ING Direct 2015 Annual Report Download - page 274

Contents
Report of the
Executive Board
Corporate
Governance
Consolidated
annual accounts
Parent company
annual accounts
Other
information
Additional
information
Additional Pillar III information - continued
The ING Bank portfolio is characterised by significant amounts of secured lending especially in the key areas of residential and
commercial mortgages, structured finance and leasing. Amount of collateral often has a significant impact on provisioning and LGD
which directly affects risk density. The cover values are pre-haircut but indexed values and exclude any cost of liquidation. Covers can
either be valid for all limits, sub-limits or a particular outstanding of a borrower, the latter being the most common. The guarantees for
the same portfolio relate to mortgages covered by governmental insurers under the Nationale Hypotheek Garantie (NHG) in the
Netherlands.
The Risk Management Paragraph of the Annual Report includes an extensive cover section where exposures are categorised into
different Value-to-Loan (VLT) buckets which gives insight in the level of collateralisation of ING Bank’s portfolio.
Credit default swaps
ING Bank participates in the credit risk derivative trading market, as a net purchaser of credit risk protection from other counterparties.
ING Bank has purchased a small amount of credit risk protection for hedging purposes, usually in order to reduce concentration on
certain ‘legal one obligor groups’ without having to reduce ING Bank’s relationship banking activities. ING Bank does not actively sell
Credit Default Swaps (CDS) for hedging or investment purposes. Although CRR/CRD IV rules permit a reduction of credit risk capital
under certain circumstances where ING Bank has purchased CDS protection, ING Bank does not currently make use of this provision in
determining its CRR/CRD IV capital base.
2015
2014
Includes both AIRB and SA portfolios; excludes securitisations, equities and ONCOA.
There were no credit derivatives bought for hedging purposes at the end of the year in 2015.
The figures above represent the notional amount of credit risk default swaps that ING Bank has entered into for the purpose of
hedging. The credit risk on the counterparties associated with credit default swap protection bought is included in the Pre-Settlement
risk calculations for the given counterparty, and not in the figures above. In addition, ING engages in CDS trading both in credit
protection bought and credit protection sold. These figures essentially cancel each other. However as they are part of the trading
book, these figures are provided in the Market Risk section. For credit default protection sold, ING Bank incurs synthetic issuer risk, on
which capital is calculated, depending on its purpose, either hedging under the banking book or trading.
Exposures secured by guarantees received
From time to time, ING Bank extends loans for which it receives a specific financial guarantee from a non-related counterparty or
obligor. The figures in the table below represent the READ that has been guaranteed by these non-related parties. It does not include
non-guaranteed amounts. For example, if a given credit risk is only partially guaranteed by a third party then only the portion of the
amount which is guaranteed is included in the figures below. For the Residential Mortgages portfolio the guarantees relate to
mortgages covered by governmental insurers under the Nationale Hypotheek Garantie (NHG) in the Netherlands. The NHG guarantees
the repayment of a loan in case of a forced property sale.
2015
2014
Sovereigns Institutions Corporate
Secured by
Res. Mortgage Other retail Total Total
Under AIRB Approach
1,944
4,194
48,659
25,605
6,424
86,826
85,622
Total
2.2%
4.8%
56.0%
29.5%
7.4%
100.0%
100.0%
Includes AIRB portfolio only; excludes securitisations, equities and ONCOA.
These figures exclude any guarantees which are received from a party related to the obligor, such as a parent or sister company. The
figures also exclude any guarantees that may be implied as a result of credit default swap activities. The figures do include amounts
that are guaranteed through an unfunded risk participation construction.
Maturity profile
Outstandings by tenor bucket
The table below shows the outstanding of ING Bank by run-off profile. The figures assume that no new credit risks are introduced into
the portfolio and that there are no delays in repayments associated with non-performing loans, nor are there write offs associated
with provisions. The portfolio tenor is implied by the difference in the figures between two periods.
Credit derivatives used for hedging purposes
– credit protection bought
n.a.
70
– credit protection sold
Credit risks from credit risk derivatives
Exposures secured by third party guarantees received
ING Bank Annual Report 2015 272