ING Direct 2015 Annual Report Download - page 114

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
Furthermore, Level 3 financial assets includes approximately EUR 0.4 billion (31 December 2014: EUR 0.1 billion) which relates to
financial assets that are part of structures that are designed to be fully neutral in terms of market risk. Such structures include various
financial assets and liabilities for which the overall sensitivity to market risk is insignificant. Whereas the fair value of individual
components of these structures may be determined using different techniques and the fair value of each of the components of these
structures may be sensitive to unobservable inputs, the overall sensitivity is by design not significant.
The remaining EUR 0.9 billion (31 December 2014: EUR 0.7 billion) of the fair value classified in Level 3 financial assets is established
using valuation techniques that incorporates certain inputs that are unobservable. This relates mainly to assets that are classified as
Available-for-sale investments, for which changes in fair value are recognised in shareholders’ equity and do not directly impact profit
and loss.
Of the total amount of financial liabilities classified as Level 3 as at 31 December 2015 of EUR 1.4 billion (31 December 2014: EUR 1.3
billion), an amount of EUR 0.7 billion (50%) (31 December 2014: EUR 0.7 billion, being 54%) 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.
Furthermore, Level 3 financial liabilities includes approximately EUR 0.2 billion (31 December 2014: EUR 0.2 billion) which relates to
financial liabilities that are part of structures that are designed to be fully neutral in terms of market risk. As explained above, the fair
value of each of the components of these structures may be sensitive to unobservable inputs, but the overall sensitivity is by design
not significant.
The remaining EUR 0.5 billion (31 December 2014: EUR 0.4 billion) of the fair value classified in Level 3 financial liabilities is established
using valuation techniques that incorporates certain inputs that are unobservable.
The table below provides a summary of the valuation techniques, key unobservable inputs and the lower and upper range of such
unobservable inputs, by type of Level 3 asset/liability. The lower and upper range mentioned in the overview represent the lowest and
highest variance of the respective valuation input as actually used in the valuation of the different financial instruments. Amounts and
percentages stated are unweighted. The range could change from period to period subject to market movements and change in Level
3 position. Lower and upper bounds reflect the variability of Level 3 positions and their underlying valuation inputs in the portfolio, but
do not adequately reflect their level of valuation uncertainty. For valuation uncertainty assessment, please refer to section below
‘Sensitivity analysis of unobservable inputs (Level 3)’.
ING Bank Annual Report 2015 112