ING Direct 2015 Annual Report Download - page 161

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
The tables below provide ING Bank’s EC and RC by risk type and business line. For 2015, both the total RC and EC increased compared
to 2014. Both are well below the total amounts of available capital of EUR 51,052 million based on CRR/CRD IV phased-in rules. Details
regarding the available capital can be found in the Capital Management paragraph, section ‘Capital Adequacy Assessment’.
Economic capital
Regulatory capital
2015
2014
2015
2014
Credit risk
20,057
21,353
21,234
20,148
Market risk
8,581
7,369
771
858
Business risk
2,571
2,609
Operational risk
4,748
3,781
3,451
2,700
Total banking operations
35,957
35,112
25,456
23,706
Economic capital
Regulatory capital
2015
2014
2015
2014
Wholesale Banking
12,127
13,236
12,195
11,038
Retail Banking Benelux
9,237
8,459
7,159
6,907
Retail Challengers & Growth Markets
10,729
9,562
5,886
5,451
Corporate Line1
3,864
3,855
216
310
Total banking operations
35,957
35,112
25,456
23,706
1 Corporate Line includes funding activities at ING Bank level, internal transactions between business units and the Corporate Line, and is managed by Capital
Management.
The main changes in and differences between ING Bank’s economic capital and regulatory capital are:
• As of 2015, the final EBA guidelines on common procedures and methodologies for the SREP are taken into account. As a result,
the capital adequacy assessment in this section disregards any inter-risk diversification in the EC calculation, although ING Bank is
of the opinion that applying diversification across different risk types reflects economic reality. In case diversification was taken
into account, the total EC would decrease with EUR 5.7 billion to EUR 30.3 billion. Note that for RC diversification was never taken
into account;
• Apart from the below described risk specific differences, the EC numbers are based on a 99.95% confidence level, while the
confidence level is 99.9% for RC. The EC figures include business risk, while there is no business risk defined for RC;
• The credit risk EC methodology includes internally calibrated asset correlations and excludes conservative floors otherwise present
in the credit risk RC calculations. Furthermore, credit risk EC includes transfer risk while RC does not. Economic capital for credit risk
decreased in 2015, mainly due to double counted CVA capital in December 2014, besides a decrease of CVA exposure and ONCOA.
More information on the Credit Risk EC can be found in the ‘Credit Risk Capital and Measurement’ section;
• The market risk EC is higher than the RC primarily due to the inclusion of the interest rate risk in the banking books in EC. In RC,
only market risk in trading books is in scope. Furthermore, for Equity Investments the EC figures are reported under market risk,
while the RC figures are reported under credit risk. The reported EC numbers increased mainly due to an appreciation of the Bank
of Beijing position, resulting in higher FX translation risk due to an increase in the CNY mismatch and increase in equity price risk.
More information on the Market Risk EC, please refer to the ’Economic capital for market risk’ section;
• For operational risk, the EC calculations are done using the same methodology as for RC apart from the application of a 99.95%
confidence level. The increase in 2015 in both RC and EC is due to a model recalibration to improve the accuracy in the tail of the
loss distribution and the increased impact of external loss data. More information on the Operational Risk EC, please refer to the
’Advanced Measurement Approach’ described in the Non-Financial Risk section;
EC and RC do not cover liquidity risk: the risk that ING Bank or one of its subsidiaries cannot meet its financial liabilities, at reasonable
cost and in a timely manner, when they come due. ING Bank has a separate liquidity management framework in place to manage this
risk, which is described in the funding and liquidity risk section.
Regulatory environment
After the turmoil in the financial markets and the subsequent need for governments to provide aid to financial institutions, financial
institutions have been under more scrutiny from the public, supervisors and regulators. This has resulted in more stringent regulations
intended to avoid future crises in the financial system and taxpayers’ aid in the future.
Economic and Regulatory Capital by risk type
Economic and Regulatory Capital by business line combination
ING Bank Annual Report 2015 159