ING Direct 2015 Annual Report Download - page 272

Contents
Report of the
Executive Board
Corporate
Governance
Consolidated
annual accounts
Parent company
annual accounts
Other
information
Additional
information
Additional Pillar III information - continued
Over-the-counter and exchange traded derivatives
This section provides a quantitative and qualitative analysis of ING’s Credit Risk that arises from its derivatives transactions. This
quantifies notional derivatives exposure, including whether derivatives are traded over-the-counter (OTC) or traded on recognised
exchanges (ETD). Where the derivatives are OTC, the table shows how much is settled by central counterparties and how much is not,
and provides a description of the collateral agreements in place.
2015
2014
Notional
MtM
Notional
MtM
OTC derivatives
– CCP
2,052,351
–2,190
1,824,940
–3,608
– Non-CCP
1,759,442
–1,353
1,723,101
–2,555
ETD derivatives
46,472
–28
53,800
–3
Total
3,858,265
–3,571
3,601,841
–6,166
Includes both AIRB and SA portfolios; excludes securitisations, equities and ONCOA.
ETD Derivatives settle price movements daily. Therefore there is no MtM build-up that generates exposure.
From the total notional value of OTC derivatives transactions that are not cleared by a CCP, 82% has been documented under bilateral
(92%) and unilateral (8%) CSA agreement.
• The notional value of transactions that are done under bilateral CSA agreements relates for 69% to Interest Rate derivatives, for
25% to FX derivatives and for 6% to Credit, Equity and Commodity Derivatives.
• Unilateral CSA agreements relate mainly to agreements that are unilateral against ING and mainly consist of Interest Rate
Derivatives.
The remaining 18% of the total notional value of OTC derivatives transactions that are not cleared by a CCP are not supported by a
CSA agreement or a Clearing Agreement and mainly relate to Corporates with small credit limits and mainly comprises of Interest
Rate Derivatives (47%) and FX Derivatives (49%).
Securities financing by product type
The table below is based on the mark-to-market plus (regulatory) add-on methodology used for calculating CRR/CRD IV RWA for
determining the gross exposures. The methodology to calculate the READ is called the Current Exposure Method (CEM) and together
with the other building blocks (PD, LGD and Maturity) it allows ING Bank to classify virtually all of its Securities Financing exposures
under the AIRB approach.
2015
2014
Sovereigns
Institutions
Corporate
Secured by
Res. Mortgage
Other retail
Total
Total
Bond Financing Given
543
6,306
134
6,983
5,335
Equity Financing Given
3,719
1,421
5,140
6,583
Bond Financing Taken
88
2,121
154
2,363
2,079
Equity Financing Taken
1,167
134
1,301
1,597
Total
631
13,313
1,843
15,787
15,595
Includes both AIRB and SA portfolios; excludes securitisations, equities and ONCOA.
The slight increase in the Bond financing given portfolio is mainly driven by increased business in Asia.
Credit risk mitigation
For the determination of the Credit Risk applicable amount for Pre-Settlement deals, ING Bank first matches the trades with similar
characteristics to determine their eligibility for offsetting. This offsetting effect is called ‘compensation’. Subsequently, ING Bank
reduces the amount by any legal netting that may be permitted under various types of Master Agreements (such as ISDAs and
GMRAs). Lastly, the amount is further reduced by any collateral that is held by ING Bank under CSAs or other similar agreements.
For the other risk types and especially lending, covers are received which is intended to reduce the losses incurred subsequent to an
event of default on an obligation a customer may have towards ING Bank. These are subdivided into four groups called collateral
values mortgages, cover values cash, cover value guarantees and other physical covers.
Credit risk derivatives
Securities financing by product type in READ
ING Bank Annual Report 2015 270