ING Direct 2009 Annual Report Download - page 216

ING Bank
ING Bank experienced a considerable downward migration in terms of risk classes, largely as a result of continuing downward pressure
on external ratings related to securitisation tranches held by ING Direct and deteriorating credit worthiness in the general economy.
Additionally problem grades also increased during the year, largely related to increasing financial difficulties in the SME markets. This
was reinforced by downgrades of financial institutions as visible in Money Market and Pre-Settlement activities.
Risk concentration: ING Bank portfolio, by economic sector (1) (2)
Commercial Banking Retail Banking ING Direct Total ING Bank
2009 2008 2009 2008 2009 2008 2009 2008
Private Individuals 0.2% 0.2% 70.5% 68.4% 49.7% 4 4.1% 38.2% 34.5%
Non-Bank Financial Institutions 13.0% 13.5% 1.9% 2.0% 20.0% 29.9% 11.8% 15.0%
Commercial Banks 19.5% 20.4% 0.8% 1.2% 14.4% 15.4% 12.0% 13.1%
Central Governments 12.3% 12.8% 1.8% 1.5% 8.6% 2.7% 7.8% 6.2%
Real Estate 13.8% 12.5% 4.1% 3.9% 0.8% 0.6% 6.6% 6.2%
Natural Resources 8.7% 6.9% 0.8% 0.7% 3.4% 2.9%
Central Banks 3.7% 2.4% 0.3% 1.6% 2.8% 4.5% 2.3% 2.8%
Transportation & Logistics 5.6% 5.4% 1.5% 1.6% 2.5% 2.6%
Services 3.2% 3.5% 3.3% 3.1% 0.1% 2.2% 2.3%
Other 20.0% 22.4% 15.0% 16.0% 3.6% 2.8% 13.2% 14.4%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
(1) Based on the total amount of credit risk in the respective column using ING’s internal credit risk measurement methodologies.
(2) Economic sectors below 2% are not shown separately but grouped in Other.
ING Direct continued to increase its diversification into residential mortgages, while proportionally reducing its securitisation and bond
portfolios. The increased concentration in ‘Governments’ at ING Direct was due to the Alt-A transaction with the Dutch government. The
following industries fell below the 2.0% threshold during 2009: Food, Beverage and Personal Care (2008: 2.2%), General Industries (2.1%)
and Builders and Contractors (2.0%).
Largest economic exposures: ING Bank lending portfolio, by country (1) (2)
Commercial Banking Retail Banking ING Direct Total ING Bank
amounts in billions of euros 2009 2008 2009 2008 2009 2008 2009 2008
Netherlands 54.8 56.2 187.0 171.9 17.7 1.0 259.5 229.1
Germany 11.2 12.5 0.2 0.2 70.3 61.5 81.7 74.2
Belgium 26.5 25.6 52.9 52.6 0.9 1.1 80.3 79.3
United States 31.3 35.3 0.6 0.2 48.2 63.6 80.1 99.1
Spain 12.3 15.2 0.4 0.4 36.4 40.1 49.1 55.7
Australia 4.4 4.3 0.1 31.8 23.0 36.3 27.3
France 23.0 23.4 0.8 0.7 5.1 4.2 28.9 28.3
Italy 13.6 14.7 0.6 0.5 12.2 12.8 26.4 28.0
United Kingdom 13.9 15.8 0.2 0.2 12.1 13.5 26.2 29.5
Canada 0.7 1.4 0.0 0.0 21.8 17.4 22.5 18.8
Poland 9.0 9.7 6.2 2.1 15.2 11.8
Turkey 0.7 0.8 9.0 8.6 9.7 9.4
(1) Only covers total exposures in excess of EUR 9 billion, including intercompany exposure with ING Insurance. The selection contains the same countries as in the
previous year, albeit in a different order.
In line with ING’s de-risking strategy, the portfolio developments in most countries mirrored the developments in the portfolio as a whole.
The growth at ING Direct in The Netherlands and the decrease in the United States are the result of the Alt-A transaction with the Dutch
government. The increase in Australia is largely driven by exchange rate effects. In Canada, the increase in exposure was principally caused
by growth of the Residential Mortgage portfolio.
ING BANK – MARKET RISKS
Market risk is the risk that movements in market variables, such as interest rates, equity prices, foreign exchange rates and real estate
prices, negatively impact the bank’s earnings, market value or liquidity position. Market risk either arises through positions in trading books
or through the banking book positions. The trading positions are held for the purpose of benefiting from short-term price movements,
while the banking book positions are intended to be held in the long term (or until maturity) or for the purpose of hedging other banking
book positions.
Within ING Bank, market risk (including liquidity risk) falls under the supervision of the ALCO function with ALCO Bank as the highest
approval authority. ALCO Bank determines the overall risk appetite for market risk. The ALCO function is regionally organised with the
exception of ING Direct, which has a separate ALCO. The business lines Retail Banking and Commercial Banking are represented within
the respective regional and local ALCO’s. The ALCO structure within ING Bank facilitates top-down risk management, limit setting and
the monitoring and control of market risk. This ensures a correct implementation of the ING Bank risk appetite.
(2) Country is based on the country of residence of the obligor.
Risk management (continued)
2.1 Consolidated annual accounts
ING Group Annual Report 2009
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