ING Direct 2008 Annual Report Download - page 271

Counterparty credit risk (EAD) from securities financing (SA and AIRB)
2008
Central
governments
and central
banks Institutions Corporate
Residential
mortgages Other retail Total
Bond Financing Given 213 1,625 242 2,080
Equity Financing Given 6,619 1,815 3,330 11,764
Bond Financing Taken 237 993 1,230
Stock Financing Taken 658 1,634 2,292
Total 6,832 4,335 6,199 17,366
Includes both AIRB and SA portfolios; Excludes securitisations, equities and ONCOA.
Excludes revaluations made directly through the equity account.
Counterparty credit risk (EAD) from securities financing (SA and AIRB)
2008
Central
governments
and central
banks Institutions Corporate
Residential
mortgages Other retail Total
Gross MTM plus regulatory add-on 11,944 7,552 9,976 29,472
Amount after compensation 6,832 6,746 8,965 22,543
Amount after compensation, netting and collateral 6,832 4,336 6,198 17,366
Includes both AIRB and SA portfolios; Excludes securitisations, equities and ONCOA.
Excludes revaluations made directly through the equity account.
The previous four tables are calculated using the mark-to-market plus (Regulatory) add-on methodology used for calculating Basel II RWA
for determining the gross exposures. In order to determine the amount of credit risk applicable, ING first matches the trades with similar
characteristics to determine their eligibility for offsetting. This offsetting effect is called ‘compensation’. Subsequently, ING reduces the
amount by any legal netting that may be permitted under various types of Master Agreements, such as ISDAs, GMRAs, GMSLAs, etc.
Lastly, the amount is further reduced by any collateral that is held by ING under CSAs or other similar agreements.
CREDIT RISK MITIGATION
Credit derivatives (notional amounts)
2008 Total
Credit derivatives used for hedging purposes
– credit protection bought 2,019
– credit protection sold
Credit derivatives used for trading activities
– credit protection bought 50,092
– credit protection sold 45,395
Includes both AIRB and SA portfolios; Excludes securitisations, equities and ONCOA.
Excludes revaluations made directly through the equity account.
ING actively participates in the credit risk derivative (CDS) trading market, as a net purchaser of credit risk protection from other
counterparties. ING has purchased a small amount of credit risk protection for hedging purposes, usually in order to reduce concentration
on certain ‘legal one obligor groups’ without having to reduce ING’s relationship banking activities. ING does not actively sell credit
default swaps for hedging or investment purposes. Although Basel II rules permit a reduction of credit risk capital under certain
circumstances where ING has purchased CDS protection, ING does not currently make use of this provision in determining its Basel II
capital base.
The figures above represent the notional amount of credit risk default swaps that ING has entered into for the represented purpose. The
credit risk on the counterparties associated with credit default swap protection bought is included in the pre-settlement risk calculations
for the given counterparty, and not in the figures above. For credit default protection sold, ING incurs synthetic issuer risk, on which
capital is calculated, depending on its purpose, either hedging or trading.
SECURITISATIONS
Scope
The following information is prepared taking into account the ‘Industry Good Practice Guidelines on Pillar 3 disclosure requirements
for securitisations’ (the Guidelines) issued by the European Banking Federation and other industry associations on 18 December 2008.
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ING Group Annual Report 2008