ING Direct 2009 Annual Report Download - page 283

INTRODUCTION
This Pillar 3 section includes information that Basel II requires to be made publicly available (unless it has already been provided in the risk
management section). The information relates to ING Bank N.V. and all of its subsidiaries. The information contained in this section has not
been audited by the Group’s external auditors.
NEW CAPITAL ADEQUACY RULES – BASEL II ACCORD
The rules on capital adequacy, also referred to as Regulatory Capital (RECAP), express the regulators’ and legislators’ opinions of how
much capital a bank and other regulated credit institutions must retain in relation to the size and the type of risk taking expressed in the
form of risk-weighted assets. The most important part of the capital base is the shareholders’ equity. In addition to equity, the institution
may issue certain liabilities such as subordinated loans to be included in the capital base. The legal minimum requirement stipulates that
the capital base must correspond to at least 8% of the Risk-Weighted Assets (RWA).
The Dutch government adopted the Capital Requirements Directive (CRD), the European reflection of the Basel II capital accord in
December 2006. Since the new regulations adopt a ‘risk-based approach’ to determine the required capital base, there is a significant
difference in the measurement of capital compared to the former rules. Therefore, the Dutch government adopted legislation to
implement the new rules in stages. For 2008, the capital base was not allowed to fall below 90% of the amount that would have
been applicable under the former rules, called Basel I. For 2009, the floor reduced to 80%. Although originally the floor was no longer
applicable for 2010 and beyond, the Dutch government has decided to keep the floor at 80% for 2010.
This section relates to Pillar 3, market discipline, and as such provides information on several topics. Some of the required information
has already been given elsewhere in the annual report, e.g. in the risk management section and in the capital management section. This
section provides additional information, as well as references to the relevant sections.
The Pillar 3 information mostly relates to credit risk, but also to market risk, operational risk and securitisations. The requirements are
mainly for underlying exposure, risk weighted assets and regulatory capital. As such it relates primarily to the first Basel II pillar, the
minimum capital requirement. The second pillar concerns the banks internally used Economic Capital, and the supervisors review of that
capital and the underlying models. Economic Capital, and consequently Pillar 2, is disclosed extensively in the risk management section.
As such, the text of this Pillar 3 section should be read in conjunction with statements made in the risk management section and capital
management section of the annual accounts, where there is a comprehensive discussion of risk management and capital management.
RISK MANAGEMENT AT ING BANK
ING has a group risk management function that is embedded at all levels of the organisation and operates through a comprehensive risk
governance framework.
The primary responsibility of the Bank risk management function lies with the Chief Risk Officer (CRO), who is a member of the Executive
Board. The CRO is responsible for the management and control of risk on a consolidated level to ensure that ING’s bank risk profile is
consistent with its financial resources and the risk appetite defined by the Executive Board. The CRO has several direct reports who are all
responsible for a specific risk management function within ING Bank.
A more detailed description of risk management at ING can be found in the risk management section.
Chief Risk Officer
Corporate Market
Risk Management
Corporate Credit
Risk Management
Group Compliance
Risk Management
Corporate Operational
Risk Management
ING Group Annual Report 2009 281
Additional Pillar 3 information for ING Bank only
amounts in millions of euros, unless stated otherwise
2.4 Additional information