ING Direct 2011 Annual Report Download - page 323

LIQUIDITY RISK
The risk that ING Group or one of its subsidiaries cannot meet its
financial liabilities when they fall due, at reasonable costs and in a
timely manner.
MARKET RISK
Market risk is the risk that movements in market variables, such
as interest rates, equity prices, implied volatilities, foreign exchange
rates, real estate prices negatively impact the earnings or
market value.
MINORITY INTERESTS
The part of the profit and loss and net assets of a subsidiary
attributable to an interest which is not owned, directly or indirectly,
by the parent company.
MONETARY ASSETS AND LIABILITIES
Assets and liabilities which are fixed in terms of units of currency
by contract or otherwise. Examples are cash, short or long-term
accounts, notes receivable in cash and notes payable in cash.
MONEY MARKET RISK
Money market risk arises when ING Group places short term
deposits with a counterparty in order to manage excess liquidity,
as such, money market deposits tend to be short term in nature
(1–7 days is common). In the event of a counterparty default, ING
Group may lose the deposit placed. Money market risk is therefore
measured simply as the notional value of the deposit, excluding any
accrued and unpaid interest or the effect of any impairment.
MONOLINER
A financial company that deals specifically with one particular
branch of the financial industry.
MONTE CARLO SIMULATION
A model to calculate Value at Risk, assuming that changes in
risk factors are (jointly) normally distributed taking into account
nonlinear behaviour of financial products.
MORTGAGE BACKED SECURITIES (MBS)
A security whose cash flows are backed by typically the principal
and/ or interest payments of a pool of mortgages.
NEW SALES
New sales of life insurance, measured as Annual Premium
Equivalent (APE), have been defined as the total of annual
premiums and 10% of single premiums received on production
in a given period.
NET ASSET VALUE
Used in the equity method of accounting. The initial net asset value
of the investment is determined by the fair value of the assets and
liabilities of the investee. After the initial valuation of assets and
liabilities of the investee at fair value, the assets and liabilities of the
investee are valued in accordance with the accounting policies of
the investor. The profit and loss account reflects the investor’s share
in the results of operations of the investee.
NET PREMIUMS WRITTEN
Gross premiums written for a given period less premiums ceded
to retrocessionaires during the given period.
NET PRESENT VALUE AT RISK (NPV-AT-RISK)
Establishes what the value of future cash flows is in terms of
today’s monetary value. NPV-at-Risk establishes the change in value
of future cash flows as a result of interest rate changes in terms of
today’s monetary value.
NON-VOTING EQUITY SECURITIES
Core Tier 1 securities issued to the Dutch State in November 2008
for a total consideration of EUR 10 billion. In December 2009
EUR5billion and in May 2011 EUR 2 billion was paid back to the
Dutch State. This capital injection qualifies as core Tier 1 capital
for regulatory purposes.
NOTIONAL AMOUNTS
Represent units of account which, in respect of derivatives, reflect
the relationship with the underlying assets. They do not reflect,
however, the credit risks assumed by entering into
derivative transactions.
OPERATING LEASE
A lease other than a finance lease.
OPERATIONAL RISK
The risk of a direct or indirect loss resulting from inadequate
or failed internal processes, people and systems or from
external events.
OPTION CONTRACTS
Give the purchaser, for a premium, the right, but not the obligation,
to buy or sell within a limited period of time a financial instrument
or currency at a contracted price that may also be settled in cash.
Written options are subject to market risk, but not to credit risk
since the counterparties have already performed in accordance
with the terms of the contract by paying a cash premium up front.
ORDINARY SHARE
An equity instrument that is subordinate to all other classes
of equity instruments. Ordinary shares participate in the net
profit for the financial year after other types of shares such as
preference shares.
OUT OF THE MONEY
A call option is said to be out of the money if the exercise price is
higher than the price of the underlying value; a put option is said
to be out of the money if the exercise price is lower than the price
of the underlying value.
OVER-THE-COUNTER INSTRUMENT
A non-standardised financial instrument not traded on a
stock exchange but directly between market participants.
Financial glossary continued
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
321ING Group Annual Report 2011