ING Direct 2015 Annual Report Download - page 164

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
Cybercrime
Cybercrime is a continuous threat to companies in general and to financial institutions specifically. Both the frequency and the
intensity of attacks increase on a global scale. ING continued building on its Cybercrime Resilience Programme moving to further
enhance the control environment to protect, detect and respond to e-banking fraud, Distributed Denial of Service (DDoS) and targeted
attacks (also called Advanced Persistent Threats). Additional controls are being embedded in the organisation as part of the overall
internal control framework and re-assessed against existing and new threats.
Credit risk
Introduction
The credit risk section provides information on how ING Bank manages, measures and monitors credit risk and gives an insight into the
ING Bank portfolio from a credit risk perspective. Prior to providing insight into the portfolio, we will explain how ING Bank ensures that
credit risk is properly addressed and managed within ING Bank.
Governance
Credit Risk (CR) within ING Bank is part of the second line of defence (the front office being the first, internal audit the third) and aligns
the credit risk taking with the strategic planning of ING Bank. It is responsible for reviewing and managing credit risk including
environmental and social risk for all types of counterparties. CR consists of line credit risk managers who are responsible for their
business lines and manage specific portfolios and experts who support both the line credit risk manager as well as the business with
tools like credit risk systems, policies, models and reporting. To ensure the independence of the risk function the 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 lines by means of the top-down risk appetite framework,
which sets concentration limits for countries, individual counterparties, counterparty groups and investment activities. The aim is to
expand relationship-banking activities, while maintaining stringent internal risk/reward guidelines and controls which is also linked to
the Medium Term Plan (MTP) process.
Credit analysis at portfolio level is a function of different concentration levels and various metrics like Economic Capital (EC),
Regulatory Capital (RC), Exposure at Default (EAD), Probability of Default (PD) and Loss Given Default (LGD). The risk/reward is
monitored and managed at portfolio level by Risk and Finance together to ensure efficient use of ING Bank’s capital. Credit analysis at
facility level is also risk/reward-oriented in that the level of credit analysis is a function of the risk amount, tenor, structure (e.g. covers
received) of the facility, and the risks entered into. Risk adjusted return on capital (RAROC)-based tools are used internally to ensure a
proper balance of risk and reward within the portfolio and concentration parameters. ING Bank’s credit analysts make use of publicly
available information in combination with in-house analyses based on information provided by the counterparty, peer group
comparisons, industry comparisons and other quantitative techniques and tools.
Within ING Bank, the ultimate authority to approve or decline credit proposals resides with the Management Board Banking (MBB). The
MBB has further delegated authorities, based on amounts and tenors to lower levels in the organisation. Transactions are approved via
a dual signatory approval system that requires an individual sign off from both front office and credit risk management. For larger and
higher risk credits a committee structure exists whereby the credit risk chair takes the final decision with support of the respective
committee members, thereby ensuring accountability. Retail business units have delegated authority to decide within policies and
mandates approved by CR and any decisions outside those policies or above the delegated mandate require a specific credit risk
approval.
The CR role encompasses the following activities:
• Measurement, monitoring and management of the credit risks in the Bank’s portfolio;
• Challenging and approving new transactions or any changes to previously approved terms and conditions applicable to clients;
• Management of the levels of provisioning and risk costs, and advise on impairments; and
• Providing consistent policies and systems and tools to manage the credit lifecycle of all credit risk taking activities.
The following committees are in place to discuss and approve transactions and policies from a CR point of view. The Global Credit
Committee for Transaction Approval (GCC(TA)) is mandated to discuss and approve transactions entailing taking of credit risks. Next to
that is the Global Credit Committee Policy or ’GCC(P)’ which is authorised to discuss and approve policies, methodologies and
procedures related to Credit, Country and Reputation Risks for ING Bank. The Credit Risk Committee (CRC) is authorised to discuss and
approve policies, methodologies and procedures related to Credit Risk (with the exception of issues which are mandated to GCC(P))
within ING Bank.
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