ING Direct 2015 Annual Report Download - page 206

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
2015
2014
amounts in thousands of euros
Corporate
Financial
Institutions Corporate
Financial
Institutions
Credit Spread (CSO11)
Risk classes
1 (AAA)
0
–60
62
24
2–4 (AA)
13
–108
–21
–100
5–7 (A)
12
–207
21
–76
8–10 (BBB)
–61
–180
–52
–116
11–13 (BB)
–88
–64
–47
–45
14–16 (B)
–3
–2
–14
–18
17–22 (CCC and NPL)
–12
–11
–44
–6
Not rated
3
1
–1
–1
Total
–136
–631
–96
–338
1 Credit Spread Sensitivity (CS01) measures the impact on value of a 1 basis point increase in credit spreads.
Funding and liquidity risk
Introduction
Funding and liquidity risk is the risk that ING Bank or one of its subsidiaries cannot meet its financial liabilities when they come due, at
reasonable cost and in a timely manner.
ING Bank incorporates funding and liquidity management in its business strategy. In order to optimise it’s funding and liquidity risk
management, ING Bank has developed a funding and liquidity risk framework aimed at maximising liquidity access and minimising
funding risks and costs. The main objective of ING’s funding and liquidity risk management is to maintain sufficient liquidity to ensure
safe and sound operations under normal market circumstances and in times of stress.
Funding and liquidity risk includes three types of risk, two under normal, and one under stress conditions:
1. Business as usual situation:
• Structural funding & liquidity risk: The potential negative impact on an organisation’s income or cash position due to
mismatches between expected liquidity tenors of assets and liabilities.
• Customer behaviour funding & liquidity risk: The potential negative impact on an organisation’s income or cash position due to
liquidity options embedded in assets and liabilities that include a customer behaviour risk.
2. Stress situation:
• Stress funding & liquidity risk: The risk an organisation may become unable to meet its financial obligations when due, because
insufficient cash is available or cannot be generated in time at a reasonable costs by attracting new unsecured funding or
rolling over existing funding, or selling / repo-ing assets, potentially resulting in default.
Liquidity risk can materialise both through trading and non-trading positions.
Governance
Within ING Bank, the Management Board Bank, staff (Risk and Finance) departments, Capital Management and the Bank Treasury
function have oversight of and are responsible for managing funding and liquidity risk.
Liquidity risk management within ING Bank falls under the supervision of the ALCO function, with ALCO Bank as the highest approval
authority overseeing the execution of the overall strategy set by the Board.
ALCO Bank determines the liquidity risk (limit) framework and appetite after which this is cascaded down in the organisation under the
responsibility of the lower level ALCOs. ING Bank’s liquidity risk framework is based on the three lines of defence concept, whereby risk
principles are implemented, monitored and controlled in conjunction with both first and second line functions within the Bank.
The Management Board Bank defines the funding and liquidity strategy, target funding and liquidity position and the risk appetite
based on recommendations from Bank Treasury, Capital Management, Balance Sheet Risk and Finance.
The identification of liquidity risks is primarily a responsibility of the 1st line commercial function.
Credit spread sensitivities per risk class and sector at year-end
ING Bank Annual Report 2015 204