ING Direct 2009 Annual Report Download - page 215

ING Bank
Provisions: ING Bank portfolio
Commercial Banking Retail Banking ING Direct Total ING Bank
2009 2008 2009 2008 2009 2008 2009 2008
Opening balance 1,024 921 1,070 771 517 309 2,611 2,001
Changes in the composition of the group 2–3 –3 2
Write-offs –520 –260 –493 –399 –204 –69 –1,217 –728
Recoveries 21 24 125 63 24148 91
Increase/(decrease) in loan loss provision 1,211 596 997 401 765 283 2,973 1,280
Exchange differences –28 –17 –12 –36 –8 3–48 –50
Other changes –80 –242 27 270 –12 –13 –65 15
Closing balance 1,628 1,024 1,711 1,070 1,060 517 4,399 2,611
Following the trend in the global economy, risk costs began to increase in 2008. The trend continued in 2009, albeit at a slower pace in
the second half of 2009.
Collateral
As part of its securities financing business, ING entities actively enter into agreements to sell and buy back marketable securities. These
transactions can take many legal forms. Repurchase and reverse repurchase agreements, buy/sellback and sell/buyback agreements, and
securities borrowing and lending agreements are the most common. The amount of marketable securities that ING held as collateral under
these types of agreements was EUR 72.7 billion at 31 December 2009 and EUR 82.1 billion at 31 December 2008. The reduction is
commensurate with the overall decline in open securities financing trades at year end 2009 compared to year end 2008. These amounts
exclude the cash leg of the respective transactions, as well as any pledges of securities under Tri-Party agreements (as the underlying is not
directly pledged to or owned by ING). As a general rule, the marketable securities that have been received under these transactions are
eligible to be resold or repledged in other (similar) transactions. ING is obliged to return equivalent securities in such cases.
Risk classes
Risk classes are defined based upon the quality of the exposures in terms of creditworthiness, varying from investment grade to problem
grade expressed in S&P equivalents.
Risk classes ING Bank portfolio by business line, as % of total outstandings (1)
Commercial Banking Retail Banking ING Direct (2) Total ING Bank
2009 2008 2009 2008 2009 2008 2009 2008
1 (AAA) 3.7% 9.3% 0.2% 1.3% 19.8% 27.6% 7.8% 12.6%
2-4 (AA) 18.7% 19.3% 3.5% 5.7% 17.2% 17.1% 13.4% 14.5%
5-7 (A) 21.4% 16.7% 4.9% 4.0% 18.3% 15.6% 15.2% 12.5%
8-10 (BBB) 20.7% 23.2% 37.5% 34.3% 25.0% 22.2% 27.4% 26.2%
11-13 (BB) 22.0% 23.3% 40.9% 42.9% 11.4% 14.8% 24.5% 26.6%
14-16 (B) 8.5% 5.8% 7.7% 6.9% 5.6% 1.5% 7.3% 4.8%
17-22 (CCC & Problem Grade) 5.0% 2.4% 5.3% 4.9% 2.7% 1.2% 4.4% 2.8%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
(1) Based on credit risk measurement contained in lending, pre-settlement, money market and investment activities.
The ratings reflect probabilities of default and do not take collateral into consideration.
(2) Covered bonds are presented on the basis of the external credit rating of the issuer in question. Covered bond issues generally possess a better external credit
rating than the issuer standalone, given structural features of such covered bonds.
Risk classes ING Bank portfolio, as % of total outstandings (1)
Lending Investment Money Market Pre-settlement Total ING Bank
2009 2008 2009 2008 2009 2008 2009 2008 2009 2008
1 (AAA) 0.8% 1.3% 36.9% 49.8% 1.2% 7.1% 5.9% 8 .1% 7. 8% 12.6%
2-4 (AA) 7.0% 4.2% 29.4% 28.8% 45.6% 57.3% 26.1% 48.3% 13.4% 14.5%
5-7 (A) 9.1% 10.2% 23.1% 15.0% 40.9% 26.3% 46.7% 21.5% 15.2% 12.5%
8-10 (BBB) 35.0% 36.1% 6.5% 3.6% 7.2% 4.8% 11.0% 11. 2% 27.4% 26.2%
11-13 (BB) 32.7% 37.8% 1.8% 1.5% 4.7% 4.4% 7.3% 7.2% 24.5% 26.6%
14-16 (B) 9.9% 6.6% 0.6% 0.6% 0.2% 0.1% 1.8% 2.7% 7.3% 4.8%
17-22 (CCC &
Problem Grade) 5.5% 3.8% 1.7% 0.7% 0.2% 1.2% 1.0% 4.4% 2.8%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
(1) Based on credit risk measurement contained in lending, pre-settlement, money market and investment activities.
The ratings reflect probabilities of default and do not take collateral into consideration.
2.1 Consolidated annual accounts
Risk management (continued)
ING Group Annual Report 2009 213