ING Direct 2011 Annual Report Download - page 301

availability of credit to the financial services industry, our credit ratings and credit capacity, as well as the possibility that customers or
lenders could develop a negative perception of our long- or short-term financial prospects. Similarly, our access to funds may be limited
if regulatory authorities or rating agencies take negative actions against us. If our internal sources of liquidity prove to be insufficient,
there is a risk that external funding sources might not be available, or available at unfavourable terms.
Disruptions, uncertainty or volatility in the capital and credit markets, such as that experienced over the past few years, including in
relation to the ongoing European sovereign debt crisis, may also limit our access to capital required to operate our business. Such market
conditions may in the future limit our ability to raise additional capital to support business growth, or to counter-balance the consequences
of losses or increased regulatory capital requirements. This could force us to (1) delay raising capital, (2) reduce, cancel or postpone
payment of dividends on our shares, (3) reduce, cancel or postpone interest payments on other securities, (4) issue capital of different
types or under different terms than we would otherwise, or (5) incur a higher cost of capital than in a more stable market environment.
This would have the potential to decrease both our profitability and our financial flexibility. Our results of operations, financial condition,
cash flows and regulatory capital position could be materially adversely affected by disruptions in the financial markets.
In the course of 2008 and 2009, governments around the world, including the Dutch government, implemented unprecedented measures
to provide assistance to financial institutions, in certain cases requiring (indirect) influence on or changes to governance and remuneration
practices. In certain cases governments nationalised companies or parts thereof. The measures adopted in the Netherlands include both
liquidity provision and capital reinforcement, and a Dutch Credit Guarantee Scheme. The liquidity and capital reinforcement measures
expired on 10 October 2009, and the Credit Guarantee Scheme of the Netherlands expired on 31 December 2010. Our participation in
these measures has resulted in certain material restrictions on us, including those required by to with the European Commission (‘EC’) as
part of our Restructuring Plan. See ‘Risks Related to the Restructuring Plan – Our agreements with the Dutch State impose certain
restrictions regarding the issuance or repurchase of our shares and the compensation of certain senior management positions’, ‘Risks
Related to the Restructuring Plan – The implementation of the Restructuring Plan and the divestments anticipated in connection with that
plan will significantly alter the size and structure of the Group and involve significant costs and uncertainties that could materially impact
the Group’. The Restructuring Plan as well as any potential future transactions with the Dutch State or any other government, if any, or
actions by such government regarding ING could adversely impact the position or rights of shareholders, bondholders, customers or
creditors and our results, operations, solvency, liquidity and governance.
We are subject to the jurisdiction of a variety of banking and insurance regulatory bodies, some of which have proposed regulatory
changes that, if implemented, would hinder our ability to manage our liquidity in a centralised manner. Furthermore, regulatory liquidity
requirements in certain jurisdictions in which we operate are generally becoming more stringent, including those forming part of the ‘Basel
III’ requirements discussed further below under ‘–We operate in highly regulated industries. There could be an adverse change or increase
in the financial services laws and/or regulations governing our business’, undermining our efforts to maintain this centralised management
of our liquidity. These developments may cause trapped pools of liquidity, resulting in inefficiencies in the cost of managing our liquidity,
and hinder our efforts to integrate our balance sheet, which is an essential element of our Restructuring Plan.
The default of a major market participant could disrupt the markets.
Within the financial services industry the severe distress or default of any one institution (including sovereigns) could lead to defaults or severe
distress by other institutions. Such distress or defaults could disrupt securities markets or clearance and settlement systems in our markets.
This could cause market declines or volatility. Such a failure could lead to a chain of defaults that could adversely affect us and our contract
counterparties. Concerns about the credit worthiness of a sovereign or financial institution (or a default by any such entity) could lead to
significant liquidity and/or solvency problems, losses or defaults by other institutions, because the commercial and financial soundness of
many financial institutions may be closely related as a result of their credit, trading, clearing or other relationships. Even the perceived lack
of creditworthiness of, or questions about, a sovereign or a counterparty may lead to market-wide liquidity problems and losses or defaults by
us or by other institutions. This risk is sometimes referred to as ‘systemic risk’ and may adversely affect financial intermediaries, such as clearing
agencies, clearing houses, banks, securities firms and exchanges with whom we interact on a daily basis and financial instruments of sovereigns
in which we invest. Systemic risk could have a material adverse effect on our ability to raise new funding and on our business, financial condition,
results of operations, liquidity and/or prospects. In addition, such a failure could impact future product sales as a potential result of reduced
confidence in the financial services industry.
Management believes that despite increased attention recently, systemic risk to the markets in which we operate continues to exist, and
dislocations caused by the interdependency of financial market participants continues to be a potential source of material adverse changes
to our business, results of operations and financial condition.
Risk factors continued
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
299ING Group Annual Report 2011