ING Direct 2011 Annual Report Download - page 319

ACTUARIAL AND UNDERWRITING RISK
These risks (mortality, longevity, morbidity, adverse motor or home
claims, etc.), result from the pricing and acceptance of insurance
contracts. Actuarial risk is the risk that premium levels and
provisions in respect of insurance risk may turn out to be (no
longer) correct. Underwriting risk is the risk that an issuer will
receive a claim under an insurance policy it issues/underwrites.
Maximum underwriting exposures are limited through exclusions,
cover limits and reinsurance.
ADVANCED MEASUREMENT APPROACH (AMA)
The risk methodology to calculate the regulatory Operational
Riskcapital.
ALT-A RESIDENTIAL MORTGAGE BACKED SECURITY
(ALT-A RMBS)
A type of United States residential mortgage which is considered
riskier than ‘prime’ and less risky than ‘sub-prime’ mortgages.
Parameters generally taken into account are borrower credit
scores, residential property values and loan-to-value ratios. Alt-A
mortgages are further characterised by a limited degree of income
and/or asset verification.
AMORTISED COST
The amount at which the financial asset or liability is measured at
initial recognition less principal repayments, plus or minus the
cumulative amortisation using the effective interest method of any
difference between that initial amount and the maturity amount,
and minus any reduction for impairment or uncollectibility.
ASSET AND LIABILITY COMMITTEE (ALCO)
Manages the balance sheet of ING, especially with regard to
strategic non-trading risk. These risks comprise interest rate
exposures, equity risk, real estate risk, liquidity, solvency and
foreign exchange risk and fluctuations.
ASSET LIABILITY MANAGEMENT (ALM)
The practice of managing a business such that decisions on assets
and liabilities are coordinated. It involves the ongoing process of
formulating, implementing, monitoring and revising strategies
related to assets and liabilities.
ASSET BACKED COMMERCIAL PAPER (ABCP)
Commercial paper that is collateralised by other financial assets.
ASSET BACKED SECURITIES (ABS)
A type of bond or note that is based on pools of assets,
or collateralised by the cash flows from a specified pool
of underlying assets.
ASSOCIATE
An entity over which the Group has significant influence, generally
accompanying a shareholding of between 20% and 50% of the
voting rights, and that is not a subsidiary not a joint venture.
AVAILABLE FINANCIAL RESOURCES (AFR)
The available financial resources equal the market value of assets
minus market value of liabilities, excluding hybrids issued by ING
Group which is counted as capital. ING’s policy is that the available
financial resources should exceed economic capital for Bank,
Insurance and Group.
AVAILABLE-FOR-SALE FINANCIAL ASSETS
Those non-derivative financial assets that are designated
as available-for-sale or are not classified as:
• loans and receivables;
• held-to-maturity investments; or
• financial assets at fair value through profit and loss.
BASEL I
Regulatory requirements issued by the Basel Committee on Banking
Supervision for the solvency calculation, which are superseded by
Basel II, for ING, from 2008 onwards.
BASEL II
Regulatory requirements issued by the Basel Committee on Banking
Supervision for the solvency calculation, which, for ING, apply from
2008 onwards. Basel II is an international standard for calculating
the required capital based on internal models that take into account
the financial and operational risks.
BASEL III
Regulatory requirements issued by the Basel Committee on Banking
Supervision for the solvency calculation and liquidity requirements,
which will supersede Basel II. From 1 January 2013 these
requirements will start to apply, with the full requirements being
effective as of 1 January 2018.
BASIS POINT VALUE (BPV)
The change in the Net Present Value of a cash flow or a pool of
cash flows due to a one basis point change of the yield curve.
BASIS RISK
This risk arises from an imperfect correlation in the adjustment
of the rates earned and paid on different financial instruments.
Examples of products in which these risks are inherent are demand
deposits, saving accounts and mortgages with prepayment options.
BIS
An international organisation which fosters international monetary
and financial co-operation and serves as a bank for central banks.
BIS has set a minimum for the solvency ratio reflecting the
relationship between capital and risk weighted assets. The ratio
should be at least 8%.
BUSINESS RISK
The exposure to value loss due to fluctuations in volumes,
margins and costs. These fluctuations can occur because of
internal, industry, or wider market factors. It is the risk inherent
to strategy decisions and internal efficiency.
CERTIFICATES OF DEPOSIT
Short-term negotiable bearer debt instruments issued by banks.
CLAIM
A demand for payment of a policy benefit because of the
occurrence of an insured event, such as the death or disability of
the insured or the maturity of an endowment, the incurrence of
hospital or medical bills, the destruction or damage of property
and related deaths or injuries, defects in, liens on, or challenges
to the title to real estate, or the occurrence of a surety loss.
Financial glossary
1 Who we are 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information
317ING Group Annual Report 2011