ING Direct 2011 Annual Report Download - page 165

Notes to the consolidated annual accounts of ING Group continued
After securitisation of these assets ING Group continues to recognise them on its balance sheet under Loans and advances to customers.
These transactions are therefore not off-balance sheet arrangements.
Assets under synthetic securitisation programmes
2011 2010
Loans to small and medium-sized enterprises 5,251 5,273
Mortgages 6,245 6,476
Total 11,496 11,749
ING Group as sponsor of multi-seller conduit
In the normal course of business, ING Group structures financing transactions for its clients by assisting them in obtaining sources of
liquidity by selling the clients’ receivables or other financial assets to an SPE. The SPE issues asset-backed commercial paper to the market
to fund the purchases. ING Group, in its role as administrative agent, facilitates these transactions by providing structuring, accounting,
funding and operations services.
ING Group supports the commercial paper programmes by providing the SPE with short-term standby liquidity facilities. These liquidity
facilities are intended primarily to cover temporarily disruptions in the commercial paper market. Once drawn these facilities bear normal
credit risk. A number of programmes are supported by granting structured liquidity facilities to the SPE, in which ING Group covers at
least some of the credit risk incorporated in these programmes itself (in addition to normal liquidity facilities), and might suffer credit
losses as a consequence. Furthermore, under a Programme Wide Credit Enhancement ING Group guarantees to a limited amount all
remaining losses incorporated in the SPE to the commercial paper investors. All facilities, which vary in risk profile, are granted to the
SPEsubject to normal ING Group credit and liquidity risk analysis procedures. The fees received for services provided and for facilities
arecharged subject to market conditions. The SPE is included in the consolidation of ING Group. These transactions are therefore not
off-balance sheet arrangements.
The normal non-structured standby liquidity facilities and the structured facilities are reported under irrevocable facilities.
Collateralised debt obligations (CDO)-transactions
Within ING Group, SPEs are used for CDO transactions. In a typical CDO transaction an SPE is used to issue structured, rated securities
which are backed (or collateralised) by a pool of transferable debt securities. Besides investing in CDOs ING Group often has different roles
in these transactions:
• the arranger of the transaction; ING Group structures the SPE, acquires the assets for the SPE and sells the CDOs to investors; and
• collateral manager of the assets in the SPE; ING Group manages the assets based on strict conditions of the SPEs charter.
ING Group receives market-rate fees for structuring, asset managing and distributing CDO-securities to investors. The total amount of
these fees is not significant.
ING Group as investor
As part of its investment activities, ING Group invests in securitisations by purchasing notes or by selling credit protection in the market
using credit default swaps from securitisation SPEs. For certain own asset securitisation programmes ING Group acts as a market maker
and holds limited positions in this capacity.
Other entities
ING Group is also a party to other SPEs used, for example, in structured finance and leasing transactions.
Investment funds
ING Group as fund manager and investor
ING Group sets up investment funds for which it acts as a fund manager and sole investor at the inception of the fund. Subsequently, ING
Group will seek third-party investors to invest in the fund, thereby reducing the interest of ING Group. In general, ING Group will maintain
a small percentage of interest in these funds. These funds are included in the consolidated financial statements of the Group if and when
control exists, taking into account both ING Group’s financial interests for own risk and its role as investment manager.
ING Group as fund manager
ING Group acts as fund manager for several funds. Fees related to these management activities are charged on an at arm’s-length basis. In
general, as a fund manager ING Group will hold these funds in a fiduciary capacity. These funds are therefore generally not included in the
consolidated financial statements of ING Group.
1 Who we are 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information
163ING Group Annual Report 2011