ING Direct 2013 Annual Report Download - page 389

EXPOSURE CLASSES
The Basel Accord has developed the concept of ‘Exposure Classes’. These are essentially groupings of credit risks associated with a
common obligor type or product type. For the AIRB Approach, most of the exposure classes have subcategories. ING Bank has applied the
following definitions to determine Exposure Classes:
• Central Governments & Central Banks (hereafter Sovereigns) include Sovereign Government entities, Central Banks and Basel II
recognized Local / Regional Authorities as well as Supranational Organisations;
• Institutions include all Commercial Banks, non-Bank Financial Institutions, such as Leasing Companies, Funds and Fund Managers,
and Insurance Companies, as well as local and regional government entities not classified as governments;
• Corporates include all legal entities, that are not considered to be Governments, Institutions or Retail;
• Retail includes the following classes:
– Residential Mortgages include all mortgage loans for residential properties that are not part of a securitisation; and
– Retail Other includes all other credit obligations related to Retail SMEs, such as partnerships, one-man businesses and private
individuals, such as consumer loans, car loans and credit cards.
Under these exposure class definitions, it is possible for a private individual to be included under both Residential
Mortgages and Retail Other. For other types of counterparties or issuers, there is no potential overlap.
In the tables below an overall picture is given of the ING Bank portfolio per exposure class, after which a breakdown per exposure class is
given segmented by relevant factors. Securitisations segmentation is given in the Securitisation chapter.
Credit risk per exposure type and exposure class
The table below shows the total READ and RWA for ING Bank by Basel defined exposure types for both the SA and AIRB portfolio per
exposure class.
Model approaches per exposure class
Sovereigns Institutions Corporate Retail Total 2013 Total 2012
READ RWA READ RWA READ RWA READ RWA READ RWA READ RWA
SA approach
On-balance 3,713 2,472 1,887 998 8,640 8,557 14,442 9,025 28,682 21,051 36,085 24,762
Off-balance 6 6 480 204 2,069 2,068 2,114 1,578 4,669 3,856 6,19 0 5,183
Securities Financing 57 57 157 57
Derivatives 14 14 413 187 125 127 2 1 553 329 425 245
Total 3,790 2,548 2,781 1,389 10,834 10,752 16,557 10,605 33,961 25,294 42,699 30,190
AIRB approach
On-balance 80,120 6,170 57,420 10,057 144,965 75,041 299,760 65,014 582,264 156,282 60 6,155 132,278
Off-balance 4,801 199 13,441 3,485 53,838 20,470 14,225 2,913 86,305 27,066 102,195 30,160
Securities Financing 1,710 45 8,825 1,304 388 87 10,923 1,436 10,552 1,227
Derivatives 1,744 333 18,845 3,962 6,383 5,025 56 27 27,028 9,347 33,280 10,340
Total 88,374 6,747 98,530 18,808 205,575 100,623 314,041 67,954 706,520 194,131 752,182 174,006
SEC AIRB
On-balance 7,920 2,541 9,188 3,391
Off balance 1,938 187 2,983 2,134
Total 9,858 2,728 12,101 5,525
Total Bank 92,164 9,295 101,311 20,197 216,408 111,375 330,598 78,558 750,339 222,152 806,982 209,722
Includes both AIRB and SA portfolios; excludes equities and ONCOA.
The ING bank portfolio falls for 87.4% under the AIRB approach and for 12.6% under SA in terms of RWA. The total portfolio decreased in
2013 by EUR 56.6 billion in READ to EUR 750.3 billion while RWA increased by EUR 12.4 billion to EUR 222.2 billion. The increase in RWA is
mainly a result of adjusting key risk factors in AIRB models to reflect the economic downturn environment, especially related to Dutch
mortgages, SME clients in the Benelux and sovereign entities, while the decrease in READ is a result of the divestment of ING Direct UK,
partially the WestlandUtrecht Bank portfolio and the targeted downsizing of the REF and securitisation portfolio. Next to the portfolio
decline, a methodology change has also contributed significantly to the decrease in READ. The conservative approach of the off balance
commitment calculations, which is a factor of the READ, has now been brought more in line with the actual exposure for the best rated
Corporates and Institutions portfolios, resulting in a significant READ decrease.
Additional Pillar 3 information continued
387ING 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