ING Direct 2009 Annual Report Download - page 293

The risk weighting categories are defined in Basel II and are interpreted by ING as follows:
0% Risk Weighting
These assets fall into three categories as described below. In all of these cases, ING has developed credit risk models for the specific
portfolios, but has not yet implemented the AIRB approach due to restrictions imposed by local regulators. In most cases, these
portfolios are eligible to be converted to the AIRB approach in 2009.
Central government and central banks
In accordance with national discretion rules, the risk weight for many central governments and central banks under the standardised
approach is 0%.
Regional governments and local authorities
In many countries, exposures to provincial, regional and municipal governments are treated as exposures to the central government
in whose jurisdiction they are established.
Multilateral Development Banks
Exposures to certain specific multilateral development banks and other international organisations such as the International Bank
for Reconstruction and Development are risk weighted at 0%.
10% Risk Weighting
The 10% risk weighting is applied to covered bonds exposures under the standardised approach. All of ING’s covered bond positions
are measured under the AIRB.
20% Risk Weighting
20% Risk Weighting is applied to exposures based on their exposure class and external rating. These are generally high quality
exposures.
35% Risk Weighting
Exposures secured by mortgages on residential real estate are assigned a risk weight of 35%. The risk weight is only reduced for
the part of the exposure that is fully secured.
50% Risk Weighting
50% Risk Weighting is applied to exposures based on their exposure class and external rating. These are generally not prime grade
exposures.
75% Risk Weighting
Retail exposures under the standardised approach are assigned a risk weight of 75%.
100% Risk Weighting
Under the standardised approach, exposures without external ratings that do not fall into one of the other categories are assigned a
risk weight of 100%.
150% Risk weighting
Under the standardised approach, certain specified exposures, such as exposures to venture capital and private equity, as well as the
unsecured portion of any past due obligation is assigned a risk weighting of 150%.
200% Risk weighting
The 200% risk weighting must be applied to collective investment undertakings which contain high risk equity investments.
PORTFOLIOS UNDER THE AIRB APPROACH
RISK RATING METHODOLOGY
In principle all Risk Ratings are based on a Risk Rating (PD) Model that complies with the minimum requirements detailed the CRD, the
DNB Supervisory Rules and CEBS guidelines. This concerns all Obligor Types and Segments, including Countries.
ING’s Probability of Default (PD) rating models are based on a 1-22 scale, which roughly corresponds to the same rating grades that are
assigned by external rating agencies, such as Standard & Poor’s and Fitch. For example, an ING rating of 1 would correspond to an S&P/
Fitch rating of AAA; an ING rating of 2 would correspond to an S&P/Fitch rating of AA+, and so on.
ING Group Annual Report 2009 291
Additional Pillar 3 information for ING Bank only (continued)
2.4 Additional information