ING Direct 2015 Annual Report Download - page 197

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 ES is mainly influenced by the sensitivity of savings to interest rate movements and is partially offset by the sensitivity of
mortgages. The investment of own funds only impacts the ES marginally, as only a relative small part has to be (re)invested within the
1-year horizon.
Year-on-year variance analysis
In line with previous year, the earnings with a one year horizon as per 2015 year end are relatively insensitive to rate changes, if
compared to the net interest income. The earnings sensitivity for an upward shock has a positive impact. Positive earnings sensitivity
implies that when rates increase, the positive impact on interest received on assets is larger than the negative impact of interest paid
on liabilities. The change of the Earnings sensitivity of the +100 bps scenario within Wholesale Banking is mainly the result of
investments done by the Bank Treasury function, which is reported under Wholesale Banking.
Net Present Value (NPV) at Risk
NPV-at-Risk measures the impact of changing interest rates on value. As a full valuation approach is applied, the risk figures include
convexity risk that results from embedded optionalities like mortgage prepayment options. As for ES calculations, an instantaneous
shock of 1% is applied.
The full value impact cannot be directly linked to the balance sheet or profit and loss account, as fair value movements in banking
books are generally not reported through the profit and loss account or through equity. The value mutations are expected to
materialise over time in the profit and loss account, if interest rates develop according to forward rates throughout the remaining
maturity of the portfolio.
2015
2014
–100 bps
+100 bps
–100 bps
+100 bps
By currency
Euro
–583
–1,855
169
–1,749
US Dollar
–12
42
–4
26
Other
–58
36
1
5
Total
–653
–1,777
166
–1,718
2015
2014
–100 bps
+100 bps
–100 bps
+100 bps
By business
Wholesale Banking
–76
53
183
–120
Retail Banking Benelux
–159
–270
–109
–130
Retail Challengers & Growth Markets
–640
–274
–285
–29
Corporate Line Banking
222
–1,286
377
–1,439
Total
–653
–1,777
166
–1,718
2015
2014
–100 bps
+100 bps
–100 bps
+100 bps
By accounting category
Amortised Cost
–1,019
210
–1,203
1,292
Fair value through equity
800
–2,248
1,234
–2,920
Fair value through profit and loss
–434
261
135
–90
Total
–653
–1,777
166
–1,718
The NPV-at-Risk is dominated by the interest rate sensitive long-term investments of own funds, as the equity itself is not modelled
and hence is not presented as an offset for the investments of own funds. The value of these investments is impacted significantly if
interest rates move up by 1%. Convexity risk in retail portfolios also contributes to the overall NPV-at-Risk. The asymmetry between
the NPV-at-Risk for a –100 bps and a +100 bps shock is primarily caused by the flooring the interest rates to zero for the –100 bps
scenario.
NPV-at-Risk banking books per currency (instantaneous parallel shock)
NPV-at-Risk banking books per business (instantaneous parallel shock)
NPV-at-Risk banking books per accounting category (instantaneous parallel shock)
ING Bank Annual Report 2015 195