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ING Bank
Annual Report
2015
A step ahead

Table of contents

  • Page 1
    ING Bank Annual Report 2015 A step ahead

  • Page 2

  • Page 3
    ING Bank Annual Report 2015

  • Page 4
    ...of changes in equity Notes to the consolidated annual accounts Notes to the accounting policies 1 Accounting policies Notes to the Consolidated balance sheet 2 Cash and balances with central banks 3 Amounts due from banks 4 Financial assets at fair value through profit and loss 5 Investments 6 Loans...

  • Page 5
    ... accounts Parent company balance sheet Parent company profit and loss account Parent company statement of changes in equity Accounting policies for the parent company annual accounts Notes to the parent company annual accounts 219 220 221 222 223 Other information Independent auditor's report...

  • Page 6
    ... of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Who we are - continued Composition of the Management Board and Supervisory Board Composition of the boards ING Bank N.V. ('ING Bank') has a two...

  • Page 7
    ... Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Who we are - continued About ING Our strategy and progress Purpose In 2015 we continued to build on our Think Forward strategy to empower customers and...

  • Page 8
    ... Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Who we are - continued Market and regulatory context Three key trends are having a major impact on ING and its competitors...

  • Page 9
    Contents Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Financial developments ING Bank ING Bank posted a strong performance in 2015, resulting in a net profit of EUR 4,659 ...

  • Page 10
    ...are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Report of the Management Board - continued Retail Banking Who are we? ING's Retail Banking business lines provide products and services...

  • Page 11
    ... Consolidated annual accounts Parent company annual accounts Other information Additional information Report of the Management Board - continued Risk costs declined 39.4 percent to EUR 433 million from EUR 714 million in 2014, both in residential mortgages and business lending, supported...

  • Page 12
    ... Consolidated annual accounts Parent company annual accounts Other information Additional information Report of the Management Board - continued Our focus on financially empowering people resulted in a number of new initiatives and tools to help customers make decisions that positively...

  • Page 13
    ... Lending by supporting clients with sector expertise and in-depth knowledge of their business. Transaction Services extends our client offering with international payments and cash management, trade finance services and working capital solutions. Financial Markets, as the bank's gateway to global...

  • Page 14
    ... accounts Parent company annual accounts Other information Additional information Report of the Management Board - continued Conclusion In 2015 we proved again to be a consistently profitable wholesale bank. We continued to show solid results on the back of a consistent strategy and client...

  • Page 15
    ...believe that it will contribute to a more efficient use of financial funds across Europe and as such should help to foster the growth prospects of the European economy. After the first full year of operating under the new supervisory framework, banks' experiences are generally positive. The SSM aims...

  • Page 16
    ... the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Corporate Governance Legislative and regulatory developments The Bank Resolution and Recovery Directive ("BRRD") was implemented in Dutch law in 2015...

  • Page 17
    ... are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Corporate Governance - continued J.V. (Koos) Timmermans, member and vicechairman Management Board (Born 1960, Dutch nationality, male...

  • Page 18
    ...) Former managing director of F&C and country head for F&C Netherlands (asset management firm). Ancillary positions pursuant to CRD IV: Member of the Supervisory Board of ING Bank N.V and of ING Groep N.V. Chairman of the Supervisory Board of NSI N.V. (real estate fund). Non-executive director of...

  • Page 19
    ... Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Corporate Governance - continued M. (Mariana) Gheorghe (Born 1956, Romanian nationality, female, appointed in 2015, term expires in 2019) Current Chief...

  • Page 20
    ..., liabilities, financial position and profit or loss of ING Bank N.V. and the enterprises included in the consolidation taken as a whole; and • the ING Bank N.V. 2015 Annual Report gives a true and fair view of the position at the balance sheet date, the development and performance of the business...

  • Page 21
    ... in general, IT stability in the Netherlands and ING's sustainability direction. The Supervisory Board was also updated on ING's annual talent review achievements and developments including a trend analysis summary. In September 2015, the Supervisory Board visited ING Bank's US offices in New York...

  • Page 22
    ... accounts Parent company annual accounts Other information Additional information Report of the Supervisory Board - continued In September and November 2015, updates were provided to the Supervisory Board with regard to the status of KPMG, ING's new external auditor as per the financial year...

  • Page 23
    ...practice, the annual risk appetite statements were reviewed and supported. The Risk Committee ratified the reviewed ING Bank Recovery Plan. The Risk Committee examined how non-financial risk is measured, monitored and managed through the NonFinancial Risk Dashboard. The Committee was informed on the...

  • Page 24
    ... ING. Additional information For more information, reference is made to the Corporate governance chapter, pages 14 to 22, which is deemed to be incorporated by reference here. Composition of the Management Board Banking Aris Bogdaneris was appointed Head of Challengers & Growth Markets and member...

  • Page 25
    This page is intentionally left blank ING Bank Annual Report 2015 23

  • Page 26
    ...Parent company annual accounts Other information Additional information Consolidated balance sheet as at 31 December in EUR million 2015 2014 Assets Cash and balances with central banks 2 Amounts due from banks 3 Financial assets at fair value through profit and loss 4 - trading assets - non...

  • Page 27
    ... we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Consolidated profit and loss account for the years ended 31 December in EUR million 2015 2015 2014 2014 2013 2013 Interest...

  • Page 28
    ...Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Consolidated statement of comprehensive income for the years ended 31 December in EUR million 2015 2014 2013 Net result (before minority...

  • Page 29
    ...Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Consolidated statement of cash flows for the years ended 31 December in EUR million 2015 2014 2013 Cash flows from operating...

  • Page 30
    ... Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Consolidated statement of cash flows of ING Bank - continued in EUR million 2015 2014 2013 Net cash flow from/(used in) operating activities Net cash...

  • Page 31
    ... equity 38,686 64 35 Balance as at 1 January 2015 Remeasurement of the net defined benefit asset/liability 34 Unrealised revaluations property in own use Unrealised revaluations available-for-sale investments and other Realised gains/losses transferred to the profit and loss account Changes in cash...

  • Page 32
    Contents Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Consolidated statement of changes in equity of ING Bank - continued in EUR million Share capital 525 Share premium ...

  • Page 33
    ... longer as a separate line item in the Consolidated profit and loss account. Reference is made to Note 28 'Other operating expenses'; • As of 2015, the presentation of the table 'Debt securities by type and balance sheet lines' separately discloses the assets class Sub-sovereign Supranationals and...

  • Page 34
    ... Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued d) Other significant changes in 2015 ING Vysya Bank In April...

  • Page 35
    ... loss model. The ECL model applies to on-balance financial assets accounted for at amortised cost and FVOCI, such as loans, debt securities and trade receivables, and off-balance items such as lease receivables, and certain loan commitments financial guarantee. In 2015, ING Bank determined a number...

  • Page 36
    ...Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued In 2015, the Hedge accounting workstream performed a technical...

  • Page 37
    ... Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued All debt and equity securities (other than those carried at fair value through profit...

  • Page 38
    ... of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Reference is made to Note 36 'Fair value of assets and liabilities' and the...

  • Page 39
    ...in the profit and loss account are generally included in Net trading income. Reference is made to Note 25 'Net trading income', which discloses the amounts included in the profit and loss account. Exchange rate differences relating to the disposal of available-for-sale debt and equity securities are...

  • Page 40
    ...liabilities is the current ask price. The fair value of financial instruments that are not traded in an active market are determined using valuation techniques. ING Bank uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Reference...

  • Page 41
    ... banks, Loans and advances to customers and Other assets and are reflected in these balance sheet lines. Interest income from loans and receivables is recognised in Interest income and Investment income in the profit and loss account using the effective interest method. ING Bank Annual Report 2015...

  • Page 42
    ... price. The pre-settlement risk classification mainly relates to the balance sheet classification Financial assets at fair value through profit and loss (trading assets and non-trading derivatives) and to securities financing; • Money market risk arises when ING Bank places short term deposits...

  • Page 43
    .... Non-trading derivatives are measured at fair value with changes in the fair value taken to the profit and loss account. Offsetting of financial assets and financial liabilities Financial assets and financial liabilities are offset, and the net amount reported, in the balance sheet when ING Bank...

  • Page 44
    ... Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Impairments of loans and advances to customers (loan loss provisions) ING Bank assesses...

  • Page 45
    ...securities; generally 25% and 6 months are used as triggers. If any objective evidence exists for available-for-sale debt and equity investments, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset...

  • Page 46
    ... Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Unrealised gains on transactions between ING Bank and its associates and joint ventures...

  • Page 47
    ... annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Property and equipment Property in own use Land and buildings held for own use are stated at fair value at the balance sheet date. Increases...

  • Page 48
    ... the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued ING Bank as the lessee The leases entered into by ING Bank are primarily operating...

  • Page 49
    ... fair value through profit and loss comprise the following sub-categories: trading liabilities, non-trading derivatives and other financial liabilities designated at fair value through profit and loss by management. Trading liabilities include equity securities, debt securities, funds on deposit and...

  • Page 50
    ...are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Other liabilities Defined benefit plans The net defined benefit asset...

  • Page 51
    ... operating, investing and financing activities. In the net cash flow from operating activities, the result before tax is adjusted for those items in the profit and loss account and changes in balance sheet items, which do not result in actual cash flows during the year. ING Bank Annual Report 2015...

  • Page 52
    ... net cash flow and the balance sheet change in Cash and cash equivalents. h) Parent company accounts The parent company accounts of ING Bank N.V. are prepared in accordance with the financial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code. ING Bank Annual Report 2015...

  • Page 53
    ... of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Notes to the Consolidated balance sheet Assets 2 Cash and balances with central...

  • Page 54
    ...annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued 4 Financial assets at fair value through profit and loss Financial assets at fair value through profit and loss 2015 2014 Trading assets Non...

  • Page 55
    ...Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Designated as at fair value through profit and loss Designated...

  • Page 56
    ... externally rated AAA, AA or A. Borrowed debt securities are not recognised in the balance sheet and amount to nil (2014: nil). Reference is made to Note 41 'Transfer of financial assets' for information on securities lending as well as sale and repurchase transactions. ING Bank Annual Report 2015...

  • Page 57
    ... the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Changes in available-for-sale and held-to-maturity investments Changes in available...

  • Page 58
    ... we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Reclassifications to Loans and advances to customers and Amounts...

  • Page 59
    ...Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued 6 Loans and advances to customers Loans and advances to customers analysed by type Netherlands 2015...

  • Page 60
    ... cash flows of ING Bank. Loan loss provisions analysed by type Netherlands 2015 2014 International 2015 2014 2015 Total 2014 Loans to, or guaranteed by, public authorities Loans secured by mortgages Loans guaranteed by credit institutions Personal lending Asset backed securities Corporate loans...

  • Page 61
    ... Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Changes in loan loss provisions 2015 2014 Opening balance Write-offs Recoveries Increase in loan...

  • Page 62
    ... Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued In general, the reporting dates of all significant associates and joint...

  • Page 63
    ... company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued 8 Real estate investments Changes in real estate investments 2015 2014 Opening balance Transfers to and from Property in own use Transfers to and from Other assets...

  • Page 64
    ...accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Changes in property in own use 2015 2014 Opening balance Additions Transfers to and from Real estate investments Transfers to and from Other assets...

  • Page 65
    ...we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Changes in equipment Data processing equipment 2015 2014 Fixtures...

  • Page 66
    ... Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued 2015 - Changes in the composition of the group and other changes In 2015...

  • Page 67
    ... are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Assets held for sale 2015 2014 Investments in associates and joint...

  • Page 68
    ... Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Equity 13 Equity Total equity 2015 2014 2013 Share capital...

  • Page 69
    ... reserve In 2014, the change in the Net defined benefit asset/liability remeasurement reserve related mainly to the transfer of all future funding and indexation obligations under ING's closed defined benefit plan in the Netherlands to the Dutch ING Pension Fund. ING Bank Annual Report 2015 67

  • Page 70
    ... Dutch ING Pension Fund. Changes in other reserves Share of associates and joint ventures reserve 363 2013 Retained earnings 16,288 2,987 58 -2,955 38 16,416 Other reserves 1,153 76 Total 17,804 3,063 58 -2,955 Opening balance Result for the year Employee stock options and share plans Dividend...

  • Page 71
    ... of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Liabilities 14 Subordinated loans Subordinated loans relate subordinated capital...

  • Page 72
    ... Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued As at 31 December 2015, ING Bank has unused lines of credit available including the payment of commercial paper borrowings relating to debt securities...

  • Page 73
    ...Transfer of financial assets' for information on securities lending as well as sale and repurchase transactions. Non-trading derivatives Non-trading derivatives by type 2015 2014 Derivatives used in: - fair value hedges - cash flow hedges - hedges of net investments in foreign operations Other non...

  • Page 74
    ... Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued The amount that ING Bank is contractually required to pay at maturity to the holders of financial liabilities designated as at fair value through profit...

  • Page 75
    ... Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Other provisions Changes in other provisions Litigation 2015 2014 2015 Other 2014 2015...

  • Page 76
    ...Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Notes to the Consolidated profit and loss account 20 Interest result Interest result 2015 2014 2013...

  • Page 77
    ... of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued 21 Investment income Investment income 2015 2014 2013 Income from real estate...

  • Page 78
    ... annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued 23 Commission income Gross fee and commission income 2015 2014 2013 Funds transfer Securities business Insurance broking Asset management...

  • Page 79
    ... Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued The Valuation results on assets and liabilities designated as at fair value through profit and loss includes fair value changes on certain issued debt...

  • Page 80
    ...Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued 26 Other income Other income 2015 2014 2013 Net operating lease income Income from real estate development projects...

  • Page 81
    ... the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Stock option and share plans ING Groep N.V. has granted option rights on ING Groep...

  • Page 82
    Contents Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Summary of stock options outstanding and exercisable...

  • Page 83
    ... Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Changes in share awards Weighted average Share grant date awards fair value (in numbers) (in euros...

  • Page 84
    ... the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued The nationalisation of SNS Reaal in 2013 had as a consequence, a one-time bank tax...

  • Page 85
    ...of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Notes to the consolidated statement of cash flows 29 Net cash flow from investing...

  • Page 86
    Contents Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Included in Cash and cash equivalents, are minimum ...

  • Page 87
    ... Corporate Line Banking and the run-off portfolio of Real Estate Main countries 1 As of January 2016, ING's Commercial Banking activities are renamed to Wholesale Banking. The Management Board Banking sets the performance targets, approve and monitor the budgets prepared by the business lines...

  • Page 88
    ...the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued ING Bank evaluates the results of its segments using a financial performance measure...

  • Page 89
    ...Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Segments by line of business 2014 Retail Netherlands 3,778 464...

  • Page 90
    ...Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Segments by line of business 2013 Retail Netherlands 3,610 460...

  • Page 91
    Contents Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Geographical segments Other Challengers 1,219 149 5 ...

  • Page 92
    Contents Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Geographical segments Netherlands 4,554 706 400 5,...

  • Page 93
    ... Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued 33 Information on geographical areas ING Bank's business lines operate...

  • Page 94
    ...the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Additional information by country 2015 Geographical area Average number of employees...

  • Page 95
    ... the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued The Netherlands has a high tax charge, partly due to the non-deductible Dutch bank...

  • Page 96
    ... we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Additional information by country 2014 Geographical area Country...

  • Page 97
    ... of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued In 2014, the Netherlands had a low tax benefit on the loss, mainly due to non...

  • Page 98
    ... of Retired ING Employees to transfer all future funding and indexation obligations under ING's closed defined benefit plan in the Netherlands to the Dutch ING Pension Fund. The agreement made the ING Pension Fund financially independent from ING. Balance sheet - Net defined benefit asset/liability...

  • Page 99
    ... related to the deconsolidation of ING Vysya. Reference is made to note 50 'other events'. Amounts recognised directly in Other comprehensive income (equity) were as follows: Changes in the net defined benefit assets/liability remeasurement reserve 2015 2014 Opening balance Remeasurement of plan...

  • Page 100
    ... plans did not hold any investments in ING Groep N.V. (2014: nil). Determination of the net defined benefit asset/liability The table provides the key assumptions used in the determination of the Net defined benefit asset/liability and the Other postemployment benefits. ING Bank Annual Report 2015...

  • Page 101
    ... comply with applicable local regulations governing investments and funding levels. ING Bank's subsidiaries should fund the cost of the entitlements expected to be earned on a yearly basis. For 2016 the expected contributions to pension plans are EUR 50 million. ING Bank Annual Report 2015 99

  • Page 102
    ... paid is also dependant on the interest rate developments and DNB's methodology for determining the ultimate forward rate. These plans do not give rise to balance sheet provisions, other than relating to short-term timing differences included in other assets/liabilities. ING Bank Annual Report 2015...

  • Page 103
    ... 3 18 Net liability (-) Net asset (+) 2015 -780 -2 739 -46 -195 201 24 441 -235 118 -97 168 Change through equity 111 Investments Real estate investments Financial assets and liabilities at fair value through profit and loss Depreciation Cash flow hedges Pension and post-employment benefits Other...

  • Page 104
    Contents Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued In 2014, Changes in the composition of the group and...

  • Page 105
    ... the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Profit and loss account - Taxation Taxation by type Netherlands 2015 2014 2013 2015...

  • Page 106
    ... Bank - continued Equity - Other comprehensive income Income tax related to components of other comprehensive income 2015 2014 2013 Remeasurement of the net defined benefit asset/liability Unrealised revaluations available-for-sale investments and other Realised gains/losses transferred to profit...

  • Page 107
    ... information Notes to the Consolidated annual accounts of ING Bank - continued The estimated fair values represent the price at which an orderly transaction to sell the financial asset or to transfer the financial liability would take place between market participants at the balance sheet...

  • Page 108
    ...of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Debt securities Fair values for debt securities are based on quoted market prices...

  • Page 109
    ... Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued a.3) Fair value hierarchy ING Bank has categorised its...

  • Page 110
    ...(Level 2 in 2013) were re-invested in Government bonds (Level 1). As at 31 December 2014, ING Direct Australia reclassified EUR 2.6 billion Government and Semi-Government debt securities from Level 2 to Level 1 as the input was based on quoted prices in an active market. ING Bank Annual Report 2015...

  • Page 111
    ...Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Changes in Level 3 Financial assets Financial assets designated as at fair value through profit and loss 90 -55 467 -148 -16 2015 NonTrading trading assets...

  • Page 112
    ... Financial assets designated as at fair value through profit and loss Available-for-sale investments Financial liabilities Trading liabilities Non-trading derivatives Financial liabilities designated as at fair value through profit and loss 120 -15 -83 22 120 -15 -83 22 ING Bank Annual Report 2015...

  • Page 113
    ... Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Amounts recognised in profit and loss account during the year (Level 3) Held at balance sheet...

  • Page 114
    ... Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Furthermore, Level 3 financial assets includes approximately...

  • Page 115
    ...Available for sale - Debt - - Equity 630 63 Price based Present value techniques Discounted cash flow Multiplier method Comparable transactions Price (%) Credit spread (bps) Weighted average life (yr) Financial Statements Observable market factors Total 2,184 1,438 ING Bank Annual Report 2015...

  • Page 116
    ...equity securities mainly include corporate investments, fund investments, real estate positions and other equity securities which are not traded in active markets. In the absence of an active market, fair values are estimated on the basis of the analysis of fund managers reports, company's financial...

  • Page 117
    ... Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Credit spreads Credit spread is the premium above a benchmark interest rate, typically...

  • Page 118
    ..., credit derivatives) Available-for-sale Equity Debt 19 11 272 28 28 Asset backed security portfolio Fair value hierarchy of certain ABS bonds 2015 Level 1 Level 2 4 32 5 129 165 5 Level 3 Total 4 32 5 129 170 US Subprime RMBS US Alt-A RMBS CDO/CLOs CMBS Total ING Bank Annual Report 2015 116

  • Page 119
    ... at fair value in the balance sheet. Reference is made to Note 1 'Accounting policies' in the sections 'Real estate investments' and 'Property in own use' for the methods and assumptions used by ING Bank to estimate the fair value of the non-financial assets. ING Bank Annual Report 2015 117

  • Page 120
    ... Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Fair value of non-financial assets 2015 Estimated Balance fair value sheet value 77 982 1,059 77 982 1,059 Real estate investments Property in own use...

  • Page 121
    ... Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Changes in Level 3 non-financial assets 2014 Real estate invest- Property in ments own use...

  • Page 122
    ... retail operations in which the net exposure of retail funding (savings and current accounts) and retail lending (mortgages) is hedged. The hedging activities are designated under a portfolio fair value hedge on the mortgages, using the IFRS-EU provisions. Cash flow hedge accounting ING Bank's cash...

  • Page 123
    ... to the Consolidated annual accounts of ING Bank - continued For the year ended 31 December 2015, ING Bank recognised EUR -200 million (2014: EUR 1,651 million) after tax in equity as effective fair value changes on derivatives under cash flow hedge accounting. As a consequence, the balance of the...

  • Page 124
    ... are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued 38 Assets by contractual maturity Amounts presented in these tables...

  • Page 125
    ...Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Assets by contractual maturity 2014 Less than 1 1 month 12,222...

  • Page 126
    ...Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Liabilities by maturity 2015 Less than 1 1 month 8,772 14,835...

  • Page 127
    ... EUR 5 billion (2014: EUR 4 billion) and in Australia to EUR 3 billion (2014: EUR 3 billion). The table does not include assets relating to securities lending as well as sale and repurchase transactions. Reference is made to Note 41 'Transfer of financial assets'. ING Bank Annual Report 2015 125

  • Page 128
    ... Securities lending 2015 Equity Debt Sale and repurchase Equity Debt 18 4,339 7,892 2,502 Transferred assets at carrying amount Amounts due from banks Financial assets at fair value through profit and loss Investments Associated liabilities at carrying amount Amounts due to banks Customer deposits...

  • Page 129
    ... Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued 42 Offsetting financial assets and liabilities The following tables include information...

  • Page 130
    ... Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements Related amounts not offset in the balance sheet...

  • Page 131
    ... Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements Related amounts not offset in the balance sheet...

  • Page 132
    ... Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements Related amounts not offset in the balance sheet...

  • Page 133
    ... Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Contingent liabilities and commitments 2015 Less than 1 month 1-3 months...

  • Page 134
    ... Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Furthermore, ING Banks leases assets from third parties under operating...

  • Page 135
    ... Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued In January 2011, the Dutch Association of Stockholders...

  • Page 136
    ...EUR 4.2 billion of Dutch mortgages were transferred from WestlandUtrecht Bank to NN Group. The transfers were made at an arm's length pricing. Most significant companies divested in 2013 ING Direct UK Total -7,186 -7,186 Sales proceeds Cash proceeds1 Sales proceeds Assets Cash and cash equivalents1...

  • Page 137
    ... ING Corporate Investments B.V. ING Real Estate B.V. ING België N.V. ING Luxembourg S.A. ING-DiBa A.G. ING Bank Slaski S.A. ING Financial Holdings Corporation ING Bank A.S. ING Bank (Australia) Ltd ING Bank (Eurasia) Joint stock company Country The Netherlands The Netherlands The Netherlands The...

  • Page 138
    ...transactions by providing structuring, accounting, funding and operations services. The types of assets currently in Mont Blanc include trade receivables, consumer finance receivables, credit card receivables, motor vehicle loans and residential mortgage backed securities ('RMBS'). ING Bank supports...

  • Page 139
    ...comprise short-term deposits and private loans made by NN Group N.V. During 2013, due to the partial transfer of WestlandUtrecht Bank, certain assets and liabilities were transferred from ING Bank to NN Group. Reference is made to Note 49 'Transaction with the Dutch State and the European Commission...

  • Page 140
    ...July 2013, for providing certain management services in relation to a housing mortgage loan portfolio of WestlandUtrecht Bank. Associates and joint ventures Transactions with ING Bank's main associates and joint ventures Associates 2015 2014 Joint ventures 2015 2014 Assets Liabilities Off-balance...

  • Page 141
    ...the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Key management personnel compensation (Executive Board and Management Board) 2015 in...

  • Page 142
    ... a funding fee and a management fee. As a result of the transaction ING derecognised 80% of the Alt-A portfolio from its balance sheet and recognised a receivable from the Dutch State. The transferred Alt-A portfolio was previously included in Available-for-sale debt securities. The Dutch State also...

  • Page 143
    ... of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued The valuation method of the 20% Alt-A securities in the IFRS-EU balance sheet is...

  • Page 144
    ... Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued It was agreed that these restrictions would apply for the...

  • Page 145
    ... Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued The calling or buy-back of Tier 2 capital and Tier 1 Hybrid Securities...

  • Page 146
    ... year-end 2015. At the end of 2015, ING and the Dutch State reported to the European Commission that the NN Bank related commitments have been fulfilled. Reference is made to Note 11 'Assets held for sale', Note 45 'Companies and businesses acquired and divested' and Note 50 'Other events'. Credit...

  • Page 147
    ... Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued On 7 April 2015, the merger between ING Vysya and Kotak...

  • Page 148
    ... risk management departments that each covers its own area of expertise. ING Bank's risk management disclosures provide qualitative and quantitative disclosures about credit, market, liquidity and funding, business and non-financial risks. The risk management section is in line with the accounting...

  • Page 149
    Contents Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Market risk Subjects Risk Management 191 278 191 192...

  • Page 150
    ... Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued The commercial departments form the first line of defence and have primary responsibility for the day-to-day risk management. They originate loans, deposits...

  • Page 151
    ... well informed and understand ING Bank's risk position at all times. Every quarter, the CRO reports to the board committees on ING Bank's risk appetite levels and on ING Bank's risk profile. In addition, the CRO briefs the board committees on developments in internal and external risk related issues...

  • Page 152
    ... accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued In 2015, the risk management organisation was redesigned to effectively address the internal and external (market and regulatory) developments...

  • Page 153
    ...Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Risk model governance and validation All risk models are built according to the internal...

  • Page 154
    ...by ING Bank's debtors (including bond issuers) or trading counterparties; Market risk: the risk of potential loss due to adverse movements in market variables. Market risks include interest rate, credit spread, equity, real estate and foreign exchange risks; Funding and liquidity risk: the risk that...

  • Page 155
    ... EUR billions, high level information on the risks arising from the Bank's business activities. 1 EC market risk: Mainly held for the price risk embedded in equity investments; 2 EC market risk: Mainly held for the interest rate risk embedded in the long-term investment of ING's capital (investment...

  • Page 156
    ...the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Risk identification Risk identification is a joint effort of the commercial business...

  • Page 157
    Contents Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Process The ING Bank risk appetite framework (RAF) ...

  • Page 158
    ... Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued The solvency risk appetite is closely aligned with capital management activities and policies. ING...

  • Page 159
    ...the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Types of stress tests Within ING Bank, different types of stress tests are performed...

  • Page 160
    ... uses internally to manage its own risk. EC is a non-accounting measure that is inherently subject to dynamic changes and updated as a result of ING Bank's portfolio mix and general market developments. ING Bank continuously recalibrates the underlying assumptions behind its economic capital model...

  • Page 161
    ... Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued The tables below provide ING Bank's EC and RC by risk type and business line. For 2015...

  • Page 162
    ... are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued CRR/CRD IV and upcoming regulations To accomplish this, a new Basel...

  • Page 163
    ... Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Risk developments in 2015 Risk developments listed below are...

  • Page 164
    ... CR General Manager is functionally responsible for the global network of credit risk staff. ING Bank's credit policy is to maintain an internationally diversified loan and bond portfolio, while avoiding large risk concentrations. The emphasis is on managing business developments within the business...

  • Page 165
    ...) market price. The pre-settlement risk (potential or expected risk) is the cost of ING Bank replacing a trade in the market. This credit risk category is associated with dealing room products such as options, swaps, and securities financing transactions. Where there is a mutual exchange of value...

  • Page 166
    ...-settlement, money market, lending, investment), and connected to ING Bank high-level risk appetite across all risk types (credit, market, business and non-financial risk). They consist of a set of high-level credit risk metrics: expected loss, economic capital, risk-weighted assets and exposure at...

  • Page 167
    ...'s risk profile is regularly evaluated, resulting in a country rating, which is used to set the country reference benchmark. Based on these two components country limits are set and exposures derived from lending, investment, pre-settlement and money market activities are then measured and reported...

  • Page 168
    ... of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued A risk appetite statement in the context of a retail risk portfolio program is...

  • Page 169
    ... credit CVA risk is taken into account as calculated under Pillar I based on the risk. CRR Standardised Approach. In the Solvency Report other non-credit obligation assets (ONCOA) are Credit risk related ONCOA items are included. included. EC is calculated using the economic values of rating models...

  • Page 170
    ...of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Credit risk measurement There are two ways to measure credit risk within ING Bank...

  • Page 171
    ... Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued ING Bank uses the Internal Assessment Approach for the support facilities it provides to Asset Backed Commercial...

  • Page 172
    ... ING Bank has invested are leading. Risk ratings assigned to counterparties are regularly, at least annually, reviewed, and the performance of the underlying models regularly monitored. Over 95% of ING Bank's credit risks have been rated using one of the in-house developed PD rating models. Within...

  • Page 173
    ... Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Rating Models for retail counterparties are predominantly...

  • Page 174
    ... customer deposits and providing lending products to its retail customers. The savings product is typically the first product to be launched in a country followed by mortgages and other retail products (current accounts, unsecured loans, credit cards etc.). The difference between retail liabilities...

  • Page 175
    .... Credit risk portfolio ING Bank's credit exposure is mainly related to traditional lending to individuals and businesses followed by investments in bonds and other securitised assets. Loans to individuals are mainly mortgage loans secured by residential property. Loans (including guarantees issued...

  • Page 176
    ... the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Risk classes ING Bank portfolio, as % of total outstandings1 Wholesale Banking 2015...

  • Page 177
    ... the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Risk concentration: ING Bank portfolio, by economic sector1 Wholesale Banking 2015...

  • Page 178
    ...Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Credit quality Upturn witnessed in key markets and a trend of...

  • Page 179
    ...a general rule, in line with the Regulatory definition (CRR/CRDIV), ING Bank considers all business loans as non-performing if they are 90 days past due. Credit restructuring Global Credit Restructuring (GCR) is the dedicated and independent corporate department that deals with non-performing loans...

  • Page 180
    ... Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Watch list, Restructuring and Recovery are discussed at least on a quarterly basis between Front Office, respective Credit Risk Management executives...

  • Page 181
    ... in business lending. Challengers and Growth markets have witnessed stable risk costs over the quarters. There was an improvement in the bank coverage ratio to 38.5% (2014: 35.5%) mainly due to a faster outflow from the non-performing loan portfolio and a comparatively lesser decrease in stock...

  • Page 182
    ... is changed compared to previous years. Currently, the business portfolio is present in both Business Lines, while previously the entire business portfolio was reported in Wholesale Banking. ING Bank: Summary Forborne assets 2015 2014 Forborne assets Of which: Of which: Perfor- Non-Performing ming...

  • Page 183
    ... Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Wholesale Banking: Forborne assets by Geographical Region 2015 2014 Region Netherlands...

  • Page 184
    ... policy, resulting in a partial shift of forborne assets from the non-performing to performing portfolio. The forborne assets in Turkey increased in the business as well as in the consumer portfolio and was mainly driven by new inflow. Credit risk mitigation ING Bank's lending and investment...

  • Page 185
    ... risk category: Lending, Investment, Money-Market and Pre-settlement. For each risk category, the cover amounts are presented by the most relevant collateral forms, being mortgages and financial collateral (cash and securities), and the most relevant third party obligation being guarantees. ING Bank...

  • Page 186
    ... ING Bank's central database (Vortex) and in most cases external data is used to index the market value. On a quarterly or annual basis, the mortgages value is updated in Vortex using the relevant house price index (the NVM Index in the Netherlands, Level Housing Index in Australia, Crif Real Estate...

  • Page 187
    ... Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued The below tables show the values of different covers and the VTL split between performing and non...

  • Page 188
    .... The numbers shown are conservative as the savings pledged to the mortgage product, 'Spaarhypotheek' (or Mortgage with external Saving account) present in the Dutch mortgage portfolio are not taken into account in the table above. For the Residential Mortgages portfolio, the guarantees relate to...

  • Page 189
    ... Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Cover values including guarantees received - Business Lending portfolio...

  • Page 190
    ...Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Business Lending per region Cover values including guarantees received - Business Lending Portfolio...

  • Page 191
    ...Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Investment and Money Market portfolio Investment and Money Market exposure...

  • Page 192
    ... of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued The next table represents the different types of outstandings in 2015 and 2014...

  • Page 193
    ... value movements due to changes in market variables and model risk. Model disclosure Economic Capital for market risk is calculated for exposures both in trading portfolios and banking portfolios and includes interest rate risk, equity price risk, foreign exchange rate risk, real estate risk...

  • Page 194
    ... for the long-term. ING Bank distinguishes the following types of market risk in banking books: • Interest Rate Risk, including customer behaviour risk; • Credit Spread Risk; • Foreign Exchange (FX) Risk; • Equity Price Risk; and • Real Estate Price Risk. ING Bank Annual Report 2015 192

  • Page 195
    ... Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Risk transferring An important element of the management of market risks...

  • Page 196
    ... risk is a result of products that contain embedded options, like mortgages. In some cases, convexity risk is transferred from the commercial books to treasury books using swaption and cap/floor contracts. Bank Treasury manages the strategic interest rate position excluding capital investments...

  • Page 197
    ...Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued The ES is mainly influenced by the sensitivity of savings to interest rate...

  • Page 198
    ... thousand 2015 2014 By accounting category Amortised Cost Fair value through equity Fair value through profit and loss Total 4,691 -22,798 2,325 -15,782 16,311 -30,205 -1,756 -15,650 In line with NPV-at-Risk, the bank's overall BPV position is dominated by the long-term investment of own funds...

  • Page 199
    ... the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Governance - Core banking business Every business unit hedges the FX risk resulting...

  • Page 200
    ...sale portfolio is directly linked to equity security prices with increases/decreases being recognised in the revaluation reserve, except in the case of impairment. Investments in associates and joint ventures are measured in accordance with the equity method of accounting and the balance sheet value...

  • Page 201
    ...transactions with clients and may serve to benefit from short-term price movements. Market risk arises in the trading portfolios through exposure to various market risk factors, including interest rates, equity prices, foreign exchange rates and credit spreads. Governance The Financial Markets Risk...

  • Page 202
    ...of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued In general, positions are valued taking the bid price for a long position and the...

  • Page 203
    ..., event risk is limited by ALCO Bank. ING Bank's event risk policy is based on a large set of possible stress scenarios per risk type (fixed income, equity, foreign exchange, credit and related derivative markets). For example, for equity products we assume both a crisis scenario (prices decreasing...

  • Page 204
    ... Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued The risk figures in the table below only relate to the CAD2 trading books for which the internal model...

  • Page 205
    ... 11 Interest rate/Credit spread Equity Commodity1 Foreign exchange Incremental Risk Charge Total Internal Model Approach Standardised model2 Total Regulatory Capital Market Risk Weighted Assets, in EUR billions 154 58 6 17 235 1 As of 2015 the capital allocated to the equity portfolio was split...

  • Page 206
    ... in time at a reasonable costs by attracting new unsecured funding or rolling over existing funding, or selling / repo-ing assets, potentially resulting in default. Liquidity risk can materialise both through trading and non-trading positions. Governance Within ING Bank, the Management Board Bank...

  • Page 207
    ... position. Bank Treasury is ING's primary contact to the market for long and short term funding, with exception of capital transactions which are under the responsibility of the Capital Management function and the execution of some specific structured funding products which are executed by Financial...

  • Page 208
    ... but operable market conditions. • Managing risk by adhering to internally and externally imposed risk limits and balance sheet ratios. • Optimising the cost of funding under the principles above. With respect to funding sources, ING Bank manages its balance sheet prudently, whereby short-term...

  • Page 209
    ... a profit contribution to funds raised, lent, or invested. FTP is the pricing mechanism used within ING to transfer interest rate risk, basis risk and liquidity risk positions from commercial units to Bank Treasury. The FTP framework enables local ALCOs to set their local FTP levels and manage these...

  • Page 210
    ... accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Funding and Liquidity profile Funding sources In 2015, ING Bank had readily access to a large variety of funding sources, both short term and long...

  • Page 211
    ... annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued The Head of NFR reports to the Chief Risk Officer (CRO) and is responsible for developing the framework of non-financial risk policies...

  • Page 212
    ... Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Business units and departments perform regular BEAs and...

  • Page 213
    ...Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Legal risk is defined as the risk related to (i) a failure (or...

  • Page 214
    ... Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued In cases where an employee from ING Bank suspects a breach of external laws and regulations, internal policies...

  • Page 215
    ...the management and monitoring of this risk is part of the day-to-day business of the Balance Sheet Risk department. A more extensive explanation of the risk management practices for customer behaviour risk, please refer to the 'Market Risk in Banking Books' section. ING Bank Annual Report 2015 213

  • Page 216
    ... all times in order to manage the risk associated with ING's business activities. This involves not only the management, planning and allocation of capital within ING Group and ING Bank, but also the necessary capital market transactions, term (capital) funding and risk management transactions. ING...

  • Page 217
    ... for ING Group and ING Bank and ensuring adherence to the set limits and targets through planning and executing capital management transactions. The ongoing assessment and monitoring of capital adequacy is embedded in Capital Management's capital planning process. Following the annual budgeting...

  • Page 218
    ... Report of the Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Group - continued ING Bank NV capital position according to CRR/CRD IV (fully-loaded) 2015...

  • Page 219
    ... of the Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Group - continued Main credit ratings of ING at 31 December 2015 Standard & Poor's Rating ING Bank...

  • Page 220
    ... Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the Consolidated annual accounts of ING Bank - continued Authorisation of annual accounts Amsterdam, 29 February...

  • Page 221
    ... Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Parent company balance sheet as at 31 December before appropriation of result in EUR million 2015 2014 Assets Cash and balances with central banks 1 Short...

  • Page 222
    ... of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Parent company profit and loss account for the years ended 31 December in EUR million 2015 2014 Result of group companies, associates and joint...

  • Page 223
    ...transferred to profit and loss account Changes in cash flow hedge reserve Exchange rate differences and other Total amount recognised directly in equity Net result 2,661 2,661 1,532 -1,225 55 -1,532 2,744 6,429 Transfer to retained earnings Dividends Employee stock options and share plans Changes...

  • Page 224
    ..., reference is made to Note 1 'Accounting policies' of the Consolidated annual accounts. Investments in group companies are accounted in the Parent company accounts according to the equity method. The profit and loss account is drawn up in accordance with Section 402, Book 2 of the Dutch Civil Code...

  • Page 225
    ... Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the parent company annual accounts amounts in millions of euros, unless stated otherwise Assets 1 Cash and balances with central banks Amounts...

  • Page 226
    ...of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the parent company annual accounts of ING Bank N.V. - continued 5 Debt securities Debt securities by issuer 2015 2014 Public sector Other...

  • Page 227
    ...are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the parent company annual accounts of ING Bank N.V. - continued 6 Equity securities Equity securities analysed by listing 2015...

  • Page 228
    ... are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the parent company annual accounts of ING Bank N.V. - continued Changes in investments in group companies 2015 2014 Opening...

  • Page 229
    ... Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the parent company annual accounts of ING Bank N.V. - continued 10 Equipment Changes in equipment 2015 2014 Opening...

  • Page 230
    ...the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the parent company annual accounts of ING Bank N.V. - continued Liabilities and equity 12 Amounts due to banks Amounts due to banks 2015 2014...

  • Page 231
    ... the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the parent company annual accounts of ING Bank N.V. - continued 15 General provisions General provisions 2015 2014 Pension liabilities and...

  • Page 232
    ... Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the parent company annual accounts of ING Bank N.V. - continued Changes in revaluation reserves Net defined benefit assets/ liability Cash flow...

  • Page 233
    ... Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the parent company annual accounts of ING Bank N.V. - continued Changes in legal and statutory reserves Share of associates and joint Currency...

  • Page 234
    ... Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the parent company annual accounts of ING Bank N.V. - continued The total amount of non-distributable reserves, in...

  • Page 235
    ... Additional information Notes to the parent company annual accounts of ING Bank N.V. - continued 20 Contingent liabilities and other commitments Contingent liabilities by type 2015 2014 Discounted bills Guarantees Irrevocable letters of credit Other Contingent debts Irrevocable facilities 47...

  • Page 236
    ...Who we are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Notes to the parent company annual accounts of ING Bank N.V. - continued Remuneration of Senior management, Management board and...

  • Page 237
    ..., and of its result and its cash flows for 2015 in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code. • the company annual accounts give a true and fair view of the financial position of ING Bank as at 31...

  • Page 238
    ... net selling prices. The use of different modelling techniques and assumptions could produce significantly different estimates of loan loss provisions. Associated risk management disclosure is complex and dependent on high quality data. Specific ING Bank portfolios of focus included the SME lending...

  • Page 239
    ...the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Independent auditor's report - continued As part of the preparation of the annual accounts, the Management Board is responsible for assessing ING Bank...

  • Page 240
    ...of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Independent auditor's report - continued Engagement We have been appointed as auditors for the audit of the 2015 annual accounts of ING Bank at the...

  • Page 241
    ... are Report of the Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Proposed appropriation of result The result is appropriated pursuant to Article 24 of the Articles of Association of ING Bank N.V., the...

  • Page 242
    ... Management Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information Additional Pillar III information Introduction Basis of disclosure The information in this report relates to ING Bank...

  • Page 243
    ... Credit Value Adjustment Securitisation exposures Equity portfolios in the banking book under the simple risk weight approach Other Non-Credit Obligation Assets Total Credit Risk Market risk Standardised approach Internal models approach - trading book Total Market risk Operational risk Advanced...

  • Page 244
    ...the tail accuracy in Operational risk, and an increase in Credit risk where volume growth and equity investment were partially offset by reduction in CVA. ONCOA represents assets of non-credit obligation character that are not included in the SA or AIRB calculations. At 31 December 2015, the capital...

  • Page 245
    Contents Report of the Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued ING Bank Capital position 2015 2014 2019 rules 2014 rules 2015 rules (CRR/CRD IV (...

  • Page 246
    Contents Report of the Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued Own funds The CRR requires ING Bank to disclose information on own funds in a ...

  • Page 247
    Contents Report of the Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued Bank leverage ratio common disclosure 2015 2015 CRR/CRD IV CRR/CRD IV phased in fully...

  • Page 248
    ... credit risk section of Pillar III, data included in tables are related to ING Bank's core credit risk activities in the areas of: Lending (both on- and off-balance); Securities Financing, Derivatives (collectively Counterparty Credit Risk); Money Market activities, and Investment Risks. Equity Risk...

  • Page 249
    ... implemented to calculate capital for the Default Fund Contribution held by ING Bank at central clearing houses. Foreign exchange movements: The impact of FX movements was significant. The currency fluctuations caused RWA to increase by EUR 5.5 billion due to the appreciation of the US Dollar (11.34...

  • Page 250
    ... Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued Advanced IRB and Standardised Approach ING uses two methods to calculate Regulatory Capital for Credit Risk...

  • Page 251
    ... Report of the Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued In the tables below an overall picture is given of the ING Bank portfolio per exposure class...

  • Page 252
    ... - credit risk disclosure in READ and RWA READ 2015 2014 Delta % 2015 RWA 2014 Delta % Sovereigns Total per rating Performing Non-performing Geography/business units Africa America Asia Australia Europe Europe Netherlands Belgium Germany Other Europe Product Type Bond Investments Revolving Money...

  • Page 253
    Contents Report of the Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued The sovereigns portfolio increased by EUR 14.7 billion in READ and EUR 0.4 billion ...

  • Page 254
    ... - credit risk disclosure in READ and RWA READ 2015 2014 Delta % 2015 RWA 2014 Delta % Institutions Total per rating Performing Non-performing Geography/business units Africa America Asia Australia Europe Europe Netherlands Belgium Germany Other Europe Product Type Derivatives Bond Investments...

  • Page 255
    ... credit risk disclosure in READ and RWA READ 2015 2014 Delta % 2015 RWA 2014 Delta % Corporate Total per rating Performing Impaired/Non-performing Geography/business units Africa America Asia Australia Europe Europe Netherlands Belgium Germany Rest of Europe Industry Natural Resources Real Estate...

  • Page 256
    ... which the largest in READ was driven by a change in the rating for a client which was assessed as performing by its super preferential character. The risk profile of the Real Estate portfolio has also improved, decreasing its share in the non-performing loan book. ING Bank Annual Report 2015 254

  • Page 257
    ... class 'Retail'. Retail - credit risk disclosure in READ and RWA READ 2015 2014 Delta % 2015 RWA 2014 Delta % Retail Total per rating Performing Impaired/Non-performing Customer Segment Private Persons Small Mid-sized Enterprises Private Banking Other Geography/business units Africa America...

  • Page 258
    ... house prices, combined with the willingness of customers to take up higher loans caused a higher LTV in the mortgage origination translating in an increase of the portfolio LTV. The ING policy is to index property values on a quarterly basis. In some markets only annual figures are available...

  • Page 259
    ... of stand-alone fundamentals as well as geography. The Low Default EAD model is a hybrid model that pools default information from multiple low default portfolios, including government related entities. >7 years >7 years >7 years >7 years >7 years >7 years ING Bank Annual Report 2015 257

  • Page 260
    ... Report of the Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued AIRB models and methodology - continued PD 3 The main PD model applied is Bank Commercial...

  • Page 261
    .... This effect can cause RWA to increase or decrease together with risk rating migration without a significant change in the size of the underlying financial assets, in terms of financial accounting. As such, rating migrations are closely monitored within ING Bank. ING Bank Annual Report 2015 259

  • Page 262
    ... the Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued Exposures (READ) per internal rating grade and corresponding PD, LGD and RWA 2015 Internal rating grade...

  • Page 263
    ...the Commercial Property Finance LGD model update which now incorporates more conservatism. The improved PD values in the Corporates exposure class improved with 20% for which the main drivers were the restructuring of a few files within the Real Estate Finance portfolio and an improving risk profile...

  • Page 264
    Contents Report of the Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued The table below provides a back-testing of the PD models per exposure class. In order...

  • Page 265
    ...is limited as the portfolio is denominated in both Turkish Lira's and US dollar for which the FX impacts offset each other). The remaining increase in the SA portfolio is mainly related to Nostro exposures which have a short term nature and fluctuate throughout the year. ING Bank Annual Report 2015...

  • Page 266
    ... include Lending and Debt Securities. Reconciliation of non-performing loans disclosures The table below shows the reconciliation of non-performing loans segmented by the lines of businesses used internally by ING Bank. A narrative explanation on these business lines is given in the Risk Management...

  • Page 267
    ... 7,898 Includes both AIRB and SA portfolios; only Lending and Investment are included; excludes securitisations, equities and ONCOA. Non-performing exposure (READ) by geographic area 2015 2014 Sovereigns Secured by Institutions Corporate Res. Mortgage Other retail 341 1 2,907 1,127 81 3,102 356...

  • Page 268
    ... Report of the Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued The total non-performing exposure decreased from EUR 17.2 billion to EUR 15.0 billion year...

  • Page 269
    .... Credit Risk outstandings include amounts associated with both on- and off- balance sheet products, but exclude amounts related to unused limits. Past due but not non-performing consumer loans by geographic area (based on outstandings) 2015 2014 Secured by Res. Mortgage Other retail Total...

  • Page 270
    ... 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 2015 2014 Sovereigns Secured...

  • Page 271
    ...Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued CVA risk CRR/CRD IV introduced an additional regulatory capital charge for material increases in the CVA, the market price of the credit...

  • Page 272
    ... Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued Over-the-counter and exchange traded derivatives This section provides a quantitative and qualitative analysis of ING...

  • Page 273
    ... Report of the Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued The table below presents the ING bank portfolio excluding equities per loan type. Exposures...

  • Page 274
    ...Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued The ING Bank portfolio is characterised by significant amounts of secured lending especially in the key areas...

  • Page 275
    Contents Report of the Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued The assumption is that loans, money market and investments in fixed income securities...

  • Page 276
    ...Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued Regulatory capital method used and Rating Agencies ING Bank has implemented the AIRB approach for credit risk...

  • Page 277
    ... Report of the Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued During 2015 the exposure to securitisations increased from EUR 7.8 billion to EUR 8.1 billion...

  • Page 278
    ... 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. ING Bank Annual Report 2015 276

  • Page 279
    ... increase in the exchanged traded equity position value of EUR 1 billion. Additionally, the merger increased the RWA due to a change in accounting treatment. Before the merger, the Vysya stake was an investment in associates larger than 10%, therefore the Simple Risk Weight Approach was not applied...

  • Page 280
    ...and available for sale debt securities. Furthermore the sensitivity of the currency translation reserve is an intended open position to stabilise the common equity tier1 ratio for foreign exchange movements, as the RWA are impacted as well by these market movements. ING Bank Annual Report 2015 278

  • Page 281
    ... Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued Risk profile Capital Elements & Market Risk Impact on Capital Market Risk Sensitivity (before tax) Interest Rate...

  • Page 282
    Contents Report of the Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued Funding & liquidity risk Funding and liquidity risk is the risk that ING Bank or one ...

  • Page 283
    Contents Report of the Executive Board Corporate Governance Consolidated annual accounts Parent company annual accounts Other information Additional information Additional Pillar III information - continued Collateral received ING Bank Fair value of Fair value of encumbered collateral ...

  • Page 284
    ... of the euro, (4) ING's implementation of the restructuring plan as agreed with the European Commission, (5) changes in the availability of, and costs associated with, sources of liquidity such as interbank funding, as well as conditions in the credit markets generally, including changes in borrower...

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    ING Bank N.V. Bijlmerplein 888 1102 MG Amsterdam P.O. Box 1800, 1000 BV Amsterdam The Netherlands Telephone: +31 20 5639111 Internet: www.ing.com Commercial Register of Amsterdam, no. 33031431.