ING Direct 2013 Annual Report Download - page 409

Purchased exposures per risk weight band
2013 2012
READ RWA READ RWA
Risk weight band 1 <= 10% 4,628 359 4,917 394
Risk weight band 2 >10% and <= 18% 249 33 346 45
Risk weight band 3 >18% and <= 35% 1,515 445 2,639 665
Risk weight band 4 >35% and <= 75% 602 376 158 99
Risk weight band 5 >75% and <1250% 505 646 1,917 2,810
Risk weight 1250% 45 567 101 1,165
Total 7,544 2,427 10,078 5,179
Excludes equities and ONCOA.
The investment positions in securitisations are mainly originated in Spain, US and UK (75% of total portfolio). The majority of INGs’
positions are of high quality with 94% of the portfolio externally rated AAA, AA or A. The main vintages in the underlying mortgages are
between 2004-2007. All securitisations are subject to rigorous testing using various stress scenarios. Securitisation positions with
underperforming collateral have been sold in order to mitigate RWA increases, the main driver for the reductions in the lowest bands
compared to last year are driven by the unwinding of the Illiquid Assets Back-up Facility (IABF) as announced on 1 November 2013.
Additionally, impaired positions have shown signs of improvement compared to last year, over the year ING’s impairment charges due to
underperforming securitisations have declined significantly, impairment charges related to investment securitisation positions for 2013
were minimal. Performance of the underlying assets is monitored on a quarterly basis through analysis of the relevant performance metrics
(Delinquencies, Prepayments, Roll-Rates, Severities etc.), the review is performed for every vintage and loan type bucket.
Sponsor securitisations
In the normal course of business, ING Bank structures financing transactions for its clients by assisting them in obtaining sources of liquidity
by selling the clients’ receivables or other financial assets to an ING originated Special Purpose Vehicle (SPV). The transactions are funded by
the ING administered multi seller Asset Backed Commercial Paper (ABCP) conduit Mont Blanc Capital Corp. (rated A-1/P-1). Despite the
conditions in the international money markets Mont Blanc Capital Corp. continues to fund itself externally in the ABCP markets.
In its role as administrative agent, ING Bank facilitates these transactions by acting as administrative agent, swap counterparty and liquidity
provider to Mont Blanc. ING Bank also provides support facilities (liquidity and program wide enhancement) backing the transactions
funded by the conduit.
The types of asset currently in the Mont Blanc Conduit include trade receivables, consumer finance receivables, credit card receivables,
auto loans and RMBS.
ING Bank supports the commercial paper programmes by providing the Special Purpose Entity (SPE) with short-term liquidity facilities.
These liquidity facilities primarily cover temporary disruptions in the commercial paper market. Once drawn these facilities bear normal
credit risk. A number of programmes are supported by granting structured liquidity facilities to the SPE, in which ING Bank covers at least
some of the credit risk incorporated in these programmes itself (in addition to normal liquidity facilities), and might suffer credit losses as a
consequence. Furthermore, under a Programme Wide Credit Enhancement ING Bank guarantees to a limited amount all remaining losses
incorporated in the SPE to the commercial paper investors.
The liquidity facilities, provided to Mont Blanc are EUR 1,728.1 million. The drawn liquidity amount as at 31 December 2013 is EUR 158.7
million.
Mont Blanc has no investments in securitisation positions that ING Bank has securitised. Nor are there entities either managed or advised
by ING Bank that invest in Mont Blanc.
The normal non-structured standby liquidity facilities and the structured facilities are reported under irrevocable facilities. All facilities,
which vary in risk profile, are granted to the SPE subject to normal ING Bank credit and liquidity risk analysis procedures. The fees received
for services provided and for facilities are charged subject to market conditions. Mont Blanc is consolidated by ING Bank. These
transactions are therefore on-balance sheet arrangements
Originator securitisations
ING Bank originates own securitisation transactions for economic and regulatory capital purposes, as well as liquidity and funding purposes.
Economic and regulatory capital
Seven synthetic securitisations of mortgages, small and medium enterprise (SME) and corporate exposures have been issued since ING
Bank began actively undertaking the securitisation of its own assets in 2003. Upon the closer alignment of transfer and regulatory capital
solvency rules at year end 2007, the most senior tranches of ING Bank’s own securitisations have been called and are now retained by ING
Bank. Except for Memphis 2005, ING Bank has also hedged the first loss tranches in 2009 (Flipper transaction). The mezzanine tranches
are still transferred to third parties.
Additional Pillar 3 information continued
407ING 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