ING Direct 2011 Annual Report Download - page 306

Board (‘FSB’), consisting of representatives of national financial authorities of the G20 nations. The G20 and the FSB have issued a series of
papers and recommendations intended to produce significant changes in how financial companies, particularly companies that are
members of large and complex financial groups, should be regulated. These proposals address such issues as financial group supervision,
capital and solvency standards, systemic economic risk, corporate governance including executive compensation, and a host of related
issues associated with responses to the financial crisis. The lawmakers and regulatory authorities in a number of jurisdictions in which
the Group’s subsidiaries conduct business have already begun introducing legislative and regulatory changes consistent with G20 and
FSB recommendations, including proposals governing consolidated regulation of insurance holdings companies by the Financial Services
Agency in Japan, proposals governing executive compensation by the financial regulators in the Netherlands (DNB), Germany (BaFIN)
and the United Kingdom (FSA).
Additional Governmental Measures
Governments in the Netherlands and abroad have also intervened over the past few years on an unprecedented scale, responding to
stresses experienced in the global financial markets. Some of the measures adopted subject us and other institutions for which they were
designed to additional restrictions, oversight or costs. For restrictions related to the core Tier 1 Securities and the IABF, 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’. As a result of having received state aid through the Dutch State
Transactions, we were required to submit our Restructuring Plan to the EC in connection with obtaining final approval for the Dutch State
Transactions. See ‘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’.
Sections 382 and 383 of the U.S. Internal Revenue Code contain tax attribute limitation rules, the general purpose of which is to prevent
trafficking in tax losses and credits (i.e. they are anti-abuse rules), but which can apply without regard to whether a ‘loss trafficking’
transaction occurs or is intended. These rules are triggered when an ‘ownership change’ (as specially defined for U.S. federal income tax
purposes) occurs. As of 31 December 2011, we believe that our U.S. subsidiaries have not had an ‘ownership change’ for purposes of
Sections 382 and 383. However, this determination is subject to uncertainties and is based on various assumptions. Future increases of
capital or other changes in ownership may adversely affect our cumulative ownership, and could trigger an ‘ownership change’, which
could limit the ability of our US subsidiaries to use tax attributes, and could correspondingly decrease the value of these attributes.
On 28 September 2011, the European Commission published a proposal for a financial transaction tax that would be levied on transactions
in financial instruments by financial institutions if at least one of the parties to the transaction is located in the European Union. If not
adopted by the European Union as a whole, such a tax might nonetheless be adopted by one or more European Union member states (as
has recently been proposed in the Netherlands and approved in France by the French Parliament on certain financial instruments). As
proposed, this tax could require us to pay a tax on transactions in financial instruments with parties (including, with respect to the EU-wide
proposal, Group affiliates) located in the European Union. The Ministry of Finance in the Netherlands has put forward a proposal to
introduce a banking tax in the Netherlands. That proposal, if approved by the Dutch Parliament, will likely result in increased taxes on ING’s
Banking operations, which could negatively impact our operations, financial condition and liquidity. In addition, it is possible that the
United States Congress may adopt a form of ‘financial crisis responsibility’ fee and tax on banks and other financial firms to mitigate costs
to taxpayers of various government programs established to address the financial crisis and to offset the costs of potential future crises.
The Obama Administration’s 2013 revenue proposals include such a fee. Any regulations resulting from these financial transaction tax
initiatives and proposals could affect our operational results, financial condition and liquidity, and could negatively impact the costs and
scope of our transactions, including transactions with other financial institutions.
Test Achats Decision
On 1 March 2011, the European Court of Justice issued its judgment in the widely-followed Test Achats case. The Test Achats decision,
in effect, provides that the use of gender as a factor in the pricing of or benefits under life and non-life insurance coverage is incompatible
with the principles of equal treatment of men and women under the EU Charter. The Test Achat decision provides for a transition period,
however, until 21 December 2012, after which the use of such gender-based factors will no longer be permissible. It is unclear whether
this prohibition also applies to existing insurance contracts. While it is too early to assess the impacts of the Test Achats case on ING’s
insurance business, it is expected that the industry generally will incur potentially significant compliance-related costs as policy forms,
underwriting and pricing criteria, and related systems undergo required modifications. On 22 December 2011, the European Commission
issued guidelines to assist the insurance industry in implementing unisex pricing by 21 December 2012 (i.e., the end of the transition period
specified in the Test Achats decision). ING is unable at this stage to quantify the extent of any such costs or other impacts on its business,
and intends to follow closely the implementation of the Test Achats decision and the guidelines published by the European Commission.
Turbulence and volatility in the financial markets have adversely affected us, and may continue to do so.
General
Our results of operations are materially impacted by conditions in the global capital markets and the economy generally. Concerns over
theslow economic recovery, the European sovereign debt crisis, unemployment, the availability and cost of credit, the level of US national
debt and the US mortgage market, inflation levels, energy costs and geopolitical issues all have contributed to increased volatility and
diminished expectations for the economy and the markets in recent years.
Risk factors continued
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