ING Direct 2008 Annual Report Download - page 189

Capital at Risk
The level of Capital at Risk (CaR) measured against ING’s financial position provides understanding as to whether ING can maintain
a sound financial position under a ‘moderate’ (i.e. 1 in 10) stress scenario. The risk appetite set by the Executive Board defines the
maximum potential value reduction over the next year during a (non extreme) stress scenario as a percentage of Available Financial
Resources (AFR) (the definition of AFR is provided in the Capital Management section below).The tables below show the Capital at
Risk per risk type.
Capital at Risk by risk type (Group diversified)
Credit and
Transfer Market Insurance
Other
risks Total
Available
financial
resources
CaR/
Available
financial
resources
2008 Interest Rate Equity Real Estate FX
ING Bank 2,145 1,110 405 504 164 213 4,541 34,849 13%
ING Insurance 534 1,464 893 308 240 70 173 3,682 14,456 25%
Total ING Group 2,679 2,574 1,298 812 404 70 386 8,223 42,135(1) 20%
(1) Total ING Group is comprised of ING Bank and ING Insurance, excluding core debt of EUR 7,170 million within ING Group.
Capital at Risk by risk type (Group diversified)
Credit and
Transfer Market Insurance
Other
risks Total
Available
financial
resources
CaR/Available
financial
resources
2007 Interest Rate Equity Real Estate FX
ING Bank 1,282 716 675 505 81 169 3,428 31,733 11%
ING Insurance 307 3,365 2,439 378 169 273 172 7,103 22,710 31%
Total ING Group 1,589 4,081 3,114 883 250 273 341 10,531 49,715(1) 21%
(1) Total ING Group is comprised of ING Bank and ING Insurance, excluding core debt of EUR 4,728 million within ING Group.
The Capital at Risk figure substantially decreased over 2008 as ING initiated several de-risking initiatives. Group CaR decreased because
increased credit risk was more than offset by lower interest rate and equity risk.
In 2007 the Capital at Risk figure was dominated by ING Insurance, mainly due to interest rate risk related to long-term client guarantees
and equity risk. Although these risks are still dominant for ING Insurance in the overall ING risk profile these risks have decreased
significantly, while increased credit risk became the largest contributor to CaR during 2008.
The credit and transfer risk increase is mainly due to downgrades and lower initial ratings for unrated facilities. These increases will
be only partially offset by the risk reducing impact of the Illiquid Assets Back-up Facility through which the Dutch State will become
the economic owner of 80% of the Alt-A Portfolio. This transaction is expected to close in the first quarter of 2009 subject to final
documentation and regulatory approval. The effect of this deal has already been included since the dashboard is forward looking.
Total CaR for interest rate risk decreased. The large decrease in interest rate CaR for ING Insurance is primarily caused by the sale of
ING Life Taiwan, which is also the main reason for the decrease in Insurance risk. The ING Bank interest rate risk increase is primarily
caused by increased volatility in the market.
The decrease in equity risk is the result of the declining equity markets and de-risking activities and hedges put in place near the end
of 2008.
Capital at Risk and Earnings at Risk by line of business (Group diversified)
Earnings at Risk Capital at Risk
2008 2007 2008 2007
Wholesale Banking 1,937 1,551 2,321 1,634
Retail Banking 581 438 1,055 939
ING Direct 453 158 893 566
Corporate Line Bank 69 58 272 289
ING Bank 3,040 2,205 4,541 3,428
Insurance Americas 571 430 1,855 2,022
Insurance Asia/Pacific 137 183 502 2,258
Insurance Europe 442 469 910 2,004
Corporate Line Insurance 122 107 415 819
ING Insurance 1,273 1,189 3,682 7,103
ING Group 4,313 3,394 8,223 10,531
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ING Group Annual Report 2008