ING Direct 2011 Annual Report Download - page 244

Risk management continued
ING Bank
Real Estate Exposure banking books recorded as fair value through P&L (by geographic area and sector type)
2011 2010 2011 2010
Continent Sector
Europe 462 662 Residential 70 207
Americas 28 812 Office 150 385
Australia 20 189 Retail 510 620
Asia 380 349 Industrial 113 516
Other 014 Other 46 298
Total 890 2,026 Total 889 2,026
ING Bank’s real estate exposure not revaluing through P&L has not been affected much. This is because divestments and impairments in Real
Estate Development (EUR –450 million) were compensated by the inclusion of assets in the REIM portfolio previously revalued through P&L.
Real Estate Exposure banking books not revalued through P&L (by geographic area and sector type)
2011 2010 2011 2010
Continent Sector
Europe 2,456 2,772 Residential 512 614
Americas 306 70 Office 1,350 1,456
Australia 176 204 Retail 896 874
Asia Industrial 44 43
Other 147 99 Other 283 158
Total 3,085 3,145 Total 3,085 3,145
ING BANK – LIQUIDITY RISK
Liquidity risk is the risk that ING Bank or one of its subsidiaries cannot meet its financial liabilities when they come due, at reasonable cost
and in a timely manner. Liquidity risk can materialise both through trading and non-trading positions.
Liquidity Risk Management
MRM is responsible for determining adequate policies and procedures for managing liquidity risk and for monitoring the compliance with
these guidelines. In addition it is also responsible for performing liquidity risk stress testing. In accordance with Dutch Central Bank
guidelines, ING Bank’s liquidity positions are stress tested on a monthly basis under a scenario that is a mix between a market event and an
ING Bank specific event. Additional stress testing exercises are undertaken on consolidated and local level on a periodic and ad-hoc basis.
Governance
As with other bank market risks, liquidity risk falls under the supervision of the ALCO function within ING Bank, with ALCO Bank as the
highest approval authority. ALCO Bank determines the liquidity risk (limit) framework and appetite after which this is cascaded down in
theorganisation under the responsibility of the regional and local ALCOs. The main objective of ING Bank’s liquidity risk framework is to
ascertain – by means of proper risk appetite limits – that sufficient liquidity is maintained in order to ensure safe and sound operations
under a variety of circumstances. For this purpose liquidity risk is measured, managed and controlled from three different angles, namely
astructural, a tactical and acontingency point of view.
Risk profile
Structural liquidity risk
Structural liquidity risk is the risk that the structural, long-term balance sheet cannot be financed timely or at a reasonable cost. For the
purpose of managing structural liquidity risk, a specific advisory committee to ALCO Bank has been established.
This committee which consists of key representatives from MRM, Capital Management and Financial Markets focuses on all liquidity risk
aspects from a going concern perspective. The main objective of the committee is to maintain a sound liquidity profile through:
• Maintaining a well diversified mix of funding sources in terms of instrument types (e.g. unsecured deposits, commercial paper,
longterm bonds or repurchase agreements), fund providers (e.g. professional money market players, wholesale and retail clients),
geographic markets and currencies;
• Actively managing access to the capital markets by regularly issuing public debt in all material markets and the maintenance of
investorrelations;
• Holding a broad portfolio of eligible assets that can be utilised to obtain secured funding, e.g. from the repo market or (E)CB;
inthisrespect the total marketable/(E)CB eligible collateral position amounts to EUR 194 billion (MtM);
• Management of liquidity gaps, taking into account the asset mix and both the secured and unsecured funding opportunities
ofINGBank; and
• Maintaining a funds transfer pricing mechanism in which ING Bank’s cost of liquidity is adequately reflected both under a going concern
and a contingency perspective.
242 ING Group Annual Report 2011