ING Direct 2013 Annual Report Download - page 403

Loan Loss Provisioning Shortfall (1)
2013 2012
AIRB SA Total AIRB SA Total
REL 6,962 n.a. 6,962 5,972 n.a. 5,972
Provisions (1) 5,550 604 6,154 4,774 731 5,505
Shortfall 1,412 n.a. n.a. 1,199 n.a. n.a.
Shortfall % 20% n.a. n.a. 20% n.a. n.a.
Includes both AIRB and SA portfolios; excludes securitisations, equities and ONCOA.
(1) At the end of 2013, the stock of provisions included provisions for amounts due from banks: EUR 19 million (2012: EUR 19 million)
Over the year, Regulatory Expected Loss (REL) for the AIRB portfolio increased from EUR 6.0 billion to EUR 7.0 billion. Provisions reported in
the SA portfolio showed a decline while overall provisions showed a significant increase to EUR 6.1 billion. The shortfall amount increased
to EUR 1.4 billion, while the shortfall as a percentage of the REL is stable at 21%.
OFF-BALANCE ITEMS
Undrawn commitments
The figures below represent the potential exposure that may be drawn by ING Bank’s obligors under committed facilities. In most cases,
the obligors have the right to make use of these facilities unless an event of default has occurred, or another defined event within the
associated credit risk agreement has occurred. In most cases, the obligor pays a commitment fee to ING Bank on the unused portion of
these facilities. Pre-Settlement, Money Market and Investment limits are generally not committed.
Undrawn commitments
Sovereigns Institutions Corporate
Residential
mortgages Other retail Total Total
2013 2012
Under SA approach 12 196 674 141 3,850 4,872 5,541
Under AIRB Approach 467 6,363 52,741 8,710 12,623 80,904 84,235
0% risk weight 295 1,933 9,163 7,322 7,161 25,873
10% risk weight 98 2,302 9,546 875 1,552 14,374
20% risk weight 45 1,341 13,923 316 1,296 16,922
35% risk weight 426 8,904 99 843 10,272
50% risk weight 3270 5,733 70 696 6,772
75% risk weight 24 31 3,097 10 544 3,706
100% risk weight 29 1,668 12 436 2,145
150% risk weight 2293 360 358
200% risk weight 29 415 433 481
1250% risk weight
Total 478 6,559 53,414 8,852 16,472 85,776 89,776
Includes both AIRB and SA portfolios; excludes securitisations, equities and ONCOA.
Excludes revaluations made directly through the equity account.
ING Bank has seen many of its Large Corporate customers obtain funding from capital markets in the course of 2013. This often leads to
large undrawn commitments. These stand-by commitments are usually for top rated Corporates which have historically shown a
reluctance to draw these facilities. The overall decrease in undrawn commitments comes mainly from this Corporates portfolio where the
limits where lowered. Much of the undrawn commitments in the mortgage area relate to forward commitments of clients to lock in
interest rates in mainly the German, Australian and Dutch mortgage portfolio.
If all of the unused commitments were called upon at the same time, ING Bank’s credit risks (in terms of outstandings) would increase by
12%. As part of its READ models, ING Bank makes an estimate of how much of these unused commitments would be drawn under
normal circumstances. The effect is included in the calculation of RWA, together with a similar effect applied to uncommitted facilities,
albeit at a lower rate.
DERIVATIVES AND SECURITIES FINANCING
As part of its normal derivatives trading activities and securities financing, ING Bank enters into master agreements such as ISDA master
agreements and Global Master Repurchase Agreements (GMRAs). Under the terms contained in sections related to Minimum Threshold
Amounts and Minimum Transfer Amounts of Credit Support Annexes (CSA) or other similar clauses, both ING Bank and it counterparties
may agree to pledge additional collateral to each other in the event that either party is downgraded by one of the established rating
agencies. ING Bank has determined that under prevailing market conditions, a one notch downgrade would only have a limited effect on
the amount of additional collateral that ING Bank would be required to pledge under these agreements. However, the actual amount that
ING Bank may be required to pledge in the future may vary based on ING Bank’s portfolio composition of both derivatives and securities
pledged in securities financing transactions, market circumstances, the number of downgrade notches as well as the terms and conditions
of future CSAs or other similar agreements entered into.
Additional Pillar 3 information continued
401ING 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