ING Direct 2011 Annual Report Download - page 218

Several European countries have been downgraded but there have also been some positive developments related to the Eurozone crisis.
Financial markets rallied due to amongst others the Long-term Refinancing Operations from the ECB and better than expected economic
data. Credit spreads for some of the involved countries tightened significantly. Furthermore, a new Greek bail-out plan was approved in
February 2012.
Nevertheless, despite these positive signs the Eurozone is not yet out of the doldrums, as many of the fundamental problems still remain.
There is no guarantee that the weaker countries will succeed in making their economies more competitive, which is a prerequisite for
long-term debt sustainability. Risks and concerns about the debt crisis in Europe, as well as the possible exit from the Eurozone of one or
more European states and/or the replacement of the Euro by one or more successor currencies, could have a detrimental impact on the
global economic recovery, sovereign and non-sovereign debt in these European countries and the financial condition of European financial
institutions, including ING.
On 21 February 2012 a new common understanding on key terms of a voluntary exchange of privately held Greek government bonds
was reached. The programme is expected to be implemented in March 2012 and did not have an impact on the 2011 results.
Liquidity risk
Under the volatile market circumstances in 2011, funding and liquidity risk remains an important topic on the agenda of senior
management and Asset and Liability Committee Bank (ALCO), that requires continuous monitoring and management. External market
and regulatory developments and internal financial developments are closely monitored. Regular stress testing and measurement of early
warning indicators are, among others, used to provide additional management information. In 2011 the funding and liquidity risk appetite
were updated. The appetite statement is set and allocated throughout ING Bank. In addition, funding and liquidity usage is steered by
means of funds transfer pricing thus embedding funding and liquidity risk management in the total organisation. ING Group continued to
maintain its liquidity position within conservative internal targets.
In 2011, new frameworks for the funding and liquidity risk management as well as the organisational Assets and Liability Management (ALM)
that reflects the evolved importance of funding and liquidity risk was developed. Both of these frameworks will be implemented in 2012.
ING Insurance defines different levels of Liquidity Management; short-term liquidity or cash management, long-term liquidity
management, and stress liquidity management. Liquidity risk is measured through several metrics including ratios and cash flow
scenario analysis, in the base case and under several stressed scenarios.
Like most insurance companies, in normal circumstances liquidity risk is quite remote to ING Insurance. Also under the current challenging
market circumstances ING Insurance liquidity position is comfortable.
Risk management continued
Risk management in 2011
216 ING Group Annual Report 2011