ING Direct 2011 Annual Report Download - page 317

Risk factors continued
While we have begun and expect to continue to implement these strategies, there can be no assurance that we will be able to do so
successfully or that we will realize the projected benefits of these and other restructuring and cost saving initiatives. If we are unable
torealize these anticipated cost reductions, our business may be adversely affected. Moreover, our continued implementation of
restructuring and cost saving initiatives may have a material adverse effect on our business, financial condition, results of operations and
cash flows.
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.
For so long as the Dutch State holds at least 25% of the core Tier 1 Securities, for so long as the IABF is in place or for so long as any of
the government guaranteed senior unsecured bonds issued by ING Bank N.V. under the Credit Guarantee Scheme of the Netherlands (the
‘Government Guaranteed Bonds’) are outstanding, we are prohibited from issuing or repurchasing any of our own shares (other than as
part of regular hedging operations and the issuance of shares according to employment schemes) without the consent of the Dutch State’s
nominees on the Supervisory Board. In addition, under the terms of the core Tier 1 Securities and IABF, we have agreed to institute certain
restrictions on the compensation of the members of the Executive Board and senior management, including incentives or performance-
based compensation. These restrictions could hinder or prevent us from attracting or retaining the most qualified management with the
talent and experience to manage our business effectively. In connection with these transactions, the Dutch State was granted the right to
nominate two candidates for appointment to the Supervisory Board. The Dutch State’s nominees have veto rights over certain material
transactions. Our agreements with the Dutch State have also led to certain restrictions imposed by the EC as part of the Restructuring
Plan, including with respect to our price leadership in EU banking markets and our ability to make acquisitions of financial institutions and
other businesses. See ‘– The limitations required by the EC on our ability to compete and to make acquisitions or call certain debt
instruments could materially impact the Group above’.
Whenever the overall return on the (remaining) core Tier 1 securities issued to the Dutch State is expected to be lower than
10% p.a., the European Commission may consider the imposition of additional behavioural constraints.
As stated in the decision of the European Commission of 12 November 2008 (in State aid N 528/2008 – The Netherlands), the core Tier 1
state-aid measure must be (re)notified to the European Commission by the Dutch authorities if the overall return on the core Tier 1
Securities of at least 10% p.a. is not expected to be achieved. Such (re)notification by the Dutch authorities is particularly required (i) if ING
abstains from paying dividend on its shares for a period of two consecutive years or for three years in the five years following the date of
the aforementioned decision or (ii) if after a transition period of one year following the date of the aforementioned decision, the share
price over a period of two consecutive years remains on average below EUR 13.00. In such cases, the European Commission may require
additional (behavioural) constraints as a condition of the compatibility of the measure.
In 2011, ING reported to the Dutch authorities that ING has abstained from paying dividends on its shares for a period of two consecutive
years (i.e. 2009 and 2010). ING (publicly) indicated in 2011 that provided that the strong capital generation continues, it intends to
repurchase the remaining EUR 3 billion Core Tier 1 securities from retained earnings ultimately by May 2012 on terms that are acceptable
to all stakeholders. In this context, ING also indicated that this repurchase is conditional upon there having been no material changes
regarding ING’s capital requirements and/or (ING’s outlook on) external market circumstances. Any repayment of the remaining Core Tier
Securities is furthermore conditional on approval from the Dutch Central Bank (‘De Nederlandsche Bank’)
Early 2012, ING indicated that it aims to repay the remaining core Tier 1 securities as soon as possible – ideally a (part) in 2012 – but that
given the ongoing crisis in the eurozone and increasing regulatory capital requirements, it needs to take a cautious approach and pay
special attention to liquidity, funding and capital. Against this background, ING is discussing the (terms and timing of the) repayment of the
remaining EUR 3 billion Core Tier 1 securities with the Dutch Authorities and the European Commission.
Any of the fact that ING has not paid a dividend for (at least) two consecutive years, the status and outcome of discussions with the Dutch
State and the European Commission on the terms of the repayment of the Core Tier 1 Securities and/or a change in ING’s repayment
schedule due to market circumstances, increased capital requirements and/or other relevant factors, could result in the European
Commission imposing additional (behavioural) constraints on us as a condition of the compatibility of the measure of and/or requiring a
higher minimum overall return on the Securities than 10% p.a.
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
315ING Group Annual Report 2011