ING Direct 2009 Annual Report Download - page 294

Risk Ratings from Rating Models:
Risk Rating processes take on several forms as described below:
Rating Models requiring manual interference: these are Models that require manual interference from the User who has to answer •
Rating Model based questions for each individual legal organisation in order to arrive at a Risk Rating. If not reviewed, the Risk Rating
will expire 18 months after the previous review. These models are typically used for Governments, Institutions and larger Corporates;
and
Automated Rating Models:• these are Models that do not require manual interference. Instead, data is automatically gathered and used
to determine the Risk Rating (this process is detailed further in the sections that describe ING’s Data Management and IT processes).
These models are typically used for small businesses, consumer loans, and residential mortgage exposures;
Risk Ratings from Appeals:• Rating Model outcomes that are perceived to be inaccurate can be appealed through the relevant Rating
Appeal Process, where this exists. The Rating Appeal Process applies to all Rating Models that require manual interference. It does not
apply to automated Rating Models developed for consumer lending and residential mortgage business;
Non-Rating Model based Ratings• : this pertains to Risk Ratings not calculated by means of an approved Rating Model, but manually
calculated or set on the basis of an approved subjective methodology. These are generally only used for problem loan classifications
(20-22) which are owned by the relevant global or regional credit restructuring unit; and for the securitisation portfolios, whereby the
external ratings of the tranche in which ING has invested are leading.
Exposures (EAD) by PD grade under the AIRB approach
Central
Governments
and Central
Banks Institutions Corporate
Residential
mortgages Other retail Total 2009 Total 2008
1 (AAA) 14,562 2,129 3,014 10 19,715 38,481
2 (AA+) 41,369 5,435 3,255 71 70 50,200 32,014
3 (AA) 15,958 7,446 5,467 2,014 610 31,495 29,711
4 (AA-) 733 28,297 5,591 467 302 35,390 62,706
5 (A+) 8,304 18,456 7,335 3,887 625 38,607 40,248
6 (A) 2,073 13,412 8,959 3,940 753 29,137 24,966
7 (A-) 84 11,344 15,742 24,490 1,343 53,003 44,940
8 (BBB+) 611 5,907 19,119 26,976 3,689 56,302 52,281
9 (BBB) 153 3,915 25,924 48,909 3,433 82,334 76,884
10 (BBB-) 36 3,131 32,163 54,390 5,296 95,016 93,115
11 (BB+) 320 1,139 28,187 64,684 4,896 99,226 110,469
12 (BB) 468 792 28,032 22,522 3,727 55,541 66,082
13 (BB-) 42 881 23,171 9,739 2,768 36,601 33,177
14 (B+) 159 604 17,061 4,805 2,088 24,717 17,56 6
15 (B) 56 116 8,394 13,740 1,455 23,761 13,946
16 (B-) 53 101 3,720 2,157 573 6,604 3,894
17 (CCC-C) 10 299 5,372 3,190 999 9,870 8,048
18 (Special Mention) 50 4,364 372 476 5,262 3,034
19 (Substandard) 115 1,237 2,935 536 4,724 2,450
20 (Doubtful) 2102 5,392 2,261 765 8,522 5,689
21 (Liquidation – no loss) 168 1,462 229 1,859 1,607
22 (Liquidation – with loss) 10 663 63 176 912 549
Total 84,994 103,581 252,330 293,074 34,819 768,798 761,857
* Includes only AIRB portfolios; Excludes securitisations, equities and ONCOA.
* Excludes revaluations made directly through the equity account.
The figures presented above are based on EAD and as such differ from those presented in the annual accounts due to different
measurement methodology.
Over 95% of ING’s credit risks have been rated using one of the in-house developed PD rating models. Within the AIRB Portfolio, the level
of Basel II ratings exceeds 99% coverage by exposure. Bankwide, ING has implemented more than 100 rating models, including various
submodels that may be applicable. Some of these models are universal in nature, such as models for Large Corporate, Commercial Banks,
Insurance Companies, Central Governments, Local Governments, Funds, Fund Managers, Project Finance, and Leveraged Companies.
While other models are more regional or country specific, such as PD models for SME companies in Central Europe, the Netherlands,
Belgium, Luxembourg, and the United Kingdom, as well as residential mortgage and consumer loan models in the various retail markets.
ING Group Annual Report 2009
292
Additional Pillar 3 information for ING Bank only (continued)
2.4 Additional information