ING Direct 2015 Annual Report Download - page 199

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
Governance – Core banking business
Every business unit hedges the FX risk resulting from core banking business activities into its base currency. Consequently, assets and
liabilities are matched in terms of currency.
Governance – FX translation result
ING Bank’s strategy is to protect the target common equity tier 1 ratio against FX rate fluctuations within a certain risk appetite, whilst
limiting the volatility in the profit and loss account. Therefore, hedges are only done to the extent that they can be hedge accounted
for against equity. Taking this into account, the common equity tier 1 ratio hedge can be achieved by deliberately taking foreign
currency positions equal to certain target positions, such that the target common equity tier 1 capital and risk-weighted assets are
equally sensitive in relative terms to changing FX rates. A selection of emerging market currencies that meet specific requirements do
not have a target position, but are allowed to remain open under the policy.
Risk profile – FX translation result
The following table presents the currency exposures in the banking books for the most important currencies for FX translation result.
Positive figures indicate long positions in the respective currency.
Foreign Investments
Hedges
Net exposures
in EUR thousand
2015
2014
2015
2014
2015
2014
US Dollar
2,869
2,601
65
–189
2,935
2,412
Pound Sterling
992
635
–179
21
812
656
Polish Zloty
1,881
1,774
–854
–848
1,027
926
Australian Dollar
3,662
3,665
–3,329
–3,309
332
356
Turkish Lira
2,186
2,033
–3
–3
2,183
2,030
Chinese Yuan
2,817
2,289
–168
–166
2,649
2,123
Korean Won
838
800
–662
–635
176
165
Indian Rupee
1,172
701
-
1,172
701
Brazilian Real
211
277
-
211
277
Russian Rouble
429
502
–181
–311
248
191
Other currency
2,615
2,359
–1,385
–1,359
1,230
1,000
Total
19,672
17,636
–6,696
–6,799
12,977
10,837
In order to measure the remaining sensitivity of the target common equity tier 1 ratio against FX rate fluctuations, the common
equity tier ratio at Risk (cTaR) measure is used. It measures the drop in the common equity tier 1 ratio from the target when stressing
a certain FX rate. The stress scenario for a currency corresponds with the scenario that causes a drop in the common equity tier 1
ratio. A negative sign thus indicates that a depreciation of the corresponding currency against the Euro will result in a drop of the
common equity tier 1 ratio.
cTaR
Stress Scenario
2015
2014
2015
2014
Currency
US Dollar
0.13%
0.12%
15%
15%
Pound Sterling
0.01%
0.00%
–15%
15%
Polish Zloty
0.00%
0.00%
15%
–15%
Australian Dollar
0.00%
0.00%
20%
20%
Turkish Lira
0.07%
0.06%
–25%
–25%
Chinese Yuan
0.09%
0.08%
–15%
–15%
Korean Won
0.01%
0.01%
–15%
–15%
Indian Rupee
0.05%
0.04%
–20%
–20%
Brazilian Real
0.01%
0.02%
–25%
–25%
Russian Rouble
0.01%
0.01%
–20%
–20%
The US Dollar is the main currency in terms of Net Exposure as the risk-weighted assets position in US Dollar is most significant besides
the Euro.
Net banking currency exposures banking books
Common Equity Tier 1 ratio sensitivity ING Bank
ING Bank Annual Report 2015 197