ING Direct 2009 Annual Report Download - page 270

lenders could develop a negative perception of our long- or short-term financial prospects. Similarly, our access to funds may be limited if
regulatory authorities or rating agencies take negative actions against us. If our internal sources of liquidity prove to be insufficient, there is
a risk that external funding sources might not be available, or available at unfavorable terms.
Disruptions, uncertainty or volatility in the capital and credit markets may also limit our access to capital required to operate our business.
Such market conditions may limit our ability to raise additional capital to support business growth, or to counter-balance the consequences
of losses or increased regulatory capital requirements. This could force us to (1) delay raising capital, (2) reduce, cancel or postpone
payment of dividends on our shares, (3) reduce, cancel or postpone interest payments on other securities, (4) issue capital of different
types or under different terms than we would otherwise, or (5) incur a higher cost of capital than in a more stable market environment.
This would have the potential to decrease both our profitability and our financial flexibility. Our results of operations, financial condition,
cash flows and regulatory capital position could be materially adversely affected by disruptions in the financial markets.
In the course of 2008 and 2009, governments around the world, including the Dutch government, implemented unprecedented measures
to provide assistance to financial institutions, in certain cases requiring (indirect) influence on or changes to governance and remuneration
practices. In certain cases governments nationalised companies or parts thereof. The measures adopted in the Netherlands include both
liquidity provision and capital reinforcement, and a Dutch Credit Guarantee Scheme. The liquidity and capital reinforcement measures
expired on 10 October 2009, while the Credit Guarantee Scheme of the Netherlands is scheduled to run through 30 June 2010. To date,
we have been able to benefit from these measures, but our participation in these measures has resulted in certain material restrictions on
us, including those agreed to with the European Commission (‘EC’) as part of our Restructuring Plan. See ‘Risks Related to the Group - Our
agreements with the Dutch State impose certain restrictions regarding the issuance or repurchase of our shares and the compensation of
certain senior management positions’, ‘Risks Related to the Group - The implementation of the Restructuring Plan and the divestments
anticipated in connection with that plan will significantly alter the size and structure of the Group and involve significant costs and
uncertainties that could materially impact the Group’. The Restructuring Plan as well as any potential future transactions with the Dutch
State or any other government, if any, or actions by such government regarding ING could adversely impact the position or rights of
shareholders, bondholders, customers or creditors and our results, operations, solvency, liquidity and governance.
In addition, we have built our liquidity risk framework on the premise that our liquidity is most efficiently and effectively managed by a
centralised Group function. However, we are subject to the jurisdiction of a variety of banking and insurance regulatory bodies, some of
which have proposed regulatory changes that, if implemented, would hinder our ability to manage our liquidity in such a centralised
manner. Furthermore, regulatory liquidity requirements in certain jurisdictions in which we operate are generally becoming more stringent,
undermining our efforts to maintain this centralised management of our liquidity. These developments may cause trapped pools of
liquidity, resulting in inefficiencies in the cost of managing our liquidity, and hinder our efforts to integrate our balance sheet, which is an
essential element of our Back to Basics program and our Restructuring Plan.
The default of a major market participant could disrupt the markets.
Within the financial services industry the default of any one institution could lead to defaults by other institutions. The failure of a
sufficiently large and influential institution could disrupt securities markets or clearance and settlement systems in our markets. This could
cause market declines or volatility. Such a failure could lead to a chain of defaults that could adversely affect us and our contract
counterparties. Concerns about, or a default by, one institution could lead to significant liquidity problems, losses or defaults by other
institutions, as was the case after the bankruptcy of Lehman Brothers, because the commercial and financial soundness of many financial
institutions may be closely related as a result of their credit, trading, clearing or other relationships. Even the perceived lack of
creditworthiness of, or questions about, a counterparty may lead to market-wide liquidity problems and losses or defaults by us or by
other institutions. This risk is sometimes referred to as ‘systemic risk’ and may adversely affect financial intermediaries, such as clearing
agencies, clearing houses, banks, securities firms and exchanges with whom we interact on a daily basis. Systemic risk could have a
material adverse effect on our ability to raise new funding and on its business, financial condition, results of operations, liquidity and/or
prospects. In addition, such a failure could impact future product sales as a potential result of reduced confidence in the financial services
industry.
Management believes that despite increased attention recently, systemic risk to the markets in which we operate continues to exist, and
dislocations caused by the interdependency of financial market participants continues to be a potential source of material adverse changes
to our business, results of operations and financial condition.
Because our life and non-life insurance and reinsurance businesses are subject to losses from unforeseeable and/or
catastrophic events, which are inherently unpredictable, our actual claims amount may exceed our established reserves or
we may experience an abrupt interruption of activities, each of which could result in lower net results and have an adverse
effect on our results of operations.
In our life and non-life insurance and reinsurance businesses, we are subject to losses from natural and man-made catastrophic events.
Such events include, without limitation, weather and other natural catastrophes such as hurricanes, floods, earthquakes and epidemics, as
well as events such as terrorist attacks.
Risk factors (continued)
2.4 Additional information
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