ING Direct 2015 Annual Report Download - page 166

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
Credit risk appetite
Credit risk appetite is the maximum level of credit risk ING Bank is willing to accept for growth and value creation. This credit risk
appetite is linked to the overall Bank-wide risk appetite framework. Articulating the credit risk appetite is a complex task that requires
balanced views. It can be expressed in quantitative and qualitative measures. Having a credit risk appetite achieves:
• Clarity over the credit risks that ING Bank can assume; focused execution in balancing ING Bank's credit risk exposures within the
boundaries of ING's strategy, target setting and prudent risk management;
• Consistent communication to different stakeholders;
• Guidelines how to align reporting and monitoring tools with the organisational structure and strategy;
• Alignment of business strategies and key performance indicators of business units with the overall ING Bank credit risk appetite by
means of the MTP.
Credit risk appetite is present across different levels within ING Bank, at the portfolio level as well as transaction level. The various
credit risk appetite components at the portfolio and transaction level together result in the credit risk appetite framework.
Credit risk appetite statements are defined top-down across the credit risk categories (pre-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 default. For
each credit risk metric a boundary is set that is cascaded down and monitored on a monthly basis. The adherence to the boundaries
and the pro-active approach to manage the portfolio within the risk appetite boundaries are part of the key performance indicators of
the business line managers and as such have a direct impact on their remuneration.
Concentration risk framework
Country risk framework
Country risk is the risk specifically attributable to events in a specific country (or group of countries). Country risk is the risk of loss that
ING Bank faces associated with lending, pre-settlement, money market and investment transactions in any given country or group of
countries, as a result of country risk events. A country risk event can be described as any event or crisis, which relates mostly to large
domestic economic, financial and political shocks, as well as transfer or exchange restrictions, affecting all counterparties in a specific
country in an indiscriminate way. The occurrence of a country risk event may cause all counterparties in a country to be unable to
ensure timely payments, despite their willingness to meet their contractual debt obligations. As such, country risk is an additional
factor to be taken into account in the credit approval process of individual customers, as the country risk event probability may impact
the default probability of individual counterparties.
ING Bank Annual Report 2015 164