ING Direct 2009 Annual Report Download - page 301

OTHER NON CREDIT OBLIGATION ASSETS
Other Non Credit Obligation Assets (ONCOA) represent assets of non credit obligation character that are not included in the SA or A-IRB
calculations. Capital requirement for ONCOA as of 31 December 2009 is EUR 2,275 million (2008: EUR 2,166 million).
OPERATIONAL RISK
The Operational Risk Capital model of ING is based on a Loss Distribution Approach (LDA). The Loss Distribution is based on both external
and internal loss data exceeding EUR 1 million. The model is adjusted for the scorecard results, taking into account the specific quality of
control in a business line and the occurrence of large incidents (‘bonus/malus’). This provides an incentive to local (operational risk)
management to better manage operational risk. The capital calculation meets industry standards and was approved in April 2008 by DNB.
Originally, the model was designed for Economic Capital (99.95% confidence level) and the Financial Risk Dashboard (90% confidence
level). From 2008 onwards, the model is used for regulatory capital reporting purposes as well.
The Operational Risk Capital based on AMA slightly decreased to EUR 3,309 million in 2009, from EUR 3,368 million in 2008, due the
reduction of the size of ING Bank relative to the total banking industry.
MARKET RISK
The general description of market risk in ING Bank can be found in the risk paragraph of the annual report, where the organisation,
measurement and management of market risk is explained. Further, for 2009 the scope for Pillar 3 non-trading exposures is in line with the
risk paragraph where several banking books are governed by the trading risk process. In the 2008 Pillar 3 figures non-trading exposures
are excluded from the trading governance resulting in differences with the 2008 numbers from the risk paragraph.
CAPITAL REQUIREMENTS
Capital requirements
Standardised approach Internal Model Approach Total
2009 2008 2009 2008 2009 2008
Interest rate risk 127 255 233 456 360 711
Equity position risk 75 80 75 80
Foreign exchange risk (1) 23 194 33 51 56 245
Total 150 449 341 587 491 1,036
(1) The FX exposure under the Standardised Approach contains FX exposures on both trading and banking books.
TRADING BOOK POSITIONS
Model approach
According to the Dutch regulation, regulatory capital for trading portfolios can be calculated using the standardised approach (CAD1) or
an internal model approach (CAD2). In 1998, ING received approval from the Dutch Central Bank (DNB) to use an internal Value-at-Risk
(VAR) model to determine the regulatory capital for the market risk in the trading book of ING Bank. Market risk capital of CAD2 trading
books is calculated according to the internal VaR model, where correlations and volatilities are taken into account. On the other hand,
market risk capital of CAD1 books is calculated using standardised fixed risk weights.
In 2009, ING applied the CAD2 model for most of its trading activities. The standard CAD1 model is used for some trading books in
smaller locations and / or products for which the internal model is not yet CAD2 compliant. The aim of ING is to receive CAD2 status for all
its trading books. It should be noted that due to the conservative nature of the CAD1 model the capital charge for the standardised
approach is much larger than for the internal model approach.
VAR Values for IMA Portfolios
High Mean Low Period-end
Over the reporting period 2009 31 Dec 2009 31 Dec 2008
Interest rate risk 49 29 19 21 40
Equity position risk 11 7 4 5 7
Foreign exchange risk 10 4 1 3 6
Diversification effect 6 4 3
Total 35 25 50
For a summary of the Value-at-Risk measurement applicable to the internal model approach please refer to the Market Risk Paragraph in
the Annual Report 2009. It should be noted that the VaR figures in the above table only relate to the CAD2 trading books for which the
internal model approach is applied. The VaR figures reported in the Annual Report relate to all books under trading governance.
ING Group Annual Report 2009 299
Additional Pillar 3 information for ING Bank only (continued)
2.4 Additional information