ING Direct 2008 Annual Report Download - page 196

2.1 Consolidated annual accounts
Provisions: ING Bank portfolio
Wholesale Banking Retail Banking ING Direct Total ING Bank
2008 2007 2008 2007 2008 2007 2008 2007
Opening balance 921 1,610 771 741 309 291 2,001 2,642
Changes in the
composition of the
group 2295 1298
Write-offs –260 –593 –399 –302 –69 –57 –728 –952
Recoveries 24 30 63 26 4391 59
Increase/(decrease) in
loan loss provision 596 –115 401 172 283 68 1,280 125
Exchange differences –17 –23 –36 53–1 –50 –19
Other changes –242 10 270 34 –13 415 48
Closing balance 1,024 921 1,070 771 517 309 2,611 2,001
After three years of declining annual risk costs, the trend turned in 2008 as a result of the global credit crisis. Other changes includes
a provision reclassification of mid-sized corporates and wholesale SME from Wholesale Banking to Retail Banking.
Collateral
As part of its securities financing business, ING entities actively enter into agreements to sell and buy back marketable securities. These
transactions can take many legal forms. Repurchase and reverse repurchase agreements, buy/sellback and sell/buyback agreements, and
securities borrowing and lending agreements are the most common. The amount of marketable securities that ING held as collateral under
these types of agreements was EUR 82.1 billion at 31 December 2008 and EUR 120.2 billion at 31 December 2007. The reduction is
commensurate with the overall decline in open securities financing trades at year end 2008 compared to year end 2007. These amounts
exclude the cash leg of the respective transactions, as well as any pledges of securities under Tri-Party agreements (as the underlying is
not directly pledged to or owned by ING). As a general rule, the marketable securities that have been received under these transactions
are eligible to be resold or repledged in other (similar) transactions. ING is obliged to return equivalent securities in such cases.
Risk classes are defined based upon the quality of the exposures in terms of creditworthiness, varying from investment grade to problem
grade expressed in S&P equivalents.
Risk classes ING Bank portfolio by business line, as % of total outstandings (1)
Wholesale Banking Retail Banking ING Direct (2) Total ING Bank
2008 2007 2008 2007 2008 2007 2008 2007
1 (AAA) 9.3% 5.6% 1.3% 0.2% 27.6% 31.5% 12.6% 12.8%
2-4 (AA) 19.3% 26.2% 5.7% 4.8% 17.1% 19.3% 14.5% 18.6%
5-7 (A) 16.7% 14.5% 4.0% 3.4% 15.6% 14.4% 12.5% 11.8%
8-10 (BBB) 23.2% 21.4% 34.3% 35.3% 22.2% 21.0% 26.2% 24.7%
11-13 (BB) 23.3% 24.5% 42.9% 46.0% 14.8% 12.3% 26.6% 25.8%
14-16 (B) 5.8% 5.9% 6.9% 6.3% 1.5% 0.8% 4.8% 4.3%
17-22 (CCC &
Problem Grade) 2.4% 1.9% 4.9% 4.0% 1.2% 0.7% 2.8% 2.0%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
(1) Based on credit risk measurement contained in lending, pre-settlement, money market and investment activities.
The ratings reflect probabilities of default and does not take collateral into consideration.
(2) Covered bonds are presented on the basis of the external credit rating of the issuer in question. Covered bond issues generally possess a better
external credit rating than the issuer standalone, given structural features of such covered bonds.
Risk classes ING Bank portfolio, as % of total outstandings (1)
Lending Investment Money Market Pre-settlement Total ING Bank
2008 2007 2008 2007 2008 2007 2008 2007 2008 2007
1 (AAA) 1.3% 1.9% 49.8% 48.4% 7.1% 5.9% 8.1% 5.4% 12.6% 12.8%
2-4 (AA) 4.2% 6.0% 28.8% 35.2% 57.3% 61.4% 48.3% 58.2% 14.5% 18.6%
5-7 (A) 10.2% 9.5% 15.0% 13.7% 26.3% 16.8% 21.5% 22.3% 12.5% 11.8%
8-10 (BBB) 36.1% 35.7% 3.6% 1.5% 4.8% 8.2% 11.2% 7.1% 26.2% 24.7%
11-13 (BB) 37.8% 37.7% 1.5% 0.9% 4.4% 7.1% 7.2% 5.3% 26.6% 25.8%
14-16 (B) 6.6% 6.3% 0.6% 0.1% 0.1% 0.3% 2.7% 1.2% 4.8% 4.3%
17-22 (CCC &
Problem Grade) 3.8% 2.9% 0.7% 0.2% 0.3% 1.0% 0.5% 2.8% 2.0%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
(1) Based on credit risk measurement contained in lending, pre-settlement, money market and investment activities.
The ratings reflect probabilities of default and does not take collateral into consideration.
Risk management (continued)
ING Group Annual Report 2008
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