ING Direct 2015 Annual Report Download - page 279

Contents
Report of the
Executive Board
Corporate
Governance
Consolidated
annual accounts
Parent company
annual accounts
Other
information
Additional
information
Additional Pillar III information - continued
Originator securitisations
ING Bank originates own securitisation transactions for economic and regulatory capital purposes, as well as liquidity and funding
purposes. As of 31 December 2015, there were no synthetic transactions..
Liquidity and funding
Although the most senior tranches in securitisations are no longer efficient to release regulatory capital under CRR/CRD IV, they are
used to obtain funding and improve liquidity. To be eligible as collateral for central banks securitised exposures must be sold to a
Special Purpose Vehicle (SPV) which, in turn, issues securitisation notes (‘traditional securitisations’) in two tranches, one subordinated
tranche and one senior tranche, rated AAA by a rating agency. The AAA tranche can then be used by ING Bank as (stand-by) collateral
in the money market for secured borrowings.
ING Bank has created a number of these securitisations with a 31 December 2015 position of approximately EUR 78 billion of AAA
rated notes and unrated subordinated notes. The underlying exposures are residential mortgages in the Netherlands, Germany,
Belgium, Spain, Italy and Australia and SME Loans in the Netherlands and Belgium.
As long as the securitisation exposures created are not transferred to third parties, the regulatory capital remains unchanged. These
are not detailed hereunder. Apart from the structuring and administration costs of these securitisations, these securitisations are
profit / loss neutral.
Simple risk weight method
ING Bank N.V. does not use the simple risk weight method for specialised lending. It uses the PD, LGD and EAD approach instead. A
small part of ING’s portfolio – some of the equity exposure – is subject to the simple risk weight method for calculating the regulatory
capital. The table below shows more details on the equity exposure for which this method is used.
On balance sheet
amount
Off balance sheet
amount
Risk
Weight
Exposure amount
RWA
Capital requirements
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
Exchange traded
equity exposures
1,224
128
290%
1,224
128
3,548
371
283
30
Private equity
exposures
556
479
190%
556
479
1,057
910
85
73
Other equity
exposures
370%
Total
1,780
607
1,780
607
4,605
1,281
368
102
In April 2015 the merger between ING Vysya Bank (Vysya) and Kotak Mahindra Bank (Kotak) was completed resulting in an increase in
the exchanged traded equity position value of EUR 1 billion. Additionally, the merger increased the RWA due to a change in
accounting treatment. Before the merger, the Vysya stake was an investment in associates larger than 10%, therefore the Simple Risk
Weight Approach was not applied. Since the merger, ING holds a stake of 6.5% in Kotak and therefore this position is treated as a
Financial Instruments less than 10% (Available for Sale, AfS) with 290% risk weight, resulting in an increase of CRWA of EUR 3.3 billion.
Exposures (READ) per internal rating grade and corresponding PD, LGD and RWA 2015
ING Bank Annual Report 2015 277