ING Direct 2008 Annual Report Download - page 273

ING as Originator
ING originates own securitisation transactions for economic and regulatory capital purposes, as well as liquidity and funding purposes.
Economic and Regulatory Capital• Seven synthetic securitisations of mortgages, small and medium enterprise (SME) and corporate
exposures have been issued since ING began actively undertaking the securitisation of its own assets in 2003. Upon the closer alignment
of transfer and regulatory capital solvency rules at year end 2007, the most senior tranches of ING’s own securitisations have been
called and are now retained by ING. ING also retains the first loss tranches. The mezzanine tranches are still transferred to third parties.
The first transactions (Moon and Memphis 2003) were repaid in 2008 with no loss for the investors. As of 31 December 2008, five
transactions totalling approximately EUR 15 billion (Mars 2004, Mars 2006 and BEL SME 2006 on SME exposures, Memphis 2005
and Memphis 2006 on residential mortgages) remain outstanding, as further detailed below. Memphis 2006 transfers risk on high
Loan to Value (LTV) Dutch mortgages.
Securitisations of residential mortgages release less capital under Basel II than under Basel I because the capital required for this type
of exposure has been reduced under Basel II rules.
Liquidity/Funding• Although the most senior tranches in securitisations are no longer efficient to release regulatory capital under
Basel II, they may still be used to obtain funding and improve liquidity. To be eligible as collateral for central banks securitised exposures
must be sold to a Special Purpose Vehicle (SPV) which, in turn, issues securitisation notes (‘traditional securitisations’) in two tranches,
one subordinated tranche and one senior tranche, rated AAA by a rating agency. The AAA tranche can then be used by ING as
collateral in the money market for secured borrowings.
ING Bank has created a number of these securitisations with a 31 December 2008 position of approximately EUR 70 billion of AAA
rated notes. The underlying exposures are residential mortgages in the Netherlands, Canada, Germany and Australia.
As long as the securitisation exposures created are not transferred to third parties, the regulatory capital remains unchanged. These
are not detailed hereunder. Apart from the structuring and administration costs of these securitisations these securitisations are profit/
loss neutral.
Exposures securitised as originator: All securitisations reported in this section are synthetic securitisations used to transfer risk to third
parties. Transactions for liquidity/funding purpose are not included.
The determination of impairments and losses occurs at least every quarter at the cut-off date applicable to each specific transaction.
Figures as of 31 December 2008 are used whenever available.
Exposures securitised
Cut off Date Initial Pool Outstandings Credit Events
Past due
Assets Losses
Residential Mortgages
Memphis 2005 31 Oct 2008 3,000 2,351 362 < 1
Memphis 2006 31 Oct 2008 4,000 3,750 11 207 2
7,000 6,101
SME
Mars 2004 31 Oct 2008 2,000 1,995 3 25 < 1
Mars 2006 31 Dec 2008 4,500 4,202 12 32 2
BEL SME 2006 30 Nov 2008 2,500 2,406 11 5 1
Total 9,000 8,603
Notes: Cut-Off Date Most recent date in respect of which determination and allocation of losses have been made pursuant to
the legal documentation of the transaction. Information on the performance of ING’s securitised exposures
is published regularly.
Outstandings EAD on 31 December 2008 of assets that were performing on the Cut-off date.
Credit Events Aggregate outstandings of assets subject to a credit event reported in the twelve months period ending on
the Cut-off date.
Past Due Assets Outstandings on the Cut-off date of assets that are past due, but not in credit event on that date, as more
fully detailed in the quarterly reports. Past due for residential mortgage transactions means ‘more than
1 monthly payment in arrears’. Past due for SME deals means ‘reference entities that are rated 20-22’.
Losses Aggregate losses recognised on securitised assets and reported in the twelve months period ending on
the Cut-off date.
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ING Group Annual Report 2008