ING Direct 2013 Annual Report Download - page 411

Securitisation in the trading book
Per 31 December 2013, securitisation positions in trading books are reported under the Standardised Capital Framework in the Market Risk
section.
MARKET RISK
Introduction
After the turmoil in the financial markets and the consequent need for governments to provide aid to financial institutions, financial
institutions have been under more scrutiny from the public, supervisors and regulators. This has resulted in more stringent regulations
intended to avoid future crises in the financial system and taxpayers’ aid in the future. Reference is made to the General Risk Management
section ‘Ongoing changes in the regulatory environment’.
Capital at Risk
Capital at Risk measures the impact of predefined instant shocks of market risk factors such as interest rates, credit spreads, foreign
exchange, equity prices and real estate prices on the volatility of IFRS-EU and core Tier 1 equity.
Main Drivers
The main market risk sensitivities of capital are interest rate and credit spread driven, resulting from cash flow hedges and available for sale
debt securities. Furthermore the sensitivity of the currency translation reserve is an intended open position to stabilise the core Tier 1 ratio
for foreign exchange movements, as the RWA are impacted as well by these market movements.
Risk profile
Capital Elements & Market Risk Impact on Capital
Market Risk Sensitivity (before tax),
excluding pension fund Interest Rate Credit Spread Equity Prices Real Estate
Foreign
Exchange
IFRS-EU Basel II Basel III* +10 0bp +40bp -10% -10% +10%
Capital Elements
Reserve
Property revaluation reserve • • –111
Cash flow hedge reserve •–1,369
Available-for-sale reserve
Debt securities • • –1,268 –1,176
Equity securities • • –145 –124
Currency translations reserve • • • –679
P&L
All items impacting P&L, excluding DVA •••–296 –182 –98 –187 –154
DVA own issued debt/structured notes • –222
DVA derivatives • • 6 22 –7
Impact on Capital
IFRS-EU Equity –2,927 –1,558 –243 –298 –963
Core Tier 1 Equity (Basel II) –290 –160 –98 –187 –840
Core Tier 1 Equity (Basel III, full spot) –1,564 –1,358 –243 –298 –957
* Basel III on a fully loaded basis, no phase in assumed.
• Indicates the item has an impact on the capital as indicated in that column.
Revaluation Reserve Impact
The revaluation reserve for real estate, debt securities and equity securities are not part of Basel II equity, but will be part of Basel III equity.
The revaluation reserve for cash flow hedges is not part of Basel II equity and will also not be part of Basel III equity. The revaluation
reserve for foreign exchange is part of Basel II equity and will also be part of Basel III equity. The interest rate sensitivity shown for debt
securities is the unhedged interest rate sensitivity, i.e. debt securities in hedge accounting relations are excluded.
P&L Impact
Items on fair value which revalue through P&L, excluding debit valuation adjustments, impact IFRS-EU equity as well as Basel II and Basel III
equity. Debit valuation adjustments of own issued debt only impacts IFRS-EU equity and not Basel II or Basel III equity. Debit valuation
adjustments of derivatives impacts Basel II equity, but will not be part of Basel III equity.
Pension Fund
The market risk impact of the pension fund is not included in the table due to announcement in January 2014 with regard to the transfer
of all future funding and indexation obligations under ING’s current closed defined benefit plan in the Netherlands to the Dutch ING
Pension Fund. Reference is made to note 60 ‘Subsequent events’ of the consolidated annual accounts section.
Additional Pillar 3 information continued
409ING 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