-off can occur. The following events can lead to a write-off:  After a restructuring has been completed and there is a high improbability of recovery of part of the remaining loan exposure (including partial debt waivers);  In a bankruptcy liquidation scenario;  After divestment or sale of a credit facility at a discount;  Upon conversion of a credit facility into equity; or
Critical judgements and key estimation uncertainties: 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.
For legal proceedings where it is not possible to make a reliable estimate of the expected financial effect, that could result from the ultimate resolution of the proceedings, no provision is recognised, however disclosure is included in the annual accounts. Reference is made to Note 47 ‘Legal proceedings’.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Financial assets at fair value through profit or loss > 4
Financial assets at fair value through profit or loss 8,431 9,216
Loans guaranteed by credit institutions 195 257 2,901 1,722 3,095 1,979
Net remeasurement of loan loss provision 17 –55 312 –0 274
Net carrying value as at 31 December 290 291 589 626 879 917
Assets and liabilities held for sale includes disposal groups whose carrying amount will be recovered principally through a sale transaction rather than through continuing operations. As at 31
Other non-trading derivatives mainly includes interest rate swaps and foreign currency swaps for which no hedge accounting is applied.
For further information, reference is made to Note 31 ‘Dividend per ordinary share’.
Change in fair value of assets and liabilities (hedged items) –52 –793 –167
Other operating expenses include lease and sublease payments in respect of operating leases of
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Fair value of assets and liabilities > 39 interest rates and credit spreads that apply to similar instruments. Reference is made to Financial assets at fair value through profit or loss above.
(for which current market information about similar assets to use as observable, corroborated data for all significant inputs into a valuation model is not available), and asset backed securities for which there is no active market and a wide dispersion in quoted prices.
– Equity n/a 467 Discounted cash flow Annual accounts n/a n/a n/a n/a
As at 31 December 2018, the estimated fair value of Property in own use and Investment property amounts to EUR 780 million (2017: EUR 774 million) and EUR 54 million (2017: EUR 65 million)
Accumulated amount of fair value hedge adjustment on the hedged item included in the carrying amount of the hedged item
The effect of the net investment hedge accounting in the statement of profit or loss and other comprehensive income is as follows: Change in value used for calculating hedge ineffectiveness for the period
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 46 billion (2017: EUR 50 billion), in
In October 2018 ING made a first milestone payment of EUR 7 million.
The fair value of the identified intangible assets are determined using an income approach.
The total goodwill of EUR 202 million, from the acquisition of both Payvision and Makelaarsland recognised in the first half of 2018, comprises the the fair value of expected synergies arising from the acquisitions.
The Risk Management section describes the key risks that arise from ING’s business model. It explains how the risk management function is embedded within the organisation based on the
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Risk Management > 53 committees at executive level. To assess client integrity risk, local Client Risk Integrity Committees
and a KYC awareness module were added to the programme in 2018. To enhance risk awareness, these topics are discussed between managers and employees through dialogue sessions that managers organise within their teams to create a clear and consistent understanding of each subject. The endorsement from the executive level and the emphasis on communication strengthen the culture.
By monitoring the risk control measures, ING checks if they are executed, complied with, have the expected mitigating effects and follow the development of the risks and their risk levels. Risk reporting provides senior and local management with information needed to manage risk.
Based on ING’s risk assessment and risk ambition, specific targets are set for both financial and non-financial risks. For financial risks, ING expresses its risk appetite as a tolerance from which key ratios may deviate from their target levels where the high level risk ambition is translated into quantitative targets for solvency risk, concentration risk, business risk and funding & liquidity risk, whereas for non-financial risks, to assess that the organisation’s actual risk exposure is commensurate with its strategic objectives and that exposure beyond the tolerance risk levels is timely identified and acted upon.
Cybercrime remains a continuous threat to companies in general and to financial institutions specifically. Both the frequency and the intensity of attacks increase on a global scale. Threats from
Within ING, internal Basel compliant models are used to determine PD, EAD and 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 both regulatory capital and loan loss provisioning purposes.
A reduced concentration of Lower public administration was seen within Retail Challengers &
The most noticeable outstandings trends in the Netherlands were the aforementioned decreased volumes in residential mortgage loans and decreased Nostro / Loro exposures to Commercial
General guidelines for cover valuation are established to have consistent application within ING.
guarantees the repayment of a loan in case of a forced property sale.
 ING believes the borrower is unlikely to pay; the borrower has evidenced significant financial difficulty, to the extent that it will have a negative impact on the future cash flows of the financial asset. The following events could be seen as examples of financial difficulty indicators: (1) The borrower (or third party) has started insolvency proceedings.
Accounting policies applied from 1 January 2018 sub-section iv) Impairment of financial assets.
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
The worst scenarios per market are combined across markets by assessing both independent events per market, and the worst events happening in all markets at the same time.
Group Treasury and Commercial Business lines are the first line of defence functions. Group
Group NFRC has been established covering the ING Group entities that are not in scope of the Bank
Business units and departments perform regular monitoring activities, BEAs and Risk & Control Self-
 Develop and rollout KYC communication and awareness initiatives and set up a behavioural risk department that performs risk assessments. In its internal communications, ING has made it clear that non-financial risk and compliance are just as important as financial risk and will be embedded in ING’s DNA. An online training module to enhance awareness of KYC was rolled out to all employees worldwide. MBB members spent a considerable amount of time engaging with staff to explain and discuss our responsibility as gatekeepers of the financial system. In these meetings, the impact of the settlement, the root causes, the shortcomings and our commitment and efforts to enhance were discussed. ING started behavioural risk assessments during which more than 100 interviews were held and more than 200 surveys were done to understand better how people, teams and departments interact and work together. Based on these insights, actions for improvement will be considered.
(CCN) between the Member States which will be set-up by the EU. Although DAC6 is not effective until 1 July 2020, taxpayers and intermediaries need to monitor cross-border arrangements already as of 25 June 2018.
requirement, a 1.875% Capital Conservation Buffer (CCB), a 0.06% Countercyclical Buffer (based on
Through the improved assessment of the impact of Basel IV and IFRS 9 on ING’s capital and earnings, we have formulated ING Group’s CET1 ratio and annual underlying ROE financial ambitions. The underlying ROE ambition applies to the current average IFRS-EU shareholder’s equity, excluding interim profit, which is not included in CET1 capital. As of December 2018, our
Interim profit not included in CET1 capital1 –174 –44 –174 –44
Annually, ING provides in-depth documentation on its Internal Capital Adequacy Assessment
Parent company statement of profit or loss for the years ended 31 December
Change in fair value of own credit risk of financial liabilities at fair value through profit or loss 199 199
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Equity > 3 million) and Net defined benefit asset/liability remeasurement reserve of EUR –394 million (2017: EUR –400 million).
External advisory fees 1 3 8 Interest and other financial income
In the ordinary course of business we have entered into a number of agreements whereby we are provided and being provided indemnifications related to sale of our past businesses and agreements whereby we made detailed arrangements regarding allocation and handling of claims.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Proposed appropriation of results > 13 13 Proposed appropriation of results
withholding tax regulations. Payments made with respect to certain products offered by members of the Group may also be or become subject to withholding under FATCA. The possibility of such withholding and the need for account holders and investors to provide certain information may adversely affect the sales of certain of the Group’s products. In addition, (i) compliance with the terms of IGAs and with FATCA, any regulations or other guidance promulgated thereunder, or any legislation promulgated under an IGA, and (ii) offering products subject to US withholding, may substantially increase the Group’s compliance costs. Failure to comply with FATCA and other US
ING Group relies to a considerable extent on the quality of local management in the various countries in which it operates. The success of ING Group’s operations is dependent, among other things, on its ability to attract and retain highly qualified personnel. Competition for key personnel in most countries in which ING Group operates is intense. ING Group’s ability to attract and retain key personnel, in particular in areas such as technology and operational management, client relationship management, finance, risk and product development, is dependent on a number of factors, including prevailing market conditions and compensation packages offered by companies competing for the same talent.
We may not be able to protect our intellectual property and may be subject to infringement claims by third parties, which may have a material adverse effect on our business and results of operations.
ING identifies topics which have the greatest impact on our business and the greatest level of concern to stakeholders in our value chain. This process allows us to prioritise and focus on the most material topics and effectively address these in our policies, programmes and targets.
C Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.
Contents | Report of the Executive Board | Corporate governance | Consolidated annual accounts | Parent company annual accounts | Other information | Appendices > Non-GAAP measures
 Annual Report on Form 20-F, in English (in accordance with SEC guidelines)