ING Direct 2013 Annual Report Download - page 277

Risk management continued ING Bank
The financial statements module provides the user with the ability not only to register a company’s financial statements in a common
(IFRS-EU based) format, but also to project the company’s future financial position as a result of the transactions contemplated. This allows
the common view on the company’s financial status to be communicated throughout ING and to form a consistent basis on decision
making processes relying on financial information. This data is then aggregated and presented on the (read-only) browser-based Financial
Statements component of STARpro.
Financial Statements data is automatically forwarded to Risk Rater, where it is incorporated into one of the various probabilities of default
rating models. Risk Rater contains two kinds of rating models:
• Automated, whereby the data for a large number of counterparties is automatically processed from the source systems on a periodic
(usually monthly) basis to determine new risk ratings; and
• Manual ratings, which are calculated on an individual basis and where the user is required to also answer additional qualitative
questions in order to create a rating.
Once a rating is approved the rating results are forwarded in real time to GRID. GRID then redistributes the rating (update) to the
subscribing systems.
The Loan Pricer module is used to price loans and investments. It accesses existing data from within Vantage for existing deals and uses
this data in the loan pricing component, a tool which assists the user in structuring and optimising a deal, while determining if the
transaction meets ING Bank’s internal risk/reward requirements. Functionality includes the ability to create and compare different
scenarios, and to search for break-even values.
The Approval Package module supports the credit approval process by automating the creation and management of credit application
documents and routing them to reviewers and approvers. Approval Package is the tool that collects the data from all of the other modules
(including data received from other STARpro modules and all exposure data from Vortex), in order to put together the credit application
package. For annual reviews, the user is required to check the existing data (sourced from their local tools via Vortex), and make any
requested changes. For new deals, the user (usually an account manager) inputs the entire deal structure (using local source system codes)
directly into Approval Package. The tool then has a workflow function to guide the credit application through the credit approval process.
The Problem Loans module is used to create provisions for organisations where the rating is set to 20, 21 or 22 and the outstanding is
equal or bigger than the threshold (in general 1 million Euro, in individual cases or for certain units, the threshold could be lower). It also
records detailed information on organisations in default. In addition the Problem Loan tool supports the non-performing loan provisioning
process by automating the creation of problem loan applications and routing provisioning proposals to designated reviewers and
approvers. It also provides a centralised ING Bank-wide repository for problem loan applications. All relevant policies, regulations and
methodologies are as much incorporated in the systems as possible, providing an integrated approach.
Credit risk reporting
Credit risk reporting is an important element of credit risk management. Regulators and ING Bank’s management increasingly recognise
the value of risk-reporting systems and accessibility of data to monitor trends as well as to keep consistency and credibility in published
data. A dedicated credit risk reporting department addresses various reporting requirements as well as key reporting principles.
Role of reporting department
The credit risk reporting department contributes in the following ways to CRM:
• Provides periodic overviews of credit capital, migration of risk weighted assets, concentration overviews by industry/sector/counterparty
names required or requested by the DNB and other European regulators;
• Participate in the various exercises/simulations conducted by regulators and other policy-makers by being transparent in the data and
analysis shared, to allow useful results and work towards more stable and efficient financial markets;
• Provides senior management and other risk departments an insight showing trends and quantitative as well as qualitative analysis in
significant risk areas within ING Bank in a comprehensive and simplified manner to facilitate informed decision-making;
• Addresses ad-hoc requests from regulators, analysts and rating agencies and other external stakeholders which are driven by current
market events impacting specific regions, portfolios or counterparties; and
• Serves as a control function by analysing various portfolios and comparing them to certain risk policies. In addition, significant monthly
portfolio changes are analysed and reviewed.
Reporting principles
The Basel Committee published in January 2013 new ‘Principles for Effective Data Aggregation and Risk Reporting’ which outline 11 key
principles that global SIBs have to implement by 2016. As a first step of the implementation, ING performed a ‘stocktaking’ self-
assessment survey in 2013. Based on this survey Credit Risk Reporting can rate itself satisfactory on all principles, including their key
principles: Accuracy, Timelines, Completeness, Adaptability and Auditability. Nonetheless, gaps have been identified in certain sub-
portfolios and actions are being planned to further improve the credit information technology and reporting.
275ING Group Annual Report 2013
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