ING Direct 2015 Annual Report Download - page 113

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
2014
Held at
balance
sheet date
Dere-
cognised
during
the year Total
Financial assets
Trading assets
–368
–368
Non-trading derivatives
68
68
Financial assets designated as at fair value through profit and loss
–67
–67
Available-for-sale investments
–11
31
20
–378
31
–347
Financial liabilities
Trading liabilities
–54
–54
Non-trading derivatives
14
14
Financial liabilities designated as at fair value through profit and loss
–81
–81
–121
–121
Recognition of unrealised gains and losses in Level 3
Amounts recognised in the profit and loss account relating to unrealised gains and losses during the year that relates to Level 3 assets
and liabilities are included in the profit and loss account as follows:
• Results on trading assets and trading liabilities are included in Net trading income;
• Non-trading derivatives are included in Valuation results on non-trading derivatives;
• Financial assets and liabilities designated as at fair value through profit and loss are included in Valuation results on non-trading
derivatives - Valuation results on assets and liabilities designated as at fair value through profit and loss (excluding trading);
• Changes in the fair value of Real estate investments are included in Investment income; and
• Impairments on Property in own use are included in Other operating expenses - Intangible amortisation and (reversals) of
impairments.
Unrealised gains and losses recognised in Other comprehensive income that relate to Available-for-sale investments are included in
the Revaluation reserve – Available-for-sale reserve and other. Unrealised gains and losses on Property in own use are also included in
the Revaluation reserve – Property in own use reserve.
Level 3 Financial assets and liabilities
Financial assets measured at fair value in the balance sheet as at 31 December 2015 of EUR 225 billion includes an amount of EUR 2.2
billion (1.0%) which is classified as Level 3 (31 December 2014: EUR 1.6 billion, being 0.7%). Changes in Level 3 from 31 December 2014
to 31 December 2015 are disclosed above in the table ‘Changes in Level 3 Financial assets’.
Financial liabilities measured at fair value in the balance sheet as at 31 December 2015 of EUR 106 billion includes an amount of EUR
1.4 billion (1.4%) which is classified as Level 3 (31 December 2014: EUR 1.3 billion, being 1.1%). Changes in Level 3 from 31 December
2014 to 31 December 2015 are disclosed above in the table ‘Changes in Level 3 Financial liabilities’.
Financial assets and liabilities in Level 3 include both assets and liabilities for which the fair value was determined using valuation
techniques that incorporate unobservable inputs and assets and liabilities for which the fair value was determined using quoted prices,
but for which the market was not actively trading at or around the balance sheet date. Unobservable inputs are inputs which are
based on ING’s own assumptions about the factors that market participants would use in pricing an asset or liability, developed based
on the best information available in the circumstances. Unobservable inputs may include volatility, correlation, spreads to discount
rates, default rates and recovery rates, prepayment rates and certain credit spreads. Fair values that are determined using valuation
techniques using unobservable inputs are sensitive to the inputs used. Fair values that are determined using quoted prices are not
sensitive to unobservable inputs, as the valuation is based on unadjusted external price quotes. These are classified in Level 3 as a
result of the illiquidity in the relevant market, but are not significantly sensitive to ING’s own unobservable inputs.
Of the total amount of financial assets classified as Level 3 as at 31 December 2015 of EUR 2.2 billion (31 December 2014: EUR 1.6
billion), an amount of EUR 0.9 billion (42%) (31 December 2014: EUR 0.8 billion, being 50%) is based on unadjusted quoted prices in
inactive markets. As ING does not generally adjust quoted prices using its own inputs, there is no significant sensitivity to ING’s own
unobservable inputs.
Amounts recognised in profit and loss account during the year (Level 3)
ING Bank Annual Report 2015 111