ING Direct 2008 Annual Report Download - page 278

DEFERRED TAX LIABILITIES
The amounts of income tax payable in future periods in respect of taxable
temporary differences between carrying amounts of assets or liabilities in
the balance sheet and tax base, based on tax rates that are expected to
apply in the period when the assets are realised or the liabilities are settled.
DEFINED BENEFIT PLAN
Post-employment benefit plans other than defined contribution plans.
DEFINED CONTRIBUTION PLAN
Post-employment benefit plans under which an enterprise pays fixed
contributions into a separate entity (a fund) and will have no legal or
constructive obligation to pay further contributions if the fund does not
hold sufficient assets to pay all employee benefits relating to employee
service in the current and prior periods.
DELTA HEDGE
Minimises the exposure of the employee option scheme by holding an
appropriate number of (depositary receipts for) ordinary shares. The
exposure is reassessed every quarter and, if necessary, ordinary shares are
bought from the market (or employees).
DEPOSITARY RECEIPT
For ordinary and preference shares, issued by the Trust, in exchange for
ordinary and preference shares issued by ING Group.
DERIVATIVES
Financial instruments, which include forwards, futures, options and swaps,
whose value is based on an underlying asset, index or reference rate.
DISCOUNTED BILLS
Bills that are sold under deduction of interest giving the owner the right to
receive an amount of money on a given date.
DISCRETIONARY PARTICIPATION FEATURE
A contractual right to receive, as a supplement to guaranteed benefits,
additional benefits that: are likely to be a significant portion of the total
contractual benefits, whose amount or timing is contractually at the
discretion of the insurer, that are contractually based on the performance
of a specified pool or type of contract, (un)realised investment returns on a
specified pool of assets held by the insurer, or the profit of the company,
fund, or other entity that issues the contract.
EARNINGS AT RISK (EAR)
Measures the impact on earnings resulting from changes in market rates
over a one-year horizon.
ECONOMIC CAPITAL
The minimum amount of capital that is required to absorb unexpected
losses in times of severe stress. Given ING Group’s AA target rating, ING
calculates economic capital requirements at a 99.95% level of confidence.
This confidence level is derived from the historical default frequency of
AA-rated companies (probability of default of 1 in 2000 years or 0.05%).
EFFECTIVE INTEREST METHOD
A method of calculating the amortised cost of a financial asset or liability
and of allocating the interest income or interest expense over the relevant
period.
ELIMINATION
A process by which intercompany transactions are matched with each
other and deducted, so that the assets, liabilities, income and expenses are
not inflated.
COMPLIANCE RISK
Compliance risk is defined as the risk of damage to ING’s reputation as a
result of failure (or perceived failure) to comply with relevant laws,
regulations, internal policies and procedures or ethical standards.
CONCENTRATIONS
Of credit risk exist when changes in economic, industry or geographical
factors similarly affect groups of counterparties whose aggregate exposure
is material in relation to ING Group’s total exposure.
CONTINGENT LIABILITIES
Possible obligations that arises from past events and whose existence will
be confirmed only by the occurrence or non-occurrence of one or more
uncertain future events not wholly within the control of the entity; or a
present obligation that arises from past events but is not recognised
because:
it is not probable that an outflow of resources embodying economic •
benefits will be required to settle the obligation; or
the amount of the obligation cannot be measured with •
sufficient reliability.
CONTROL
The power to govern the financial and operating policies of an entity so as
to obtain benefits from its activities.
CONVERTIBLE DEBENTURES
Debentures with embedded options issued by corporations. The holder has
the right to exchange a convertible debenture for equity in the issuing
company at certain times in the future according to a certain exchange
ratio. Very often, the conversion is callable. This means that it can be
repurchased by the issuer at a certain price at certain times in the future.
Once the debentures have been called, the holder can always choose to
convert prior to repurchase.
CONVEXITY
The non-linear relationship between changes in the interest rates and
changes in bond prices and their Net Present Value. It is a very important
measure for portfolios containing (embedded) options.
CORE DEBT
Investments in ING Group subsidiaries minus the equity of the holding
company including hybrids.
COST OF CAPITAL
The costs related to owning capital. These can be split into the cost of
equity, hybrids and debt, taking a target leverage into account.
COST RATIO
Underwriting costs expressed as a percentage of premiums written.
COUNTRY RISK
The risk that a foreign government will not fulfil its obligations or obstructs
the remittance of funds by debtors, either for financial reasons (transfer
risk) or for other reasons (e.g. political risk).
CREDIT INSTITUTIONS
All institutions are subject to banking supervision by public authorities,
including mortgage banks, capital market institutions, multilateral
development banks and the International Monetary Fund (IMF).
CREDIT RISK
The risk of loss from default by borrowers (including bond issuers) or
counterparties. Credit risks arise in ING’s lending, presettlement and
investment activities, as well as in its trading activities. Credit risk
management is supported by dedicated credit risk information systems and
internal rating methodologies for debtors and counterparties.
2.4 Additional information
Financial glossary (continued)
ING Group Annual Report 2008
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