ING Direct 2015 Annual Report Download - page 181

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
All ISFA, INSFA and IBNR provisions are reported and calculated by using a common tool across ING Bank. In case there is objective
evidence that one of the default triggers is applicable, ISFA or INSFA provisions are calculated. An analysis takes place on a quarterly
basis in order to determine the appropriate level of LLP and Risk Costs. The ING Bank Provisioning Committee (IPC) discusses and
approves the LLP for ING Bank, on the basis of proposals originating from ING Business Units.
At the end of 2015, ING Bank held specific (ISFA) and collective provisions (INSFA) of EUR 3,331 million and EUR 1,686 million,
respectively (2014: EUR 3,519 million and EUR 1,696 million respectively), representing the difference between the amortised cost of
the portfolio and the estimated recoverable amount discounted at the effective rate of interest. In addition, there is EUR 769 million
(2014: EUR 780 million) in provisions (IBNR) against the performing portfolio.
Wholesale Banking Retail Banking Benelux
Retail Challengers &
Growth Markets Total ING Bank
2015
2014
2015
2014
2015
2014
2015
2014
Opening Balance
2,259
2,459
2,529
2,264
1,207
1,431
5,995
6,154
Changes in the composition of the group
0
0
0
0
0
–170
0
–170
Write-offs
–520
–715
–956
–716
–242
–298
–1,718
–1,729
Recoveries
32
49
50
48
9
8
91
105
Increase/(decrease) in loan loss provision
478
500
602
857
267
237
1,347
1,594
Exchange rate or other movements
122
–34
–26
76
–25
–1
71
41
Closing Balance
2,371
2,259
2,199
2,529
1,216
1,207
5,786
5,995
1 At the end of 2015, the stock of provisions included provisions for amounts due from banks: EUR 14 million (2014: EUR 6 million)
The total risk costs in 2015 were just above EUR 1.3 billion confirming the downward trend since 2014. In 2015 the average risk costs
were close to EUR 300 million per quarter, compared to almost EUR 400 average quarterly risk costs in 2014, displaying the improving
risk cost trend on the back of economic recovery. In relation to the average RWA, total risk costs were approximately 44 basis points,
within the range of the pre-crisis 40-45 basis point ‘expected loss’ benchmark. The total stock of provisions decreased to EUR 5.8 billion
from EUR 6.0 billion. While these signs are encouraging, ING Bank remains vigilant for any potential impact that imbalances in
emerging economies and financial markets could have on clients and business units.
Risk costs at Wholesale Banking increased in Q1 but have since then shown a declining trend due to lower risk costs in Structured
Finance and Real Estate Finance compared to 2014. Risk costs declined in Retail Netherlands as well supported by the recovery of the
Dutch economy and increase in house prices. Retail Belgium also witnessed a decline in risk costs, especially in business lending.
Challengers and Growth markets have witnessed stable risk costs over the quarters.
There was an improvement in the bank coverage ratio to 38.5% (2014: 35.5%) mainly due to a faster outflow from the non-performing
loan portfolio and a comparatively lesser decrease in stock provision level.
Large parts of the Investment portfolio are not accounted for at amortised costs (Loans & Receivables or Held-to-Maturity) and
therefore out of scope for LLP. Instead, these assets are evaluated for impairment. The ING Bank Impairment Meeting held together
with the IPC is a quarterly process that reviews all assets that are subject to an IFRS-EU impairment test.
Forbearance
In July 2014, EBA has provided a final draft definition on forbearance and non-performing exposures, which was a further refinement
of the draft definition published in 2013. ING Bank has followed up on the EBA recommendations, by updating and implementing its
forbearance policy in 2014.
The definition of forbearance is: ‘Forbearance occurs when the client is considered to be unable to meet its financial commitments
under the contract due to financial difficulties, and based on these difficulties ING decides to grant concessions towards the client by
either loan modification or refinancing’. Modification is defined as changing the terms and conditions of the contract to enable the
client to service the debt. Refinancing relates to putting in place a new loan contract to ensure the total or partial repayment of an
existing loan contract, of which the debtor is unable to comply with. Examples of forbearance measures are: postponement and/or
reduction of loan principal and/or interest payments, extended payment terms, debt consolidations and deferral of foreclosures.
In 2015 a minor adjustment was made to the forbearance policy. Previously the default triggers 'more than 30 days past due and re-
forborne', were implemented conservatively for all forborne assets, while currently the policy states, in accordance with EBA, that it is
only applicable for forborne assets which were non-performing forborne in the past.
Provisions: ING Bank portfolio1
ING Bank Annual Report 2015 179