ING Direct 2015 Annual Report Download - page 200

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
Year-on-year variance analysis
The foreign investments in Chinese Yuan increased due to an increase in share price. The USD position increased mainly due to an
appreciation of USD against the EUR. The INR Foreign Investments increased due to different accounting treatment of the stake in
Vysya after the merger with Kotak Mahindra, INR appreciation against the Euro, and Vysya share price increase.
Equity price risk in banking books
Governance
ING Bank maintains a strategic portfolio with substantial equity exposure in its banking books. Local offices are responsible for the
management of the equity investments positions. Market risk is responsible for monitoring and reporting the regulatory capital for
Equity Investments on a monthly basis. Market risk acts independently from the management of the equity investments in monitoring
and reporting of the equity investments risk.
Risk Profile
Equity price risk arises from the possibility that equity security prices will fluctuate, affecting the value of equity securities and other
instruments whose value reacts similarly to a particular security, a defined basket of securities, or a securities index. This equity
exposure mainly consists of the investments in associates and joint ventures of EUR 842 million (2014: EUR 861 million) and equity
securities held in the available-for-sale (AFS) portfolio of EUR 4,434 million (2014: EUR 2,718 million). The value of equity securities held
in the available-for-sale portfolio is directly linked to equity security prices with increases/decreases being recognised in the
revaluation reserve, except in the case of impairment. Investments in associates and joint ventures are measured in accordance with
the equity method of accounting and the balance sheet value and therefore not directly linked to equity security prices.
2015
2014
Gross unrealised gains
2,662
2,019
Gross unrealised losses
–29
Total
2,633
2,019
Year-on-year variance analysis
During the year ended 31 December 2015 the revaluation reserve relating to equity securities held in the available-for-sale portfolio
fluctuated between a month-end low amount of EUR 1,931 million (2014: EUR 996 million) and a high amount of EUR 2,709 million
(2014: EUR 2,019 million). The AFS portfolio increased from EUR 2.7 billion in 2014 to EUR 4.4 billion in 2015, mainly due to the increase
in position value of Bank of Beijing (EUR 0.5 billion) and the merger of ING Vysya Bank with Kotak Mahindra Bank, as a result of which
the ING stake in Kotak has been included in the AfS position (position value EUR 1.2 billion).
Real Estate price risk in banking books
Real estate price risk arises from the possibility that real estate prices fluctuate. This affects both the value of real estate assets and
earnings related to real estate activities.
Governance
Real Estate is a run-off business consisting of Real Estate Development and Real Estate Investment Management activities which are
being wound down by sale of assets, strict execution of contract maturity or through portfolio sales.
Risk profile
ING Bank has two main different categories of real estate exposure on its banking books: first, the own buildings ING Bank occupies,
and second, development assets, which mostly consists of former Real Estate Development and Real Estate Investment Management
activities. The total real estate exposure amounts to EUR 1.3 billion (excluding property from foreclosures and third party interest). ING
Bank has EUR 0.2 billion recognised at fair value through profit and loss and EUR 1. 1 billion is recognised at cost or revalued through
equity (with impairments going through profit and loss). A split on the real estate exposure per continent and sector based on the risk
management view is shown below.
Equities Unrealised Gains and Losses in the AFS portfolio
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