ING Direct 2008 Annual Report Download - page 161

Non-trading derivatives
The fair values of derivatives held for non-trading purposes are based on quoted market prices. For those securities not actively traded,
fair values are estimates based on valuation techniques.
Financial assets at fair value through profit and loss
The fair values of securities in the trading portfolio and other assets at fair value through profit and loss are based on quoted market
prices, where available. For those securities not actively traded, fair values are estimated based on internal valuation techniques.
Investments
The fair values of equity securities are based on quoted market prices or, if unquoted, on estimated market values generally based on
quoted prices for similar securities as determined by management. Fair values for fixed interest securities are based on quoted market
prices, where available. For those securities not actively traded, fair values are determined by management based on an analysis of
available market inputs, which may include values obtained from one or more pricing services or by discounting expected future cash
flows using a current market rate applicable to the yield, credit quality and maturity of the investment. Reference is made to the
comments on investments in asset backed securities in the United States in Sensitivities of fair values below.
Loans and advances to customers
For loans and advances that are repriced frequently and have had no significant changes in credit risk, carrying amounts represent a
reasonable estimate of fair values. The fair values of other loans are estimated by discounting expected future cash flows using interest
rates offered for similar loans to borrowers with similar credit ratings.
The fair values of mortgage loans are estimated by taking into account prepayment behaviour and discounting future cash flows using
interest rates currently being offered for similar loans to borrowers with similar credit ratings. The fair values of fixed-rate policy loans are
estimated by discounting cash flows at the interest rates charged on policy loans of similar policies currently being issued. Loans with similar
characteristics are aggregated for calculations purposes. The carrying values of variable rate policy loans approximate their fair value.
Other assets
The carrying amount of other assets is not materially different from their fair value.
Financial liabilities
Subordinated loans
The fair value of the subordinated loans is estimated using discounted cash flows based on interest rates that apply to similar instruments.
Investment contracts
For investment contracts for risk of company the fair values have been estimated using a discounted cash flow approach based on
interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued.
For investment contracts for risk of policyholder the fair value generally equals the fair value of the underlying assets.
Amounts due to banks
The fair values of payables to banks are generally based on quoted market prices or, if unquoted, on estimates based on discounting
future cash flows using available market interest rates for payables to banks with similar characteristics.
Customer deposits and other funds on deposit
The carrying values of customer deposits and other funds on deposit with no stated maturity approximate their fair values. The fair values
of deposits with stated maturities have been estimated based on discounting future cash flows using the interest rates currently
applicable to deposits of similar maturities.
Financial liabilities at fair value through profit and loss
The fair values of securities in the trading portfolio and other liabilities at fair value through profit and loss are based on quoted market
prices, where available. For those securities not actively traded, fair values are estimated based on internal valuation techniques.
Debt securities in issue and other borrowed funds
The fair value of debt securities in issue and other borrowed funds is generally based on quoted market prices or, if unquoted, on
estimated prices by discounting expected future cash flows using a current market rate applicable to the yield, credit quality and maturity.
Other liabilities
The carrying amount of other liabilities are stated at their book value which is not materially different than fair value.
ING Group has categorised its financial instruments into a three level hierarchy based on the priority of the inputs to the valuation. The
fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority
to unobservable inputs. An active market for the asset or liability is a market in which transactions for the asset or liability occur with
sufficient frequency and volume to provide reliable pricing information on an ongoing basis.
159
ING Group Annual Report 2008