ING Direct 2013 Annual Report Download - page 248

Risk management continued ING Bank
Non-financial risk
Subjects Risk Management Pillar 3
Operational risk is the risk of direct or indirect loss
returning from inadequate or failed internal processes,
people and systems or from external events.
Compliance risk is the risk of impairment of ING Bank’s
integrity as a result of failure to comply with relevant
laws, regulations, ING Banks policies and standards.
Governance 308
Framework 309
Operational risk and main developments 309
Compliance risk and main developments 310
Business risk
Subjects Risk Management Pillar 3
Business risk is the exposure to value loss due to
fluctuations in volumes, margins and costs, as well as
customers behaviour risk. Analysis business risk 311
Besides the regularly additional information that stems from the Basel II accords with detailed tables on ING Bank’s credit portfolio, the
Pillar 3 will include additional disclosures on market, liquidity and funding risk from the EDTF recommendations as of 2013. An overview of
all the EDTF recommendations and how they are followed-up can also be found in the introduction of this same Pillar 3 section. It is ING
Bank’s ambition to incorporate most of the information into the risk management section such that all disclosed risk information is present
in one section of the Annual Report. This contributes to the EDTF recommendations that strive towards transparent and comparative risk
disclosures by global banks.
With respect to comparability of risk disclosures, it is important to note that since the start of the financial crisis there has been much
debate on the risk-weighted capitalisation of banks, and in specific whether internal models are appropriate for such purposes. ING Bank is
of the opinion that internal models are very valuable since they better represent the bank’s business model, its customers and its credit
quality than a standardised approach. However, we also acknowledge that interpretations between banks and also between regulators
may differ. This stresses the importance of having a level playing field via a uniform banking supervision within the EU, but also improves
and aligns risk disclosures as proposed by the EDTF as much as possible.
MISSION
The mission of ING Bank’s risk management function is to support the Banks ambition to be the preferred bank for our customers, by
safeguarding ING’s current and future financial strengths. The following principles support this mission:
• The risk management function is embedded in all levels of ING Bank’s organisation and is part of the daily business activities and
strategic planning to have a sustainable competitive advantage;
• Products and portfolios are structured, underwritten, priced, approved and managed appropriately and compliance with internal and
external rules and guidelines is monitored;
• Delegated authorities are consistent with the overall Bank strategy and risk appetite; and
• Transparent communication to internal and external stakeholders on risk management and value creation.
Risk management benefits ING Bank and its stakeholders directly by providing more efficient capitalisation and lower costs of risk and
funding. The cost of capital is reduced by working closely with rating agencies and regulators to align capital requirements to risks. Risk
Management helps business units to lower funding costs, make use of the latest risk management tools and skills, and lower strategic risk.
This enables them to focus on their customers with excellent service, fair and transparent products and pricing. Thus maintaining a loyal
customer base and a leadership position in our key markets and product franchises.
246 ING Group Annual Report 2013