ING Direct 2008 Annual Report Download - page 274

Retained Securitisation Exposures
Retained exposures on securitisation of ING’s own assets include the most senior tranches and the equity piece (first loss). Economically,
on a total of about EUR 15 billion underlying exposures in the five transactions mentioned below, ING has retained approximately
EUR 204 million of first loss exposure and has transferred approximately EUR 1.1 billion of mezzanine tranches (second loss) to third parties.
Securitsations originated by a company may only be considered for balance sheet derecognition when the requirements for signficant
credit risk transfer have been fulfilled. However, for a securitisation transaction to be recognised as for RWA reduction, risk transfer
alone is insufficient due to the increasing impact of the maturity mismatch formula. The RWA of the retained tranches for four of the
transactions in the table above would be higher than the total RWA of the underlying pool before securitisation, and therefore these
transactions are treated for RWA purposes as if they were not securitised. The total RWA for the fifth transaction calculated under
Pillar 1 rules is EUR 230 million (retained senior and super senior tranches). In addition EUR 28 million (retained first loss) is deducted
from capital.
ING as Sponsor
In the normal course of business, ING Bank structures financing transactions for its clients by assisting them in obtaining sources of
liquidity by selling the clients’ receivables or other financial assets to an SPV. The transactions are funded by the ING Administered Multi
Seller Asset Backed Commercial Paper (ABCP) conduit Mont Blanc Capital Corp (rated A-1+/P-1). Despite the conditions in the
international money markets Mont Blanc Capital Corp continues to fund itself externally in the ABCP markets.
In its role as administrative agent, ING facilitates these transactions by providing structuring, accounting, funding and operations services.
ING Bank also provides support facilities (liquidity and program wide enhancement) backing the transactions funded by the conduit.
The types of asset currently in the Mont Blanc Conduit are trade receivables, consumer finance receivables, credit card receivables, auto
loans, RMBS, wrapped future cash flow transactions and CDOs/CLOs.
Exposures Securitised as Sponsor
The total liquidity facilities, including programme wide enhancements, provided to the Mont Blanc conduit are EUR 4,867 million.
The total drawn liquidity amount as of 31 December 2008 is EUR 972 million.
Securitisation in the trading book
The exposures involved are mainly synthetic Collateralized Debt Obligations (CDOs) in which the underlying credit exposures are taken
on using a credit default swap rather than a vehicle buying physical assets.
The CDO’s are a form of securitisation where payments from a portfolio of fixed-income assets are pooled together and passed on
to different classes of owners in various tranches. The assets/loans are divided in different tranches according to their seniority: senior
tranches (rated AAA), mezzanine tranches (AA to BB) and equity tranches (unrated). Losses are applied in reverse order of seniority.
The CDO’s in trading books are valued mark-to-market. The underlying assets are a pool of mostly Corporate Investment Grade names.
EQUITY IN THE BANKING BOOK
Total exposure under the Simple Risk Weight Approach at the 31 December 2008 is EUR 1,042 million resulting in EUR 194 million
of capital requirement.
Equities Unrealised Gains and Losses
2008
Gross unrealised gains 874
Gross unrealised losses –211
Total 663
Above table shows the unrealised gains and losses for the equity holdings. Please refer to the Market Risk segment in the Risk
management section for a description of the equity holdings and accounting methodology.
OTHER NON CREDIT OBLIGATION ASSETS
Other Non Credit Obligation Assets (ONCOA) represent assets of non credit obligation character that are not included in the SA or A-IRB
calculations. Capital requirement for ONCOA as of 31 December 2008 is EUR 2,166 million.
2.4 Additional information
Additional Pillar 3 information for ING Bank only (continued)
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