Prospects for weaker economic growth and lower inflation induced both the US Federal Reserve and the ECB to loosen monetary policy.
We apply these and other principles, such as those of the UN Global Compact, UN Guiding Principles for Business and Human Rights, the International Labour Organisation, and OECD Guidelines for
Both innovation and transformation play crucial roles in ING transitioning to a platform business.
has done with Yolt, Cobase, Vakt, Komgo and Payconiq. These ‘spin-out’ go-to-places, are not
accordingly and are implementing revised and new requirements in each country. To know more about what personal data ING collects, what we do with it and who we share it with, go to our
To further boost and highlight the importance of AI in the Netherlands, ING joined four other
Making them easier leads to a superior customer experience, higher quality of processes and greater efficiency.
Branches in Poland (Katowice and Warsaw) and Romania (Bucharest) predominantly provide ING
Market is ING in the Philippines, where we launched an all-digital retail bank in November 2018.
In Wholesale Banking, the overall NPS score improved by 11 percent year on year to 49.6 (on a scale of -100 to +100), outperforming the industry benchmark. This suggests clients appreciate our new approach (see ‘Unleashing sector potential’ below). The number of surveys sent increased by 28 percent year on year, and the response rate increased from 46.6 percent to 50.6 percent. The
We built on our beyond banking proposition with third-party offerings such as ING+Deals in Belgium and ING Punten in the Netherlands. ING+Deals, launched in 4Q 2018, is a cashback platform for customers, made possible by exclusive deals ING has negotiated with various A-brands (40+ brands offering over 45 deals a month). It has 150,000 users who to date have received more than €400,000 cash back, generating €2 million for the participating brands. In addition, participating customers increased their interactions with ING’s online channels by more than 20 percent. ING
Our advanced data capabilities are an important asset in helping 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.
Another enhancement is the addition of a breakthrough feature called M-Token. This addresses the priority we place on security combined with convenience. It replaces the previous card-and-reader access, which became increasingly inconvenient for our customers. M-Token, via the InsideBusiness app, makes access a lot easier. Now, to gain access, clients can simply launch the mobile app and scan a QR code on the login page.
In October, we launched another product aimed at encouraging companies to get measured on
ESG goals. Our sustainability improvement capital call facility for Singapore-based Quadria Capital
“Our actions must be driven by customers’ feedback, so we can offer them the smoothest journey possible”
The Organisation Health Index (OHI) survey carried out in 2019 showed room for improvement. The overall health score is a performance indicator measuring organisational health relative to a global benchmark of 1,900 companies. Although we continue to outperform our peers in most areas, we saw a decline in the 2019 results. Just over half of employees (51 percent) completed the survey.
ING community partners. We now have a growing network of sustainability ambassadors in more than 11 countries and plans to expand.
Furthermore, a total of €1.0 billion of Tier 2 bonds were issued whereas no Tier 2 instruments were redeemed in 2019. In addition to these instruments, to build up our MREL capacity, we issued multiple transactions in 2019 for a total amount of €6.3 billion.
The first line of defence comprises the heads of our business lines, who are best positioned to act in the best interests of both our customers and ING. They have primary ownership, accountability and responsibility for assessing, controlling and mitigating all financial and non-financial risks affecting their business, and ensuring financial statements, regulatory and risk reports are complete and accurate. The COO is responsible and accountable for proper security and controls on their local and global applications and IT platforms.
While digitalisation is enabling the easy, customer-oriented and secure service offering customers now expect, it is also amplifying non-financial risk. The more digital society becomes, the more important it becomes for banks to protect their customers, society and their own business against threats that could erode people’s trust in our business and our sector. These include threats posed by cybercriminals, identity theft, misuse of data, security breaches, system failures and unethical business practices. Managing non-financial risk is therefore a priority for ING. It’s a skillset we have to master to the same level of expertise as financial risk management.
To help us manage and mitigate compliance risks we have a set of policies and procedures based on laws and regulations, as well as the standards defined for managing all non-financial risks as set out in ING’s internal control framework. We provide training for employees on topics such as money laundering, terrorist financing, sanction and export control compliance and conduct risks such as conflicts of interest, misselling, corruption and protection of customers’ interests. There is also training on risk culture, the Foreign Account Tax Compliance Act (FATCA), the Common
In this integrated annual report we also look forward and share our vision, ambitions, strategy, opinion and plans for the future. These forward-looking statements can be recognised by terms such as: • aims
This report aims to give all our stakeholders a balanced and complete overview of our activities and ability to create and sustain value. We welcome stakeholder reactions and views. Please send us your feedback via communication@ing.com.
Misstatements can arise from fraud or errors and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of users taken on the basis of this Non-financial Information and the Four Specific Topics. The materiality affects the nature, timing and extent of our assurance procedures and the evaluation of the effect of identified misstatements on our opinion.
Challenging environment 2019 was marked by a weakening of global economic growth and by persistent low interest rates that pressured results. The crisis of multilateralism in the form of US-China trade tensions and
Executive and Supervisory Boards. The new policies will be on the agenda of the Annual General
In preparing the new remuneration policies, we engaged with a wide range of internal and external stakeholders to hear their views and thoughts. This was part of a continuous dialogue in 2019 that I
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Report of the Supervisory Board
Following the discussions in early 2020 on the 2019 annual self-assessment results, a number of suggestions were made as key priorities to contribute to the performance of the Supervisory Board over the coming year. These include achieving more focused Supervisory Board (committee)
To properly prepare for the regular Audit Committee meetings, the chairman of the Audit
Management Board Banking succession planning as part of its regular meetings by means of deep dives by function and business line. Please refer to ING’s diversity and competence matrix that shows the current composition of the Executive Board, Management Board Banking and
▪ Under NYSE listing standards, shareholders of US companies must be given the opportunity to vote on all equity compensation plans and to approve material revisions to those plans, with limited exceptions set forth in the NYSE rules. The NYSE rules require a shareholder vote on all equity compensation plans applicable to any employee, director or other service provider of a company. The results of such votes are advisory in nature rather than binding. Under Dutch law and the Corporate Governance Code, binding shareholder approval is only required for equity compensation plans (or changes thereto) for members of the executive board and supervisory board, and not for equity compensation plans for other groups of employees.
General Meeting, which in the Netherlands is subject to a statutory convocation period of at least 42 days. This authorisation gives ING Group flexibility in managing its capital resources, including regulatory capital, while taking into account shareholders’ interests to prevent dilution of their shares. It particularly enables ING Group to respond promptly to developments in the financial markets, should circumstances so require. The Executive Board and the Supervisory Board consider it in the best interest of ING Group to have the flexibility this authorisation provides.
In line with market practice, ING Group currently intends to include the following categories of shareholders in such a rights issue: 1. Qualified investors as well as retail investors in the Netherlands and the US (SEC registered offering); 2 Qualified investors in EU member states; 3. Retail investors in EU member states where ING has a significant retail investor base, provided that it is feasible to meet local requirements (in ING’s 2009 rights offering, shares were offered to existing shareholders in Belgium, France, Germany, Luxembourg, Spain and the UK, where ING
ING Group may repurchase issued shares. Although the power to repurchase shares is vested in the
Supervisory Board, and to decide on: ▪ The distribution of dividends or other distributions; ▪ The appointment and/or reappointment of members of the Executive Board and the Supervisory
(Born 1970, Dutch nationality, male; appointed in 2017, term expires in 2021)
Supervisory Board members without this being proposed by the Supervisory Board, requires an absolute majority of the votes cast. Additionally, this majority must represent more than half of the issued share capital. The Articles of Association exclude the waiver of the latter requirement in a second General Meeting. This ensures that significant proposals of shareholders cannot be adopted in a General Meeting with a low attendance rate and can only be adopted with substantial support of ING Group’s shareholders.
Remuneration Committee. An organisational chart of the four permanent committees of the
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. and member of the Supervisory
Concertgebouw N.V., member of the advisory council of Goldschmeding Foundation and member of the Board of VNO-NCW (inherent to her position at Post NL N.V.).
At the 2019 AGM shareholders approved the reappointment of Mariana Gheorghe and the appointment of Mike Rees and Herna Verhagen to the Supervisory Board.
Special employment conditions, for example to secure the recruitment of new executives, may be used in exceptional circumstances subject to approval by the Supervisory Board. In 2019, there were none.
▪ Think Forward Strategy: ensuring intended outcomes of key strategic initiatives are executed and result in improved customer experience and commercial growth.
▪ The increased focus on KYC and efforts to streamline operations are leading to an increased number of accounts being closed, including inactive accounts or accounts of which the customers were insufficiently responsive to information requests.
Tanate Phutrakul 4,163 4,163 2.90 19 March 2009 19 March 2012 19 March 2019
3 Deferred share units of Tanate Phutrakul are cash settled instruments. The value of these are based on ING Group’s share price at the vesting date. No retention period applies.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Remuneration report 2019 Remuneration Supervisory Board
The objective of ING's new Executive Board remuneration policy is to enable ING to attract, motivate and retain leaders with the ability, experience, skills, values and behaviours to meet ING's strategic priorities and its stakeholder interests. In designing the new Executive Board remuneration policy, many factors were taken into account, such as the amount of fixed and variable remuneration, the performance measures used and, ING’s risk appetite and scenario analyses
This section sets out how ING manages its risks on a day-to-day basis. It explains how the risk management function is embedded within the organisation based on the ‘three lines of defence’. It describes the key risks that arise from ING’s business model and how these are managed by dedicated risk management departments, with various specific areas of expertise. The section provides qualitative and quantitative disclosures about credit, market, funding & liquidity, business, operational, IT, compliance and model risks.
EU standards, such as certain legal and regulatory disclosures. Not all information in this section can be reconciled back to the primary financial statements and corresponding notes, as it has been prepared using risk data that differs to the accounting basis of measurement. Examples of such differences include the exclusion of accrued interest and certain costs and fees from risk data, and timing differences in exposure values (IFRS 9 models report expected credit loss on underlying exposures). Disclosures in accordance with Part Eight of the CRR and CRD IV, and as required by the supervisory authority, are published in our ‘Additional Pillar III Report’, which can be found on our corporate website ing.com.
ING has a two-tier board structure consisting of a management board (EB for ING Group and MBB
SB committees on ING’s risk appetite levels and on ING’s risk profile at least quarterly. In addition, the CRO briefs them on developments in internal and external risk-related issues and seeks to ensure they understand specific risk concepts.
The outcome of the risk identification & risk assessment process is used as starting point for the review of the RAF. Within this step the risks ING is facing when executing its strategy are identified, it is assessed if the potential impact is material and if it is controlled within ING’s risk management function; benchmarking current risk framework versus regulatory developments; re-assessing known risks to confirm risk level or detect potential changes; and reflecting on the current set of
Estate sectors where the results can help improve our understanding of the impacts of changing regulation and technology developments. ING is committed to continuously reviewing and monitoring its policies and strategies as climate-related risks and opportunities emerge. As a result of transition risk ING further refined its coal policy in 2017, targeting near-zero coal exposure by
In the course of 2020 we aim to identify physical risk in our lending portfolio while we continue our transition risk analysis. We utilise learnings and best practices from sector initiatives and our participation in the UNEP FI TCFD programme.
(possibly unfavourable) market price. This credit risk category is associated with derivatives transactions (exchange-traded derivatives, over-the-counter (OTC) derivatives and securities financing transactions).
In the updated ESR policy framework we have ensured that each sector policy includes the proper references to the relevant standards of the human rights and climate change overarching pillars.
▪ 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 indicators of financial difficulty: ▪ The borrower (or third party) has started insolvency proceedings.
Funding & liquidity risk management within ING falls under the supervision of the ALCO Bank function which approves the funding and liquidity risk appetite that is subsequently cascaded throughout the organisation. In addition, ALCO Bank has delegated responsibilities concerning the
▪ In September 2019, an anomaly detection tool went live to monitor the payment flow of
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Compliance risk economic crime. The approach for innovations is per country and business line and based on success will be scaled up and rolled out in other locations.
▪ Monitoring and screening: This pillar entails translating risk assessment outcomes into scenarios and alert definitions that can be applied in transaction monitoring. This includes the design and definitions of the applicable financial economic crime and client activity monitoring scenarios tailored to the entity yet based on a global set, building alert definitions (including data feeds)
The model risk appetite is designed to control the level of model risk ING is willing to accept in pursuit of its strategic objectives. It is derived from the concepts of boundaries and instruments as described in the Risk Appetite Framework. Model RAS and related boundaries and instruments will be set in 2020 and going forward will be reviewed on an annual basis. RAS requires approval from the MBB/EB and ratification from SB.
Other interest income 3,107 2,880 n/a Staff expenses 27 5,755 5,420 5,202
Dividend paid –2,679 –2,607 –2,564 1 The amounts for the period ended 31 December 2019 and 2018 have been prepared in accordance with IFRS 9, the adoption of IFRS 9 led to new presentation requirements; 2017 period amounts have not been restated, refer also to note 21 ‘Net interest income’.
January 2021, but in June 2019 the IASB has published an Exposure Draft proposing 1 January 2022 as the new effective date. ING Group is currently assessing the detailed impact of IFRS 17.
For lessee accounting, the new Standard removes the distinction between operating and finance leases. All leases are recognised on the statement of financial position with exemptions for shortterm leases with a lease term of less than 12 months and leases of low-value assets (for example mobile phones or laptops).
There is no significant impact of the adoption of IFRS 16 on ING Group’s Net Result, Comprehensive income and Shareholders’ equity on transition. This follows ING Group’s implementation decision where the value of the right-of-use asset is based on the value of the lease liability, adjusted for any previously recognised prepaid and/or accrued lease payments on that lease contract, as is permitted under the Standard.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Basis of preparation and accounting policies > 1 was considered a finance lease if it transfers substantially all risks and rewards of the ownership of the asset. All other leases are operating leases.
Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished and the consideration paid is recognised in profit or loss.
All equity investments are measured at fair value. ING Group applies the fair value through OCI
banding thresholds constitute a significant judgement. Analysis of the sensitivity associated with the assessment of significant increase in credit risk is presented in the ‘Risk Management’ section of the Annual Report.
A liability is recognised for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the liability is recognised only upon reaching the specified minimum threshold.
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 financial statements. Reference is made to Note 46 ‘Legal proceedings’.
Changes in the defined benefit obligation that effects Shareholders’ equity and/or Net result, include mainly: ▪ Service cost which are recognised as staff costs in the statement of profit or loss; ▪ Interest expenses using a high quality corporate bond rate at the start of the period which are recognised as staff costs in the Statement of profit or loss; and
When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses.
Changes in composition of the group and other changes 23 –96 22
Interest income on trading derivatives n/a n/a 16,108 Interest expense on trading derivatives n/a n/a 16,117
Interest income other 30 25 138 Interest expense other 54 33 331
The Result on disposal of group companies includes the result (fair value less cost to sell) on the sale of part of the ING Lease Italy business amounting to EUR -123 million, which was recognized in 2018 and a final result of EUR -2 million recognized in 2019.
Contents | Report of the Executive Board | Corporate governance | Risk Management | Consolidated financial statements | Parent company financial statements | Other information | Appendices > Staff expenses > 27 recovery of defaulted receivables of EUR 32 million. The remainder of the Other income is mainly impacted by positive results on the sale of loans and property and various other non-recurring results.
The geographical segments for the Banking results are presented on page 325.
Italy Branch of ING Bank N.V. Wholesale / Retail 959 911 838 269 231 336 15,726 16,991 16,728 –39 –101 –4 4 –24 7
South Korea Branch of ING Bank N.V. Wholesale 79 80 82 60 55 55 5,457 4,299 4,602 25 14 21 7 3 6
Netherlands, Germany, Belgium, The United States of America, and the United Kingdom. The average discount rate applied for Other post-employment benefits was 3.3% (2018: 3.9%).
▪ ING applies an additional ‘Funding Valuation Adjustment’ (FVA) to address the funding costs associated with the collateral funding asymmetry on uncollateralized or partially collateralized derivatives in the portfolio. This adjustment is based on the expected exposure profiles of the uncollateralized or partially collateralized OTC derivatives and market-based funding spreads.
This category includes financial instruments whose fair value is based on market observables other than (unadjusted) quoted prices. The fair value for financial instruments in this category can be determined by reference to quoted prices for similar instruments in active markets, but for which the prices are modified based on other market observable external data or reference to quoted prices for identical or similar instruments in markets that are not active. These prices can be obtained from a third party pricing service. ING analyses how the prices are derived and determines whether the prices are liquid tradable prices or model based consensus prices taking various data as inputs.
Financial liabilities designated as at fair value through profit or loss Total
quoted prices, which have been adjusted to reflect that the market was not actively trading at or around the balance sheet date. Unobservable inputs are inputs which are based on ING’s own assumptions about the factors that market participants would use in pricing an asset or liability, developed based on the best information available in the circumstances. Unobservable inputs may include volatility, correlation, spreads to discount rates, default rates and recovery rates, prepayment rates, and certain credit spreads. Valuation techniques that incorporate unobservable inputs are sensitive to the inputs used.
Remaining assets (for which maturities are not applicable) 3 2,861 2,861 1 Includes assets on demand.
3 Includes Other liabilities, Current and Deferred tax liabilities, and Provisions as presented in the Consolidated statement of financial position.
The table above does not include assets transferred to consolidated securitisation entities as the related assets remain recognised in the consolidated statement of financial position.
Interest surcharges claims: ING received complaints and was involved in litigation with natural persons (natuurlijke personen) in the Netherlands regarding increases in interest surcharges with respect to several credit products, including but not limited to commercial property (commercieel verhuurd onroerend goed). ING has reviewed the relevant product portfolio. The provision previously taken has been reversed for certain of these complaints. All claims are dealt with individually. Thus far, the courts have ruled in favour of ING in each case, ruling that ING was allowed to increase the interest surcharged based upon the essential obligations in the contract.
ING Group originated various securitisations, as at 31 December 2019 these consisted of approximately EUR 57 billion (2018: EUR 66 billion) of senior and subordinated notes, of which approximately EUR 4 billion (2018: EUR 5 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.
Group Treasury (‘GT’) Capital Management, part of Balance Sheet & Capital Management, is responsible for maintaining the adequate capitalisation of ING Group and ING Bank entities, to manage the risk associated with ING’s business activities. This involves not only managing, planning and allocating capital within ING Group, ING Bank and its various entities, but also helping to execute necessary capital market transactions, term (capital) funding and risk management transactions. ING takes an integrated approach to assess the adequacy of its capital position in relation to its risk profile and operating environment. This means GT Capital Management takes into account both regulatory and internal, economic based metrics and requirements as well as the interests of key stakeholders such as shareholders and rating agencies.
December 2019, EUR 331 million (2018: EUR 233 million) was pledged to ING Groep N.V. as collateral.
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the ‘Our responsibilities for the audit of the financial statements’ section of our report.
— We involved professionals with specialised skills and knowledge who assisted in: • evaluating the inputs, assumptions and judgements to determine the PD, LGD, and EAD parameters in models used by the Company to calculate the collective provisions; • assessing the criteria and thresholds used to identify loans that experienced a significant increase in credit risk.
Appendix: Description of our responsibilities for the audit of the financial statements
▪ the write-down of tax assets impacting net results and/or equity; ▪ impairment expenses related to goodwill and other intangible assets, impacting net result; and/or
announced that it will no longer persuade or compel banks to submit rates for the calculation of the LIBOR benchmark after 2021. The announcement indicates that the continuation of the LIBOR
The negative publicity associated with any sales practices, any compensation payable in respect of any such issues and regulatory changes resulting from such issues, has had and could have a material adverse effect on our reputation, business, results, financial condition and prospects. For additional information regarding legal proceedings or claims, see Note 47 ‘Legal proceedings’ to the consolidated financial statements.
The inability of counterparties to meet their financial obligations or our inability to fully enforce our rights against counterparties could have a material adverse effect on our results.
In addition, we are subject to the risk that our rights against third parties may not be enforceable in all circumstances. The deterioration or perceived deterioration in the credit quality of third parties whose securities or obligations we hold could result in losses and/ or adversely affect our ability to rehypothecate or otherwise use those securities or obligations for liquidity purposes. A significant downgrade in the credit ratings of our counterparties could also have a negative impact on our income and risk weighting, leading to increased capital requirements. While in many cases we are permitted to require additional collateral from counterparties that experience financial difficulty, disputes may arise as to the amount of collateral we are entitled to receive and the value of pledged assets. Also in this case, our credit risk may also be exacerbated when the collateral we hold cannot be liquidated at prices sufficient to recover the full amount of the loan or derivative exposure due to us, which is most likely to occur during periods of illiquidity and depressed asset valuations, such as those experienced during the financial crisis of 2008. The termination of contracts and the foreclosure on collateral may subject us to claims. Bankruptcies, downgrades and disputes with counterparties as to the valuation of collateral tend to increase in times of market stress and illiquidity. Any of these developments or losses could materially and adversely affect our business, results, financial condition, and/or prospects.
Principle 6: Transparency & Accountability 6.1 Show that the bank has progressed on implementing the six Principles over the last 12 months in addition to the setting and implementation of targets in minimum two areas
While scope 3, category 15 (emissions through lending and investments) is material to ING’s indirect emissions footprint, due to measurement complexity and lack of quality data, ING is not able accurately to measure and disclose this figure.
government, (5) consequences of the United Kingdom’s withdrawal from the European Union, (6)