ING Direct 2009 Annual Report Download - page 210

ING Bank
ING BANK
ING Bank is engaged in selling a broad range of products. The Bank Management Board is responsible for managing risks associated with
the activities of ING Bank. The financial risks that arise from selling these products are managed by the Corporate Credit and Market Risk
departments. Operational risks are managed by the Corporate Operational Risk department.
ING BANK RISK PROFILE
Economic Capital ING Bank
One of the main risk management tools for ING Bank is Economic Capital which is used to determine the amount of capital that a
transaction or business unit requires to support the economic risks it faces. ING Bank implemented Economic Capital for internal use in
1998. Since 1999 ING Bank has been disclosing Economic Capital information externally. The tables below provide ING Bank’s Economic
Capital by risk type and business line.
Economic Capital (Bank diversified only) by risk type
2009 2008
Credit risk (including Transfer risk) 9,991 8,686
Market risk 8,435 10,349
Business risk 2,581 1,221
Operational risk 2,074 2,151
Total banking operations 23,081 22,407
Economic Capital (Bank diversified only) by Line of Business
2009 2008
Commercial Banking 8,662 9,849
Retail Banking 7,166 6,169
ING Direct 4,466 4,050
Corporate Line Bank (1) 2,787 2,339
Total banking operations 23,081 22,407
(1) Corporate Line includes funding activities at ING Bank level, internal transactions between business units and the Corporate Line, and is managed by
Capital Management.
Figures shown reflect all diversification effects within ING Bank, including risk reduction between the risk categories. Diversification effects
that arise as a result of combining ING Bank and ING Insurance activities are not taken into account. Business risk is to cover unexpected
losses that may arise as a result of changes in client behaviour risk and costs.
The ING Bank Economic Capital model is described in more detail in the Model Disclosure section.
Despite de-risking activities, credit deterioration increased the credit risk capital. Starting in 2009, client behaviour risk is captured under
business risks instead of market risk. This explains the increase in business risk. The drop in market risk capital is due to de-risking.
The de-risking efforts of Commercial banking have resulted in lower capital. For Retail banking, the increase in value of the strategic equity
stakes and deterioration of the retail portfolio explains an increase of economic capital. Credit migrations for securitisations are the main
contributor for the higher capital in ING Direct.
Economic capital is a non accounting measure which is inherently subject to dynamic changes and updates as a result of ING’s portfolio
mix and general market developments. ING is in the process of recalibrating the underlying assumptions to its economic capital models to
bring closer alignment of the economic capital framework with the regulatory capital framework, and to include the effects of the extreme
market influences over the last year. As of the first of January 2010, this may have a material impact on the economic capital values for
credit risk going forward.
Risk management (continued)
2.1 Consolidated annual accounts
ING Group Annual Report 2009
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