ING Direct 2015 Annual Report Download - page 249

Contents
Report of the
Executive Board
Corporate
Governance
Consolidated
annual accounts
Parent company
annual accounts
Other
information
Additional
information
Additional Pillar III information - continued
in EUR billion
2015
2014
Opening amount
226.7
222.2
Book size1
7.6
5.9
Divestments/De-consolidations
–1.5
–7.0
Book quality2
–8.4
0.8
Model updates3
5.6
–2.2
Methodology and policy4
–2.8
–3.2
Foreign exchange movements
5.5
5.1
Other
0.3
–1.6
Total Credit RWA movement excluding CVA RWA
6.3
–2.1
CVA RWA movement
–1.4
6.6
Total Credit RWA movement
4.9
4.5
Closing amount
231.6
226.7
Excluding equities and ONCOA.
1 Book size: organic changes in book size and composition (including new business and maturing loans).
2 Book quality: quality of book changes caused by experience such as underlying customer behaviour or demographics including changes to credit quality of
portfolios.
3 Model updates: model implementation, change in model scope or any change to address model malfunctions including changes through model calibrations /
realignments.
4 Methodology and policy: methodology changes to the calculations driven by internal changes in policy and regulatory policy changes.
Key changes
In 2015, Credit RWA increased by EUR 4.9 billion to EUR 231.6 billion at the end of the year, including a decline in CVA RWA of EUR 1.4
billon.
• Book size: The portfolio growth, excluding divestments/de-consolidations and FX fluctuations, led to a EUR 7.6 billion higher RWA,
mainly driven by the Wholesale Banking and Challenger & Growth portfolios. Growth was seen in the Corporates and Structured
Finance book, as well as in the mortgage portfolios in Belgium and DiBa Germany. In Australia, the white label mortgage portfolio
was sold in Q2, decreasing the portfolio but this was partially compensated by growth in own label in the second half year of 2015.
Growth was partially compensated by volume decline witnessed in the Dutch mortgage portfolio.
• Divestments/ de-consolidations: After the de-consolidation of NN Group, the internal guarantee for the funding of NN Bank has
been released decreasing RWA by EUR 0.9 billion. In addition, the transfer of residential mortgages from WestlandUtrecht to NN
Bank as part of the overall strategy for WestlandUtrecht, continued over 2015, further reducing RWA by EUR 0.6 billion.
• Book quality: As a result of the improving economies in most of our key retail countries, the book quality has improved over the
year, decreasing RWA overall by EUR 8.4 billion. Primarily in the Dutch mortgage portfolio, where improved economic conditions
especially with respect to house prices and employment in the Netherlands, accompanied with a more efficient arrears
management has led to a significant RWA reduction of EUR 3.2 billion. In addition to this, the Real Estate book has shown signs of
improvement which increased the cure rate of the portfolio and reduced risk costs. The remainder of the RWA reduction is visible
throughout the portfolio as a result of restructuring and improved client ratings. However, deteriorating conditions in Russia and
Ukraine have led to a downgrade in ING’s rating of these countries and an increase in the non-performing loan book, increasing
RWA by over EUR 2.0 billion.
• Model updates: driven by regulatory guidance were undertaken towards the end of the year and increased RWA by EUR 5.6 billion.
The Leveraged Finance LGD model update was the main contributor increasing RWA by EUR 4.2 billion. The Commercial Property
Finance LGD model update increased RWA by EUR 1.1 billion.
• Methodology and policy: The main drivers for the EUR 2.8 billion decrease were the LGD floor update for mortgages, which was
previously determined on a facility level whereas now it is determined on a portfolio level and the periodical update of the
regulatory c-factor (related to the hypothetical capital of the CCP) implemented to calculate capital for the Default Fund
Contribution held by ING Bank at central clearing houses.
• Foreign exchange movements: The impact of FX movements was significant. The currency fluctuations caused RWA to
increase by EUR 5.5 billion due to the appreciation of the US Dollar (11.34%) against the Euro which increased RWA by EUR 5.1
billion. The depreciating Turkish Lira (–10.83%) partially compensated for this increase reducing RWA by EUR 0.7 billion.
• Other: The remaining RWA increase of EUR 0.3 billion was the result of multiple small changes.
• CVA RWA movement: RWA attributable to CVA capital movements decreased during 2015 by EUR 1.4 billion to EUR 5 billion. The
decrease is due to Securities Financing transactions being excluded from the scope of the calculation as the recently published
EBA requirements for CVA RWA for Securities Financing transactions, do not apply for our portfolio .
Overall, RWA management has a very high priority throughout ING Bank in all aspects of our business. From product design, to pricing,
to divestment decisions, RWA management is extensively monitored, reported, and managed at all levels of the organisation.
Flow statement for Credit RWA
ING Bank Annual Report 2015 247