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Derivatives by product type
The table below is based on the marked-to-market (MtM) plus (regulatory) add-on methodology used for calculating Basel II RWA for
determining the gross exposures. This means that the READ figure listed hereunder is significantly below the notional amount.
The mark-to-market plus (regulatory) add-on is recalculated daily to reflect both changes in the markets as well as portfolio composition.
The Current Exposure Method (the methodology to calculate the READ) together with the other building blocks (PD, LGD and Maturity),
allow ING Bank to classify a large part of its derivatives exposures under the AIRB approach.
Derivatives by product type in READ
Sovereigns Institutions Corporate
Residential
mortgages Other retail Total Total
2013 2012
Interest Rate Derivatives 1,481 12,832 5,028 40 19,381 26,121
Foreign Exchange Derivatives 274 2,152 965 83,400 4,219
Equity Derivatives 2,118 113 72,239 1,867
Exchange Traded Products 1,440 1,440 194
Credit Derivatives 482 2484 808
Commodity Derivatives 275 242 3321 254
Derivatives 1157 158 315 241
Total 1,758 19,258 6,508 58 27,581 33,705
Includes both AIRB and SA portfolios; excludes securitisations, equities and ONCOA.
Excludes revaluations made directly through the equity account.
The derivative portfolio of ING Bank is almost exclusively based on client related business including hedging of mortgage portfolios.
This partially explains the difference between derivative amounts to Institutions and Corporates. These institutions are mainly spread across
the UK, Netherlands, Germany and France portfolios. Exchange traded derivatives picked up this year mainly in the Eurozone market.
The READ decrease in the Derivatives portfolio is mainly a result of a noticeable shift from bilateral OTC derivatives for which READ is
calculated, to OTC derivatives cleared via a Central Counterparties (CCP) which carry zero READ as a result of regulations. If the regulatory
calculation of READ for unilateral and bilateral derivatives would be similar, then the derivatives portfolio trend would be stable. The above
table does not include the trading portfolio which is accounted for under Market Risk section of the Risk Management Paragraph.
Over-the-counter and exchange traded derivatives
This section provides a quantitative and qualitative analysis of ING’s Credit Risk that arises from its derivatives transactions. This quantifies
notional derivatives exposure, including whether derivatives are over-the-counter (OTC) or traded on recognised exchanges (ETD). Where
the derivatives are OTC, the table shows how much is settled by central counterparties and how much is not, and provides a description of
the collateral agreements in place.
Credit risk derivatives
2013 2012
Notional MtM Notional MtM
OTC derivatives
CCP 1,728,308 –5,444 1,417,454 –4,430
Non-CCP 1,717,477 –1,446 2,020,068 –3,154
ETD derivatives 36,200 –3 24,000 n/a
Total 3,481,985 –6,894 3,461,522 –7,5 8 4
Includes both AIRB and SA portfolios; excludes securitisations, equities and ONCOA.
ETD Derivatives settle price movements daily. Therefore there is no MTM build-up that generates exposure.
From the total notional value of OTC derivatives transactions that are not cleared by a CCP, 85% has been documented under bilateral
(93%) and unilateral (7%) Collateral Support Annex (CSA) agreement.
• The notional value of transactions that are done under bilateral CSA agreements relates for 79% to Interest Rate derivatives, for 17%
to FX derivatives and for 4% to Credit, Equity and Commodity Derivatives.
• Unilateral CSA agreements relate mainly to agreements that are unilateral against ING and mainly consist of Interest Rate Derivatives.
The remaining 15% of the total notional value of OTC derivatives transactions that are not cleared by a CCP is not supported by a CSA
agreement or a Clearing Agreement and mainly relates to Corporates with small credit limits and mainly consists of Interest Rate
Derivatives (57%) and FX Derivatives (39%).
Securities financing by product type
The table below is based on the marked-to-market plus (regulatory) add-on methodology used for calculating Basel II RWA for determining
the gross exposures. The methodology to calculate the READ is called the Current Exposure Method (CEM) and together with the other
building blocks (PD, LGD and Maturity) it allows ING Bank to classify virtually all of its Securities Financing exposures under the AIRB approach.
Additional Pillar 3 information continued
402 ING Group Annual Report 2013