ING Direct 2008 Annual Report Download - page 12

ING Group Annual Report 2008
1.2 Report of the Executive Board
10
Strategy
Adjusting to a new reality
Key points
> Confronting the crisis head-on
> Prioritising customers, capital, risk and costs
> Delivering an easier customer experience
> Focus on banking, investments, life insurance
and retirement services
The global financial crisis has strongly impacted the financial
services sector. ING has not been immune and has seen a
corresponding deterioration in earnings. As maintaining
the confidence of our stakeholders is essential to remain
successful, we are confronting the crisis head-on by putting
customers first, preserving our capital base, further
mitigating risks and lowering costs. We will continue to align
our long-term business strategy around a universal customer
ideal: saving and investing for the future should be easier.
This is even more valid going forward, as the crisis proves
that financial institutions need to reduce the complexity of
their product and services offering and go back to the basics
of finance.
WEATHERING THE CRISIS
In the course of 2008 the financial crisis intensified significantly.
It has become evident that the long-lasting period of low interest
rates and ample liquidity has triggered the emergence of
incongruities in the financial sector. A combination of factors
has severely undermined the proper functioning of the financial
system: the mispricing of risk and excessive leverage by a number
of financial institutions, the rapid emergence of toxic assets, the
industry’s over-reliance on mathematical modelling; as well as the
detrimental effects of certain incentive structures and the pro-
cyclical working of accounting rules. As a result of the crisis,
customer confidence in the sector has decreased significantly.
The consequences have been far-reaching. The market
expectations of capital requirements for international financial
institutions have increased substantially, forcing governments
around the world to support banks with large capital injections.
Unfortunately, ING was no exception. Although our commercial
performance kept up reasonably well, the sharp market decline
in 2008 led to significant impairments and negative revaluations
across almost all asset classes, also affecting our earnings and
capital position. Looking forward, all indicators suggest that
market conditions will remain difficult throughout 2009.
BUSINESS INITIATIVES
The challenges we are facing in these exceptional times clearly
require thoughtful solutions. Therefore, we are taking a fresh
look at our business to seek new ways of doing business. In the
Netherlands, the new bank created by combining ING Bank and
Postbank began operating under the ING brand from 2009. In
Belgium, we continued with the implementation of a new retail
branch service concept, transforming traditional branches into
outlets with automated self-service cash functions and online
banking access. We invested in our retail banking network with
a particular focus on Poland, Romania, Turkey and India. Building
on our banking business, ING Direct aims to offer a more complete
range of products in all countries, instead of offering single savings
products. In Germany, ING Direct’s mortgage activities have been
strengthened by the acquisition of Interhyp.
At Wholesale Banking, we reviewed and even selectively decreased
our client coverage model in non-core markets. We reduced and
exited certain volatile products and activities, especially in equities
markets and within Financial Markets Strategic Trading. We will
increasingly focus our full-service wholesale banking activities on