ING Direct 2009 Annual Report Download - page 253

ING’s Capital base
Insurance Bank Group
2009 2008 2009 2008 2009 2008
Shareholders’ equity (parent) 15,887 11, 893 30,222 22,889 33,863 17,334
Core Tier 1 securities 5,000 10,000
Group hybrid capital (1) 3,410 4,560 8,057 7,0 85 11,478 11,655
Group leverage/core debt (2) 6,913 7,170
Total capitalisation 19,297 16,453 38,279 29,974 57, 254 46,159
Adjustments to equity:
Revaluation reserve debt securities 2,334 8,271 123 5,185 2,481 13,456
Revaluation reserve crediting to life policyholders –156 –2,235 –156 –2,235
Revaluation reserve cashflow hedge –926 –1,360 472 128 –372 –1,177
Goodwill –1,857 –1,889 –1,636 –1,636 –3,244 –3,275
Revaluation reserves fixed income & other – –605 2,787 –1,040 3,677 –1,291 6,769
Revaluation reserves excluded from Tier 1 – (3) –3,111 –1,790
Insurance hybrid capital – (4) 2,250 2,250
Minorities – 80 520 960 1,198
Deductions Tier 1 –1,073 –1,040
Available capital (Tier 1 capital for Bank) 21,022 22,010 34,015 32,019
Other qualifying capital (5) 10,716 11,870
DAC/ViF adjustments (50%) (6) 2,931 1,893
Group leverage (core debt) –6,913 –7,170
Adjusted Equity (BIS capital for Bank) (a) 23,954 23,903 44,731 43,889 49,050 45,758
Ratios
Core debt (b) 2,586 2,301 6,913 7,170
Debt/Equity ratio (b/(a+b)) 9.74% 8.78% 12.35% 13.55%
(1) Tier 1 instruments issued by ING Group (e.g. perpetual debt securities and preference shares) at nominal value. Group hybrid Tier 1 instruments other than
preference shares are provided as hybrid capital to ING Insurance or ING Bank.
(2) Investments in subsidiaries less equity (including core Tier 1 securities) of the Group holding company. This net debt position is provided as equity to ING
Insurance and ING Bank.
(3) Includes mainly EUR –2,536 million (2008: EUR –1,019 million) in participations (e.g. Kookmin, Bank of Beijing) and other equity investments, EUR –546 million
(2008: EUR –615 million) for Real Estate for own use. The Dutch banking regulator requires this deduction to be made from Tier 1 capital. This deduction is
added back to Tier 2 capital.
(4) Dated subordinated debt issued by ING Insurance at nominal value.
(5) Includes EUR 11,789 million (2008: EUR 12,910 million) Tier 2 capital and nil (2008: nil) Tier 3, offset by EUR 1,073 million (2008: EUR 1,040 million) of
regulatory deductions.
(6) Mainly includes 50% of the excess of the present value of future profits generated by policies in force (Value in Force) over the after-tax deferred
acquisition costs.
All leverage ratios were within their targets at the end of the year. The debt/equity ratio of ING Group as at year-end 2009 was 12.35%
(2008: 13.55%). The debt/equity ratio of ING Insurance as at year-end 2009 was at 9.74% (2008: 8.78%). The Basel II ING Bank Tier 1
ratio ended at 10.23%, this is a strong increase from 9.32% at year-end 2008.
REGULATORY REQUIREMENTS
ING Bank
Capital adequacy and the use of regulatory required capital are based on the guidelines developed by the Basel Committee on Banking
Supervision (The Basel Committee) and the European Union Directives, as implemented by the Dutch Central Bank (DNB) for supervisory
purposes. The minimum Tier 1 ratio is 4% and the minimum total capital ratio (known as the BIS ratio) is 8% of all risk-weighted assets.
BASEL II
As of 2008 ING Bank publishes risk weighted assets (RWA), Tier 1 and BIS capital and the accompanying capital ratios based on Basel II
data only. In addition, ING publishes the minimum required capital level according to Basel II and according to the Basel I floor. As of 2009
the Basel I floor is based on 80% of Basel I RWA. The minimum requirements according to Basel II and Basel I are both compared to total
BIS available capital according to Basel II.
ING Group Annual Report 2009 251
2.1 Consolidated annual accounts
Capital management (continued)