ING Direct 2013 Annual Report Download - page 365

The Intervention Act will need to be amended following the implementation of the ‘Recovery and Resolution Directive’. This is a draft
legislative proposal aimed at harmonising national rules on bank recovery and resolution and on which the European Council and the
European Parliament reached a political agreement in December 2013. The Recovery and Resolution Directive includes, among other
things, the obligation for institutions to draw up a recovery plan and the obligation for resolution authorities in the Member States to draw
up a resolution plan, the resolution authorities’ power to take early intervention measures and the establishment of a European system of
financing arrangements. The Recovery and Resolution Directive confers extensive resolution powers to the resolution authorities, including
the power to require the sale of (part of a) business, to establish a bridge institution, to separate assets and to take bail-in measures. The
draft Recovery and Resolution Directive will need to be formally adopted by the European Council and the European Parliament and is
expected to enter into force on 1 January 2015. The stated aim of the Recovery and Resolution Directive is to provide supervisory
authorities, including the relevant Dutch resolution authority, with common tools and powers to address banking crises pre-emptively in
order to safeguard financial stability and minimise taxpayers’ exposure to losses.
Among the powers proposed to be granted to supervisory authorities under the Recovery and Resolution Directive include, among others,
the introduction of a statutory ‘write-down and conversion’ power and a ‘bail-in’ power, which would give the relevant Dutch resolution
authority the power to (i) cancel existing shares and/or dilute existing shareholders by converting relevant capital instruments or eligible
liabilities into shares of the surviving entity and (ii) cancel all or a portion of the principal amount of, or interest on, certain unsecured
liabilities (which could include certain securities that have been or will be issued by ING) of a failing financial institution and/or to convert
certain debt claims (which could include certain securities that have been or will be issued by ING) into another security, including ordinary
shares of the surviving group entity, if any. It is currently contemplated that the majority of measures (including the write-down and
conversion powers relating to Tier 1 capital instruments and Tier 2 capital instruments) set out in the draft Recovery and Resolution
Directive will be implemented with effect from 1 January 2015, with the bail-in power for other eligible liabilities (which could include any
securities that have been issued or will be issued by ING, that are not Tier 1 or Tier 2 capital instruments) expected to be introduced by 1
January 2016. However, the draft Recovery and Resolution Directive is not in final form, and changes could be made to it in the course of
the final legislative process and anticipated implementation dates could change.
In addition to a ‘write-down and conversion’ power and a ‘bail-in’ power, the powers currently proposed to be granted to the relevant
Dutch resolution authority under the draft Recovery and Resolution Directive include the two categories of measures introduced by the
Intervention Act, as described above. In addition, the draft Recovery and Resolution Directive proposes, among the broader powers
proposed to be granted to the relevant resolution authority, to provide powers to the relevant resolution authority to amend the maturity
date and/or any interest payment date of debt instruments or other eligible liabilities of the relevant financial institution and/or impose a
temporary suspension of payments.
There remains uncertainty regarding the ultimate nature and scope of these powers and, when implemented, how they would affect us
and the securities that have been issued or will be issued by us. Accordingly, it is not yet possible to assess the full impact of the draft
Recovery and Resolution Directive on ING and on holders of any securities issued or to be issued by ING, and there can be no assurance
that, once it is implemented, the manner in which it is implemented or the taking of any actions by the relevant Dutch resolution authority
currently contemplated in the draft Recovery and Resolution Directive would not adversely affect the rights of holders of the securities
issued or to be issued by ING, the price or value of an investment in such securities and/or ING’s ability to satisfy its obligations under such
securities.
Further, the CRD IV Regulation states that if the Recovery and Resolution Directive is not adopted by 31 December 2015, the EC should
review and report whether the CRD IV Regulation should be amended so as to include write-down and conversion powers in order to
ensure that relevant capital instruments fully absorb losses at the point of non-viability of the issuing institution and before any other
resolution action is taken. There is a risk that such an amendment would result in any securities issued or to be issued by ING that
constitute relevant capital instruments being used to absorb losses on the occurrence of a non-viability event.
Finally, as part of the road towards a full banking union, on 10 July 2013, the EC published a draft Regulation for a Single Resolution
Mechanism (‘SRM’) with the aim to have a Single Resolution Board to be responsible for key decisions on how a bank subject to SSM
supervision is to be resolved if a bank has irreversible financial difficulties and cannot be wound up under normal insolvency proceedings
without destabilizing the financial system. The SRM is expected to enter into force in 2015.
There are certain differences between the provisions of the Intervention Act, the Recovery and Resolution Directive proposal and the SRM
Regulation proposal, which may further bring future changes to the law. We are unable to predict what specific effects the Intervention
Act and the future adoption of the Recovery and Resolution Directive and the SRM Regulation may have on the financial system generally,
our counterparties, holders of securities issued by or to be issued by us, or on us, our operations or our financial position.
ING Bank has set up an all-encompassing recovery planning process to enhance its readiness and decisiveness to tackle financial crises on
its own strength. ING Bank’s recovery plan has been submitted to and approved by the DNB in November 2012 and is updated at least
annually. Furthermore during 2013, ING Bank submitted information on the basis of which the Dutch Resolution Authorities will be able to
develop a Resolution Plan.
Risk factors continued
363ING 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