ING Bank
Annual Report 2021
Contents
Introduction
Report of Management Board
Risk management
Corporate governance
Consolidated financial statements
Parent company financial statements
Other information
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About this report
ING’s purpose is empowering people to stay a step ahead in life and in business. In this report we
describe how we live up to our purpose and create value as a bank, as an employer and in society.
In this report, the sections Strategy and performance, Risk management, Corporate governance and
Dutch Corporate governance statement by the Management Board Banking together form the Report
of the Management Board Banking. This annual report also contains ING Bank N.V. consolidated and
parent company financial statements, and other information.
This report is intended to inform stakeholder groups that have an impact on or are impacted by our
business. This includes customers, investors and shareholders, regulators and supervisors, employees,
government authorities and non-governmental organisations.
It aims to give our stakeholders a balanced overview of our activities and ING’s ability to create and
sustain value.
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World around us
Our business is largely shaped by what’s happening in the world around
us, from economic and political developments to the changing
regulatory environment, global trends and social issues. And of course,
in 2021 the Covid-19 pandemic continued to have an impact on people,
businesses and the economy.
All these factors provide both challenges and opportunities for ING as we navigate the ever-changing
world around us to deliver on our purpose and create long-term value for our stakeholders.
Our operating environment
Economic growth picked up this year, helped by strong policy support, the deployment of vaccine
programmes and the reversal of lockdown measures, although these were reintroduced in some
countries at the end of the year prompted by an increase in infections, and the emergence of a new
variant of the Covid-19 virus. The global economy surpassed its pre-pandemic level, but many
countries are still operating below pre-Covid levels, particularly emerging markets and developing
economies with lower vaccination rates and less government support. China and Australia had already
recovered in 2020; the US and the eurozone caught up in 2021.
A resurgence of Covid-19 cases and supply disruptions began to negatively impact economic
momentum in the second half of the year. In particular, US consumption softened in the third quarter
and German industry had to scale back because of shortages of key inputs. The economic impact of
the Delta variant, especially in countries with low vaccination rates, added to pressures on global
supply chains and costs. Supply disruptions were often longer than expected and fed inflation in many
countries. Higher commodity prices and the rise in consumer demand as economies thawed caused
consumer price inflation to increase rapidly, most significantly in the US, Canada and the UK, although
other advanced economies in Europe and Asia also saw inflation picking up.
Against the background of economic recovery and increased inflationary pressures, the Federal
Reserve started to taper its bond-buying programme. The European Central Bank (ECB) also
announced a reduction in bond purchases, but is set to move slower. The ECB plans to end its
Pandemic Asset Purchase Programme by 2Q 2022 and expects to have reduced asset purchases under
this programme to €20 billion per month by the end of the year. Together these factors drove up
longer-term interest rates and steepened yield curves. With interest rates remaining at low levels and
government policies staying growth-supportive, house prices continued to rise.
These were significant macroeconomic developments that impacted our own organisation as well as
our customers, employees, shareholders and other stakeholders. Despite the economic thaw, the
normal flow of business in countries where ING operates remained disrupted to a greater or lesser
extent throughout 2021. The German elections, continuing China/US tensions and continued
uncertainty around the full impact of Brexit all added to the volatility of our external environment.
ING is also closely monitoring the situation in Ukraine from a financial, operational and security
perspective, with the safety and wellbeing of employees our top priority. We strongly condemn
Russia’s invasion of Ukraine in February 2022 and are deeply concerned by its devastating impact and
the threat to international stability and security. ING has been providing Wholesale Banking services in
Ukraine and Russia for almost 30 years. As of 28 February 2022, ING’s total Russia-related exposure
was approximately €6.7 billion (representing around 0.9% of our total loan book), of which around 700
million was affected by new sanctions. We have around €500 million exposure in Ukraine. In March
2022, we decided to not do new business with Russian companies. Read more in Risk management.
As a global financial services company, with our profitability, solvency and liquidity linked heavily to
the state of the economy and the market environment, we remained alert to this volatility’s potential
to impact our performance.
Among other topics impacting our business in 2021 were climate change (including climate risk), anti-
money laundering, cybersecurity and fraud, personal data protection, and culture and ethics.
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Climate change
Although the threat of climate change has been signalled for some time by the scientific community,
its impact is intensifying and it’s happening faster than previously predicted. The flooding, wildfires and
heatwaves experienced this year are expected to occur more frequently due to climate change. This
formed the backdrop to the 2021 report from the United Nation’s Intergovernmental Panel on Climate
Change (IPCC), which flagged climate change as a ‘code red’ for humanity, requiring urgent
intervention from all sectors of society.
This urgency was underlined at the New York Climate Week in September 2021, where it was
reinforced that accelerated action now and in the coming years can positively affect our transition
towards a more carbon-neutral future. In November 2021, at the 26
th
(COP26) in Glasgow, agreements were reached on important steps towards net-zero emissions in 2050,
such as shifting away from coal and a pledge to halt deforestation. But this is not yet enough to get us
into the safe zone; these pledges add up to an average global warming of 1.8°C at best. There was
agreement on countries having to accelerate and strengthen their 2030 targets, and a framework for a
global carbon market was drawn up, which is expected to trigger a surge of green projects. As always
the proof is in the action and real impact on the ground. COP27 will be crucial – again. Not only for
limiting greenhouse gas emissions far more drastically, but also for agreements on climate adaptation
and the social impact of climate change, both of which affect developing countries disproportionately.
We believe ING can have the biggest impact in mitigating the effect of climate change through our
financing. We work with our clients to finance and facilitate their transition to low-carbon technologies
and offer a growing suite of sustainability products and services to help them, including sustainability-
linked loans and green bonds.
The popularity of sustainability-linked financing is growing, partly fuelled by companies facing pressure
from investors and regulators to ‘go green’. To protect the integrity of this fast-growing market, which
we pioneered back in 2017, ING published a position paper in October calling for linked sustainability
targets to be ambitious, recognised industry-wide and verified by a reputable, independent party. This
will help to retain the credibility of the market by ensuring companies tackle the most difficult and
urgent climate issues first. Ambition levels that are too low will not make the impact these products
are designed for.
While ING can voice its opinion on all transactions, and we can use our influence to steer clients
towards credible targets on those we structure ourselves, market dynamics don’t always allow us to
put the proper structures in place if we’re not in a leading role. We believe regulatory developments
like the European Commission’s green bond standard will help to improve the quality of the market as
it evolves.
The role that regulators and governments play in supporting and facilitating the road to a net-zero
emission world cannot be underestimated. To this end, the EU presented its net-zero targets with
ambitious legislative proposals to cut emissions by 55% by 2030 (‘Fit for 55’), and we look forward to
seeing ambitious national policies that align with this goal. In the meantime, ING is working on its own
action plans as new climate scenarios and expectations emerge, and we present these, and our
progress on them, in our integrated climate report on ing.com.
Climate risk
According to the European Central Bank, climate change will be a major source of systematic risk to
banks if no action is taken. A recent ECB study showed banks in the eurozone would have an 8% higher
chance of loan defaults by 2050 if nothing is done about global warming, with the risk rising to 30% for
banks in southern Europe. The physical risk from climate change is tangible – fires, floods and rising sea
levels affect people’s lives, livelihoods, assets and businesses. There is also transition risk such as
carbon pricing and shifting consumer preferences, which can leave manufacturers with stranded
assets if they don’t adapt to market demands for greener products.
ING strives to identify and understand these risks as part of our integrated approach to climate action.
We do this to build resilience to these risks in our own organisation as well as to prepare for their
potential impact on clients and other stakeholders and this helps shape our strategy. As such, climate
risk will be included in our risk management framework in a forward-looking approach. Our climate risk
programme helps measure the impact of climate change on our loan book. We follow guidance from
the ECB and the Taskforce for Climate-Related Financial Disclosure on how banks are expected to
prudently manage and transparently disclose climate-related and environmental risks under current
prudential rules.
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Anti-money laundering
As a gatekeeper to the financial system, we have an important role in protecting society against all
types of financial crime. Money laundering is one such crime, existing in and of itself and as a facilitator
of other crimes such as people trafficking and drug smuggling.
To be more effective in our efforts to fight financial economic crime, we work closely with our peers,
regulators and law enforcement. This includes initiatives with other banks in the Netherlands and
Germany to jointly monitor transactions and share intelligence, and further professionalising our KYC
organisation by means of internationally recognised certifications.
In June, the EU presented its action plan for know your customer/anti-money laundering (AML). This
aims to increase harmonisation of rules across member states and proposes direct supervision at EU
level for those banks exposed to the highest AML risk. We welcome these reforms as they will help
improve the current framework and help us with the operationalisation of new AML measures across
our network.
ING is looking into how to deal with the issue of customer tax integrity, (a process accelerated by the
Pandora Papers investigation in October), where customer transactions may be legal but are ethically
undesirable. We are exploring different approaches regarding the execution of our risk judgement
processes in this area.
Cybersecurity and fraud
Digital technology has connected the world in an unprecedented way. The pandemic has highlighted
just how much people rely on the internet to work, socialise and shop. With this increased reliance,
comes an increasing risk that some of these digital interactions will be used for criminal purposes. As a
result, there are growing societal concerns about increasingly sophisticated cyberattacks as well as
around data privacy and protection.
Cybercrime is a growing threat to society and companies in general, and to the financial system in
particular, with scams that aim to trick people out of their money. One such scam involves fake bank
employees tricking customers into redirecting their savings into a ‘safe’ account, while phishing scams
have evolved from emails to text messages as fraudsters become ever more inventive.
Falling victim to bank fraud can have devastating consequences for customers, not just financially but
also on their confidence, mental health and relationships. Raising awareness among customers and
employees is an important step in protecting people against crimes like, phishing, spoofing and
hacking.
At ING too, there is an increased risk of criminals trying to gain unauthorised access to the bank,
whether that’s through malware, phishing attacks, identity theft or online fraud. To stay resilient to
these increasingly sophisticated crimes, we take a multi-faceted approach that aims to anticipate
threats, prevent them from becoming reality and so protect our customers. Through collaboration with
governments, fintechs and our peers, we share knowledge and facilitate security innovation for the
bank, our industry and society.
Stakeholder engagement case: agri commodities and the threat of deforestation
Topic
: Financing agricultural commodities that may contribute to deforestation
Stakeholder groups
: NGO Global Witness; agricultural commodities clients
Case:
development and employment. At the same time, agricultural commodities such as coffee, grain
and soy (and cattle farming) require significant land use, which can lead to the destruction of
forests and risks to the climate, biodiversity and land rights. The supply chains of clients we
finance could be directly or indirectly contributing to this. In an October 2021 report, NGO Global
Witness mentions ING as financing agri commodities companies with an increased risk of
deforestation.
Outcome:
ING recognises the alarming rate of deforestation. We are in an ongoing dialogue with
NGOs, clients and regulators to determine the best way to mitigate our impact throughout agri
commodity supply chains. Clients who trade in and/or grow agri commodities are thoroughly
assessed against our Environmental and Social Risk (ESR) policy, including for the risk of
deforestation. We encourage clients to use certification aimed at demonstrating that no
deforestation occurred for the product in question. Where relevant, clients must participate in the
Forest Stewardship Council (FSC) scheme or Programme for the Endorsement of Forest
Certification. See ing.com for our stance on deforestation and position on biodiversity.
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Personal data protection
Customers trust us with their money and their data, and this is a responsibility we take very seriously.
Safeguarding customer data and data privacy are growing in importance on the global agenda across
sectors and geographies. This is required by an increasing legislative focus, for example through the
EU’s second Payment Services Directive (PSD2) around data sharing and the General Data Protection
Regulation (GDPR), with which we align our own global data protection policy.
Data controllers or processors who want to transfer personal data outside of the European Economic
Area (EEA) must ensure that the data subject is granted a level of protection equivalent to that
guaranteed by GDPR. In 2020, the Court of Justice of the European Union introduced the Schrems II
ruling, confirming that European companies have to carry out individual assessments of each data
transfer to a non-EEA country. In 2021, the European Commission also introduced new standard
contractual clauses to the GDPR governing the transfer of data to third countries such as the US.
Following the Schrems II ruling, ING launched its own transfer impact assessments and the necessary
updates of our standard contractual clauses, all of which should be completed by year-end 2022.
Financial institutions need to walk the fine line between privacy protection and fostering data sharing;
again, countries differ in their approach. At EU level there is a clear regulatory trend towards more
data portability and more data sharing. Under the Digital Markets Act, Big Techs will be required to
facilitate data portability and we expect the future Open Finance proposal to establish PSD2-like data
portability.
Culture and ethics
Trust is integral to our role as a bank. At ING we adhere to a comprehensive set of policies and rules
designed to protect our customers and our bank from conduct that will jeopardise people’s trust in our
business and our sector. This includes policies to prevent insider trading, price fixing and market
manipulation, as well as to detect and prevent tax evasion, fraud and other financial crimes.
Everything we do at ING is guided by our Orange Code, which describes the values and behaviours that
underpin our way of working, and which puts integrity above all.
Building on the Orange Code is ING’s Global Code of Conduct. We encourage employees to speak up
when they are confronted with unethical or illegal behaviour and provide a variety of reporting
channels, including via their manager, local compliance officer or an ING whistleblower reporting
officer. ING also has external and anonymous whistleblower channels. We take great care to protect
the identity of whistleblowers and the confidentiality of their reports to protect them against potential
retaliation.
We believe that trust, integrity and ethical behaviour are at the core of any reliable business; they go
hand-in-hand with satisfied customers. Yet, with the growth of social media platforms and the
behaviour of the tech giants that own them coming under ever closer scrutiny, these core principles
are also more frequently questioned by whistleblowers for example, who release evidence of what
they believe to be unethical practice to regulators and the media.
The 2021 Edelman Trust Barometer, (surveying 33,000 people in 28 countries), revealed a crisis of trust
in media, particularly social media, alongside governments and NGOs, fuelled by widespread
misinformation and a lack of credible leadership through the pandemic. However, businesses emerged
as the only trusted institutions regarded as both ethical and competent. People clearly expect
businesses to step in and help to solve challenges such as the pandemic impact, job automation and
societal problems.
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Our strategy
Delivering on our strategy is about creating a differentiating customer
experience that is personal, easy and smart. It’s also about focusing on
the things that matter: being a bank that is safe, secure and compliant;
maintaining a healthy business; data-driven digitalisation to better
meet our customers’ evolving needs; and jointly building a sustainable
future for all.
ING has a clear purpose: empowering people to stay a step ahead in life and in business. This is
reflected by our ‘do your thing’ tagline, which encapsulates our brand and our promise to make
banking frictionless so people and businesses can do more of the things that move them. Our purpose
guides us in everything we do and is founded on our belief that it’s our role to support and promote
social and environmental progress and at the same time generate healthy returns for shareholders.
We have a strong – and growing – primary customer base. We have a digital, mobile-first mindset and
we’ve put in place the building blocks for becoming a data-driven digital bank. We continuously strive
to improve the customer experience, working in an agile way and guided by our Orange Code, which
describes the values and behaviours that define ING.
Even in a digital world, our business is founded on relationships and our people are among our greatest
assets. We therefore work to provide a differentiating employee experience that keeps our people
motivated and engaged. This includes supporting their wellbeing, providing a safe and healthy
workplace and opportunities to develop themselves to their full potential, as well as promoting a
diverse and inclusive work environment where they feel free to be themselves. For most of the year,
the majority of our employees continued to work from home due to ongoing measures to stop the
spread of Covid-19. As restrictions were lifted in various countries, we moved towards a hybrid mode,
giving employees the flexibility to combine working from home with working from the office. However,
new outbreaks meant they had to remain ready to adapt to a constantly changing situation.
The trends that have shaped our direction so far – digitalisation, continuing low and negative interest
rates, new competitors, changing customer behaviours and expectations, increasing regulation and
the growing urgency for action on climate change and to address social imbalances – continue to
influence our business and were amplified by the Covid-19 pandemic.
We’ve also learnt some important lessons over the past years: some of our projects became too
complex, went on for too long or resulted in us sometimes losing sight of customers and competition.
We’re guided by our purpose and our strategy in how we respond to these and other challenges and
opportunities.
As we look to the future, we are now focusing on delivering with impact so we can truly differentiate
ourselves from the competition and emerge from the pandemic in a position of strength for our
customers, our investors, our employees and society in general. In the near-to-mid-term, this means
focusing on:
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being a safe, secure and compliant bank
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being a healthy business making healthy returns
●
data-driven digitalisation
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sustainability.
Safe, secure and compliant bank
Keeping our bank safe, secure and compliant remains a top priority for ING. This means fighting
financial economic crime as a gatekeeper to the financial system, protecting our bank and our
customers against cybercrime and fraud, as well as from conduct that will jeopardise people’s trust in
us, and the safe and ethical use of data and data-driven models. This year too, the growing
importance of climate risk was emphasised in ING’s first integrated climate report.
Protecting our bank and our customers also means continuously improving our risk culture and
behaviours. Everyone at ING has a responsibility to understand, discuss and act on the many non-
financial risks that banks are confronted with every day. To this end, we introduced a risk culture
programme in 2021 that aims to ensure our risk culture reflects the dynamic business and regulatory
environment we operate in. By acting with the right mindset and living up to our Orange Code and
Global Code of Conduct, we all play a part in safeguarding ING and our customers.
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Knowing our customers (KYC) and ensuring we only do business with people and companies that meet
regulatory requirements and are within our risk appetite, are essential for preventing financial
economic crime. Monitoring transactions for unusual activities and carrying out customer due-
diligence checks at regular intervals are an important part of KYC. We also assess the environmental
and social impact of companies and projects we finance.
Since 2017, we’ve introduced a number of structural improvements to enhance our KYC organisation
and activities, including standardised policies and digital tooling, and further increasing knowledge and
awareness across the bank. This includes mandatory e-learnings for all staff and the KYC and Risk
Academies for more specialist training. We are building on this with our financial economic crime
controls maturity programme, which consolidates all our activities to fight financial economic crime
(policies, systems and processes) in one holistic approach.
With the growing number of digital transactions and employees working from home it’s of the utmost
importance to safeguard ING and our customers against cybercrimes such as digital fraud, phishing
scams and malicious software. ING has preventative measures in place to test our resilience against
cyberattacks and attempts to gain unauthorised access to our systems. We also focus strongly on
managing our exposure to operational risks with respect to the availability of our networks and
infrastructure to ensure we’re always accessible to our customers and our employees.
Closely related to cybersecurity resilience is protecting customers’ data and their privacy. To this end,
ING follows European data protection regulation (GDPR) and local laws applicable in our countries. We
consider people’s expectations about how their data is used and respect their privacy when processing
it. Local and global data ethics councils help ensure we use data responsibly.
Healthy business
While the economy picked up in many of our markets in 2021, to remain a financially healthy business
it’s imperative that we diversify our income, optimise capital allocation and scrutinise costs. Our 2021
figures show we’re on the right track, with fee income up 17% compared to a year earlier and
contributing 19% to our full-year income, which is a crucial component of our strategy to diversify our
revenue sources in the negative interest environment. This strong fee income growth combined with
higher lending volumes contributed to a 4.8% increase in total income compared to 2020, while net
customer deposits grew with €10.3 billion.
We earned higher fees from daily banking activities in 2021, spurred by economic recovery, and
benefitted from continued demand for digital investment products in our Retail business. Our results
were also supported by low risk costs. We were able to release some of the Covid-19-related provisions
we took earlier and are confident about the quality of our loan book. However, we remain cautious
about the impact of supply chain disruptions, rising energy prices and increasing inflation on
companies and consumers. We therefore remain ready to support our clients when they need it.
Ensuring ING remains a financially healthy company means there are also times we have to make
difficult decisions about where and how we allocate our capital, so that we put it to work in the places
that provide the best growth opportunities and viable returns. Unfortunately, this can affect our
customers and colleagues. In the current environment, with varying local and regulatory
environments, we believe that we require sufficient local scale in the Retail markets in which we
operate to maintain a reasonable franchise. It’s in these markets that we want to invest our people,
capital and costs. This led to our decision to exit selected Retail markets in 2021. Separately, we
decided to wind down our payment services provider Payvision, which we believe was not evolving
rapidly enough to keep pace with the competitive payments market, and to stop certain partnerships.
These include discontinuing the consumer-facing smart money app Yolt to focus instead on growing its
business-to-business open banking platform Yolt Technology Services. We also sold our stake in Dutch
property platform Makelaarsland as the partnership did not bring what we had expected from it.
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We had expenses under control in 2021, with room for us as a digital-first bank to improve our cost-to-
serve, supported by investments in further (end-to-end) digitalisation. This brings benefits to the
experience of customers and colleagues and improves our operational quality and processing speed. It
also helps us better absorb the eroding effects of negative interest rates on our net interest income.
Data-driven digitalisation
Delivering on our customer promise is all about creating a customer experience that’s personal, easy
and smart. And a key driver for this is digitalisation – a trend that was accelerated by the Covid-19
pandemic and the demand it unleashed for mobile and contactless banking – and data, which is the
fuel powering end-to-end digitalisation.
Reflecting the growing importance of technology and digitalisation in fulfilling our purpose and
strategy, in 2021, ING appointed a chief technology officer to its Management Board Banking for the
first time, having split the role of the chief operations officer. Digitalisation has benefits for our
customers, our employees and our business. Automating tasks frees up time for more rewarding
activities. It improves efficiency and effectiveness, and helps to make our bank safer and compliant-by-
design. However, we also have to be cognisant of those customers who are not (yet) fully digital and
ensure our products and services remain accessible to them.
In 2021, mobile interactions grew to 6.2 billion from 5.3 billion in 2020, accounting for 91% of total
interactions with ING. The number of mobile payment transactions also grew each quarter, with 267
million made in 4Q 2021, compared to 154 million transactions in 1Q 2020.
This digital connectivity in turn yields data and insights that contribute to a more personalised and
empowering experience, giving customers even more reason to interact with us. This is how we believe
we can become an essential part of people’s digital lives.
Mastering data is essential for this. Data, used responsibly, helps us understand our customers better
and personalise our interactions. It is the main ingredient for the models that inform our business
decisions, manage risks and keep our capital in control. We use transaction data to detect money
laundering and fight financial crime. And it powers technologies like artificial intelligence, robotics and
blockchain that digitalise processes and improve the customer experience. Examples include using
machine learning to understand why customers contact us and proactively come up with solutions
that will reduce the number of calls in future; virtual assistants to help customers 24/7; and instant
loans, personalised insurance and easy-to-use investment products. And there are innovative solutions
for ING and for our customers, such as Komgo, which digitalises trade finance; supply chain
management tool Stemly; and Flowcast to reduce risk and unlock credit for businesses.
To make raw data meaningful it needs to be sorted, harmonised and put into context. That’s why it’s
essential to have one common language for defining our data. We call this ING Esperanto. In addition,
we’re standardising data models (Esperanto Warehouse Model) through which we can store and use
our data. This approach contributes to the availability, quality, integrity, usability, control and
governance of our data. We also have a uniform global customer data management approach that
facilitates customer self-service and enables new ways of doing banking by making it easier to retrieve
information that can be used to propose new types of billable ING services or new product bundles.
Global and local data ethics councils guide our decisions around the use of data based on ING’s Orange
Code values.
Our customers’ appreciation of ING’s smart and personal experience is reflected in above-average NPS
scores in a number of our Retail and Wholesale Banking markets. Over the past year we gained
481,000 primary customers, bringing the total to 14.3 million, 3.5% higher than at end-2020.
ING is not the only bank with digital ambitions. Society’s growing reliance on the internet has
fundamentally changed the way people shop – and pay. These changing behaviours, along with the
second European Payments Services Directive (PSD2), are reshaping the role of banks in the payments
industry, opening it up to new (non-traditional) payments providers. To stay a step ahead in this
competitive digital environment, there’s a growing urgency to speed up end-to-end digitalisation and
the associated requirement for operational excellence.
Given the increasing commoditisation of payments and the need for scale and efficiency to remain
competitive in this fast-growing area, we’re looking to create a dedicated payments and settlement
utility within the chief technology office domain in 2022 that will deliver all payments, settlement and
liquidity services across ING, subject to Works Council approval. Until now this has been done within the
business lines, notably Wholesale Banking, also for Retail payments. The aim is to build on our existing
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payments capabilities and further mature, scale and evolve the way these services are delivered,
allowing the business lines to focus on meeting the needs of our customers.
Digitalisation is also empowering customers to have agency over their finances with innovative tools
such as personal budget planners, expense trackers and smart saver tools. Given the costs and
complexities of cross-border integration, we’re using our scalable technology to implement products
locally that meet the needs of our customers, particularly in areas such as retail investments,
consumer finance and insurance.
Since 2016, we’ve worked on putting in place a technology and operations foundation on which to
build a mobile-first digital experience for all our 38 million customers. This foundation includes IT
infrastructure, uniform processes, data management and way of working, and bundling expertise in
shared service centres that support our businesses globally. Underlying all of this are technology
platforms such as Touchpoint and OnePipeline. Designed to create speed, scale, security and cost
efficiency, this foundation allows us to bring new products and services to our customers faster and in
multiple markets using next-generation technologies and re-useable modular components.
It has also enabled our employees to continue working from home during the ongoing lockdowns and
supports their return to the office in a hybrid mode when that’s possible.
Sustainability
Sustainability in all its forms is one of the biggest challenges facing society. Climate change is
threatening our planet and its people, many of whom also struggle with inequality, poor financial
health and even a lack of basic human rights. It’s clear the world is changing and banking needs to
change with it. We have a responsibility to society to define new ways of doing business that align
economic growth with positive environmental and social impact.
On the environmental side, we believe we can do this by aligning our lending portfolio with global
climate goals, supporting the transition to a net-zero economy in our own operations and by actively
engaging with companies to finance the investments needed, and addressing related challenges like
biodiversity; on the people side, by steering customers and local communities towards improved
financial health.
To tackle climate change even faster, we joined the Net-Zero Banking Alliance in 2021 and increased
the ambition of our Terra approach. We’re now aiming to steer our lending portfolio towards net-zero
greenhouse gas emissions by 2050 or sooner. In our integrated climate report on ing.com we report on
our progress until end-2020 in the nine most carbon-intensive sectors, which are our main focus for
steering. We’re working on pathways for those sectors to align our targets for them with our own net-
zero ambitions.
In addition to financing sustainable projects, we believe we can influence positive change by advising
clients on their own transition to sustainable and circular business models, as well as through
innovative products such as sustainability-linked financing, gaining access to a new range of
opportunities. To protect the integrity of this fast-growing market, we believe these targets should be
ambitious, recognised industry-wide and verified by a reputable, independent party, thereby ensuring
companies tackle the most difficult and urgent climate issues first.
It’s also about what we don’t finance: we say no to certain companies and sectors; for example, new
clients active in palm oil plantations and new coal-fired power plants. However, much of the ‘real’
economy still runs on fossil fuels, and some sectors are further along on their journey than others. So
rather than withdrawing completely from a particular sector (such as oil and gas) – with the associated
impact in terms of jobs and economic fall-out – we believe we can be more effective by actively
engaging with that sector to speed up its transition. For example, we’re leading the climate-aligned
finance working group for the Net-Zero Steel Initiative to support the sector’s decarbonisation and have
signed up to the Global Maritime Forum’s call to action to decarbonise the shipping industry.
Climate change also brings risks for ING and the companies we finance. These range from physical risks
such as floods and wildfires to social risks related to displacement, discrimination and human rights
violations, as well as transition risks that could lead to stranded assets when policies, regulations or
consumer preferences shift towards a lower-carbon economy. We’re working to embed the
management of climate risk into our overall risk management approach and our business practices.
We also evaluate clients and transactions against our environmental and social risk framework to limit
the negative impact of our financing decisions on the environment and communities.
Climate action requires a concerted collaborative effort across all sections of society. There’s a growing
sense of urgency for governments and businesses to step in and help. While banks can finance the
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transition, it’s companies that need to make it happen in their own businesses and supply chains.
Governments can, and should, direct and guide this change. We believe the European Union’s Green
Deal is a step in the right direction.
Stakeholder engagement case: oil and gas in the Amazon
Topic
: The role of banks in financing Amazonian oil and gas activities in Ecuador and Peru
Stakeholder groups
: NGOs Stand.Earth and Amazon Watch; hard commodities trading clients
Case
: The Amazon Sacred Headwaters region in Peru and Ecuador is one of the most biodiverse
places on earth. It protects the climate by acting as a carbon sink and is home to more than 500,000
Indigenous people. NGOs have raised concerns about ongoing oil exploration and production in this
fragile ecosystem. ING has no asset-based finance exposure to oil and gas activities here. However,
we have financed the trade of Amazonian oil.
Outcome
: In 2020, after the NGOs raised their concerns with us, we decided to no longer enter into
new contracts for oil and gas exports from Ecuador. In November 2021, we expanded this
moratorium to new oil and gas export contracts from Peru following continuing dialogue with the
NGOs and a further review of our exposure to the Amazonian oil trade. We will continue to monitor
and engage with existing clients on this topic, in line with our view that we can use our influence to
steer our clients.
Recognising the importance of environmental, social and corporate governance (ESG), we have a
number of initiatives running in the bank covering our governance structure, developing a diverse and
engaged workforce and being a trusted counterparty for our customers and clients.
When it comes to financial health, we’re embedding our activities directly into our core business where
we can make a more tangible impact on our customers. We’re currently defining actions we can take
in our Retail markets to help customers who are financially vulnerable; for example, to get out of
problematic debt, or to save more. We’re also bringing our community support closer to home through
our new community investment programme, which targets a broader range of local initiatives that
contribute to an inclusive economy and support vulnerable groups in the communities we serve.
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Our business
A sharper focus on digital investment products, daily banking and on
providing a smart, easy and personal customer experience, boosted
growth in 2021, with more people than ever doing their banking on a
mobile device. Companies also increasingly chose to link their financing
to their efforts to protect our planet and its people.
Diversifying our income is a crucial component of our strategy in a negative interest environment, and
in 2021, our fee income grew by 17% year-on-year. Much of this growth came from an increase in
daily banking activities on the back of economic recovery, coupled with good investment product
revenues from the growing number of new investment accounts opened and customers making a
higher average number of trades.
We saw continued lending growth in mortgages and in the last quarter of the year lending volumes
increased, a sign that confidence in the economy is picking up. Still, economic recovery remains fragile.
Covid-19 continues to be a factor in many markets with new waves of infections, geopolitical tensions
and supply chain disruptions, rising energy prices and increasing inflation impacting companies and
consumers alike. We therefore continue to be cautious and remain ready to support our clients when
they need it.
A differentiating customer experience
Delivering a differentiating customer experience is what sets ING apart and ensures customers choose
us rather than another provider. We can measure how successful we are by looking at our Net
Promoter Scores, which are an indicator of customer satisfaction (see
as frictionless as possible, providing smarter, easier and more personal experiences, and continuously
work to keep getting better at it.
Every interaction with our customers – whether it’s a call to a contact centre, a click on a web page, a
conversation or a survey – is an opportunity to understand their thinking and how we can improve
their experience. Sometimes it’s small changes that can make a big impact. This is the idea behind our
global CX Day where colleagues from across the organisation work on ways to improve the customer
experience. In 2021, teams from 27 countries and 15 Wholesale Banking business units worked on
around 300 improvements on the day, of which 21 were aimed at corporate clients.
By enabling ING designers and customer journey experts to work together, we connect the dots
between insights and delivering real value for our customers. This is the case for example in Germany
where our designers joined a cross-industry effort to make digital experiences more accessible to all.
Customer testimonials underscore that good design is good business.
As we’ve digitalised more of our processes, we’ve empowered customers to take more of their money
matters into their own hands. For example, in Germany, Spain, Poland, Italy and Turkey pre-approved
consumer loans are available for existing customers via our digital channels, providing them with
instant access to financing when and where they need it. Users of our OneApp in the Netherlands,
Belgium and Germany can update their contact details, block a stolen bank card, open a new account
and send payment requests without needing to visit a branch. Financial advice is also increasingly
given online.
In 2021, digital interactions with customers rose to 6.9 billion (up from 5.3 billion in 2020). In Wholesale
Banking, the number of digital interactions increased to 11.8 million, of which 49% were via or in
combination with the mobile app introduced five years ago.
This digital connectivity yields data and insights that contribute to a more personalised and
empowering experience, giving customers more reasons to interact with ING. Getting the most out of
our data will unlock even more potential to create a differentiating experience for our customers. But
there’s still work to be done to gain the most value from our data, both by moving data into our data
lakes and by using analytics. Closely linked to this is the trust our customers and employees have that
we will protect their data and ensure it’s not used for purposes they have not agreed to.
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Retail Banking
For consumers using our Retail Banking services our focus is on providing a fully digital, mobile-first
experience that’s smart, personal and easy, empowering, and seamlessly connects with the apps and
platforms they’re on.
We want to engage with these customers on mobile at every stage of the customer journey. This
means as far as possible each step of our processes has to be fully digitalised, from onboarding and
customer due diligence checks to daily banking and contact centres.
Over the past years we’ve been working to harmonise the customer experience in our different
markets and created one brand identity. Now we’re increasingly focused on end-to-end digitalisation
of our customer journeys to make our products and services even easier, smarter and more personal.
In 2021, we migrated the last of our Belgian Retail customers to ING’s OneApp for mobile banking,
which is now available to 17.4 million customers in the Netherlands, Belgium and Germany, of which
9.8 million are actively using mobile channels. OneApp offers a single unified banking proposition that
is continuously being extended with new functionalities (e.g. Apple Pay). In addition, all 9.8 million
active Retail customers in Belgium and the Netherlands have the same OneWeb online banking
environment. This is an outcome of the unite be+nl transformation programme, which ended in the
first half of 2021.
A positive impact of the pandemic was the acceleration of mobile banking, with high adoption by
customers in Turkey (88%), Romania (72%) and Spain (59%). More than half of active ING customers –
51% – were mobile-only at end-2021, up from 40% in 2020.
In addition, mobile and card payment volumes more than doubled compared to 2020, reflecting the
increasing use of contactless payments via third-party services like Apple Pay and our own Android
solution in the banking app. In Poland customers can also use their mobile phone to make contactless
ATM transactions and here the ING app has more functionality than our website (unique in the
market). Over two-thirds (68%) of active customers in Poland use mobile banking.
Another fast-growing digital market is Romania where mobile sales have tripled since 2019. Customers
here can access a complete offering of digital products from loans and insurance to investments,
shopping programmes and virtual cards.
Remote advice
This digital shift also means more customers are now using remote video advice and digital self-service
channels. We can connect with customers across multiple channels through ING’s cloud-based
customer interaction platform for phone, chat and video contacts. The customer interaction platform is
used in nine countries to harmonise the experience and ensure customers receive the same services
everywhere.
In the Netherlands, we saw a year-on-year increase of video contacts through ING Beeldgesprek, which
enables customers to speak to an advisor about a new mortgage or investment product from the
comfort of their own home. On average, it is used for around 7,500 customer conversations per month
in the Netherlands and is now also available in Belgium, Spain, Italy and Germany. A similar remote
advice service was launched in Turkey in March 2021 via the ING app. ING is the first bank to offer this
service in Turkey.
In addition, more customers are using the chat function on our website and mobile app to reach out to
us. On average, we handle around 22,500 chat interactions per month in each of the six countries
where the service is offered.
Given the rise in digital interactions, we announced the closure of a number of bank branches. In March
2021, we announced the closure of 69 branches in the Netherlands by July 2022, and over the course
of 2021 we closed 59 statutory branches in Belgium. Our business is built on both digital and real-life
connections and there are still customers who prefer to visit us in person. To make sure these
customers can still get in-person assistance, in the Netherlands, for example, we are expanding the
number of ING service points (shops inside other shops) to 321. In some countries, like the Philippines,
our Retail offering is entirely digital.
All but a limited number of branches remained open throughout the Covid-19 lockdowns, working by
appointment only in most countries. In all our branches we took precautions to ensure the health and
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safety of our customers and employees, such as limiting the number of visitors, installing plexiglass
screens and making hand sanitisers available.
Financing for consumers
Point-of-sale (POS) lending, where online merchants offer shoppers the option to ‘buy now, pay later’,
is a new area offering opportunities for ING. In June, ING Ventures invested in POS platform Divido,
which allows its partners to ‘white-label’ its technology. Merchants, banks and payment companies
can brand the Divido platform as their own to give their customers the option of paying for their
purchases in instalments when they check out online, or in-store. Based on this, ING launched its first
European POS lending initiative in Spain, where pre-approved ING customers can pay in instalments for
online purchase from enrolled merchants.
In addition to a physical POS offering in Turkey, we launched ING Shopper, a new digital sales channel
that enables shoppers (including non-ING customers) to apply for an online loan at checkout (thanks to
digital customer onboarding) or pay for their purchases in instalments. It also allows e-commerce
merchants to grow their customer base by offering easy payment alternatives. For ING Orange Extra
programme members there’s an additional incentive to repay their loans interest-free.
In Romania, we’re encouraging consumers to become more environmentally friendly by offering green
loans with favourable rates for electric and hybrid cars. A pilot programme involving 1,000 loans was
launched in the summer of 2021 as a limited offer. Around 180 loans were distributed by year-end and
ING’s share of the market for new electric and plug-in hybrid vehicle sales reached 11%. Building on
this, in 2022 we intend to add eligible new green and sustainability products to increase our social
responsibility impact.
In our mortgages business in the Netherlands, where around 60% of mortgages are sold through
intermediaries, we have been making strides to improve our services, including faster processing times
for their applications and fewer documents needing to be provided. In December 2021, intermediaries
named ING as the best money provider in a survey by the national mortgage association (Nationale
Hypotheekbond). In addition, we developed new mortgage propositions for customers nearing
retirement age, and for international home buyers, and made it possible for customers to see their
mortgages in the ING app and use it to make repayments.
At Interhyp in Germany, the HOME platform digitalises the mortgage process for home buyers,
advisors, brokers and bank partners. Almost 500,000 Interhyp customers can connect directly to real-
estate portals, create financing scenarios and upload documents from their smartphones, speeding up
the mortgage decision process. Machine learning personalises the experience by matching (potential)
buyers to advisors and mortgages for their needs, and providing property valuations. Mortgage
advisors and brokers use HOME for processing mortgages and consultations with buyers via phone,
video and chat messaging. To complete the end-to-end digitalisation of the mortgage process we’re
now focusing on integrating scoring mechanisms and digital signatures for instant approvals in just a
few clicks. In 2021, Interhyp’s market share rose to 11.6% in Germany (10% in 2020).
Case study: balancing customer needs and financial wellbeing
Financial services such as loans, credit cards and buy-now-pay-later products can cause financial
difficulties for some people. As a bank, providing loans is integral to what we do. It’s our belief that
financially healthy people contribute to a healthy economy and help drive social progress. That’s
why we take a responsible approach to all financing, looking at products like loans, mortgages and
short-term credit carefully in line with local market conditions while also balancing the needs of our
customers.
For example, in Turkey, where inflation is typically very high, it may make sense to pay for
purchases in instalments and credit card use is widespread. At the same time we remain cautious.
ING’s Orange Extra programme encourages customers in Turkey to use their debit card, or if they do
take credit, to repay their loans interest free, contributing to improving financial health.
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Business Banking
Our Business Banking segment is part of Retail Banking and serves around 1.7 million clients in seven
markets (Belgium, Luxembourg, the Netherlands, Poland, Romania, Germany and Turkey). These range
from self-employed and micro businesses to small and medium-sized enterprises (SMEs) and mid-
corporate companies. We’re using Touchpoint (ING’s open banking technology platform) to digitalise
and standardise our offering for business clients on ING’s OneApp and OneWeb in Belgium, the
Netherlands and Germany, with Luxembourg currently being migrated. This is helping to drive
efficiency by avoiding duplication of services and unlocking synergies between the countries. In
Belgium, all business clients now use OneApp and over 90% use OneWeb, providing a consistent
experience for both their personal and professional financial needs. Further roll-outs are planned for
Poland and Romania.
Our ambition to serve over 80% of SMEs digitally is in direct response to the increasing customer
demand for digital solutions and self-servicing capabilities. To ensure the continuity of the quality
customer relationships we have, we are focusing our efforts on the most important interactions with
our customers, namely: KYC outreach for customer due diligence, onboarding, account opening, and
loan or card requests. Each interaction is built in a modular way to ensure reusability across the global
network, while leveraging and scaling local best practices. Invariably, automation underpins any
improvement and supplies the speed needed to improve the customer experience.
Digital transformation of loan requests is end-to-end and focused on improving cycle times for the
application process (‘time to apply’), underwriting process (‘time to yes’) and fulfilment (‘time to cash’).
For example, Poland offers instant and fully automated lending journeys for disbursement of small
tickets in less than two hours, whereas in Germany, semi-automated (fast-track) journeys for bigger
tickets are possible within 48 hours.
We can add value for these clients through digital services that go beyond banking, such as factoring,
liquidity management, tax accounting and by using APIs (application programming interfaces) that
connect to third-party providers.
Wholesale Banking
In Wholesale Banking we believe our differentiators are our sector expertise, our network and our
people. We continued in 2021 to focus on deepening client relationships and growing our franchise by
unleashing our sector potential and delivering more of our network to our core clients in EMEA (Europe,
the Middle East and Africa), Asia and the US. By this we mean partnering global product and sector
specialists with local expert teams across our network to meet the increasingly sophisticated and
complex cross-border needs of the companies we serve.
This is reflected in deals such as with Korea Ocean Business Corporation, a government agency that
supports South Korea’s maritime industry with ships and liquidity. The successful distribution of a
$108.3 million out of the total $171.5 million loan to Korean investors – the third such transaction for
KOBC in three years – relied on close cooperation between ING teams in Seoul and Singapore combined
with our sector and product knowledge and distribution networks.
Our client segmentation model aligns our strengths with our clients’ needs and is an important
element for deepening relationships. ING’s way of working allows us to respond rapidly to our clients’
changing needs and to close the gap between local and global specialists, making an impact in our
markets. During the year we continued to pair our sector knowledge and financial expertise to support
companies with tailored advisory and daily banking, in line with the client segmentation model. We
aim to provide relevant advice, data-driven insights and customised, integrated solutions that make
our clients day-to-day banking more efficient and support their business ambitions.
Corporate clients also benefit from gains in speed, transparency, security and efficiency created by
technologies such as blockchain and artificial intelligence. In 2021, Global Finance magazine named
ING as the best bank for Commodity Finance in recognition of our efforts to modernise the market with
digital trade finance initiatives such as Komgo, MineHub, Vakt, Marco Polo and Contour. Read more
below in ‘Innovating to stay a step ahead’.
Sustainability is another area where we can make a real difference for clients. We work closely with
companies to help them transition towards net-zero emissions by providing advice, insights and
financing, including for green projects and new technology like battery storage. Recognising the
challenges many companies face in their transition journey, Wholesale Banking’s 2021 global brand
campaign is built around ‘sustainable finance for the real world’, which features actual clients who are
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working to change their sectors or industries from the inside. In 2021, we also supported 147
sustainability-linked loans (SLLs), where rates are linked to a client’s sustainability performance. These
included several firsts in their sector or industry, cementing our position as a sustainability-linked
pioneer.
Supporting customers in crisis
The last thing customers want to worry about in the midst of a crisis is their daily banking. We aim to
ensure uninterrupted access to our call centres, online banking and ATMs, and to make it easy for our
customers to make contactless payments and arrange their finances from home. But for some
customers, a bigger concern may be their ability to pay back a mortgage, loan or credit card debt.
At the start of the pandemic, ING introduced a raft of measures worldwide to alleviate these concerns.
These differed from country to country and included payment deferrals on mortgages, personal loans,
credit cards and business loans to small and medium-sized companies, as well as financing solutions
to help companies bridge their short-term liquidity needs. In harder hit sectors we proactively reached
out to business clients with tailored solutions for their specific circumstances.
A 2021 Coalition Greenwich survey recognised ING as one of eight ‘standout’ banks for its support of
corporate clients during the Covid-19 pandemic. This included maintaining a strong, coordinated and
continuous flow of information between clients and internal departments to address their clients’
evolving needs at the right time, accommodate their liquidity needs and allow more operational
flexibility while managing the potential associated risks.
Loan demand in 2021 continued to be influenced by the economic effects of the Covid-19 pandemic.
To support the provision of credit to companies and consumers, the European Central Bank modified
the terms and conditions of its third targeted longer-term refinancing operations (TLTRO III)
programme. Under these conditions (which ING has met), banks can borrow from the ECB at attractive
conditions up to -100 basis points. The programme aims to stimulate the real economy by providing
funding to banks at favourable interest rates that they can pass on to their customers and business
clients.
At the same time, signs of economic recovery during the year were tempered by other issues like
supply chain disruptions, rising energy prices and rising inflation. We continue to support our
customers and business clients wherever we can.
Financial health
According to the financial health working group convened by the United Nations Secretary-General’s
Special Advocate for Inclusive Finance for Development, having financial health as a core business
purpose contributes to happier, more engaged and more profitable customers (larger deposit
balances, lower delinquency and loan loss), leading to greater financial resilience and enhanced brand
and reputation. ING is part of this working group and our approach to financial health has been
showcased as a best practice.
In 2021, we renewed our financial health approach to integrate it more closely into our core business
in order to increase the impact on our customers and target our support to the local communities
where we operate.
This includes embedding into our business some of the activities related to the Think Forward Initiative
(TFI), which was discontinued in December 2021. ING and its TFI partners believe the initiative has
achieved key milestones in fulfilling its purpose to empower people financially through its research and
insights. Since it was started in 2016, TFI has supported almost 60 research projects, 19 start-ups and
reached more than 100 million people in 18 countries with insights aimed at improving their financial
health. We will continue to use our insights into money management and people’s financial behaviour
to empower our customers and communities to make better financial decisions.
In late 2021, we started defining new ambitions for our financial health approach. We’ll determine the
specific financial health challenges in our local markets and actions we can take in each country to
support financially vulnerable customers, for example with programmes to save structurally for the
future or overcome problematic debt. This reflects our belief that financial health contributes to a
healthy economy and helps drive social progress. We are committed to reporting on our financial
health activities and progress systematically and regularly, as we do for climate action. Our efforts are
aligned with the Principles for Responsible Banking and we’re working with the United Nations
Environment Programme Finance Initiative (UNEP FI) to contribute to setting a standard for financial
health impact for our industry.
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We think our biggest impact on improving financial health can be made through our products and
services by equipping our customers with actionable insights, innovative tools and real-time
information to make better, smarter financial choices now and in the future.
Financial health is also about financial inclusion. By this we mean creating equal opportunities and
making sure our products, services and facilities are accessible to everyone in a way that best suits
people’s needs and abilities. Examples of this include talking ATMs in Poland, the Netherlands and
Turkey, and an accessible bank card in the Netherlands and Belgium; the card has a notch in it so
customers with a visual impairment can insert it correctly when it’s used. It’s also designed to support
customers with limited hand functionality. In Australia we provide phone banking for customers with
speech or hearing impairments via the national relay service, and sign language services are available
in some bank branches in Poland. When it comes to accessible content on our websites we’re working
towards the web content accessibility guidelines standard (WCAG 2.1).
By using our knowledge of digitalisation and insights about money we’ve created innovative tools that
help our customers manage their finances and improve their financial health. Among these are a
personal budget planner and categorisation tool that helps customers in Germany to plan and control
their expenses better and discover potential savings and a ‘Smart Saver’ tool that helps customers in
Poland build their savings with automated transfers to a special account.
Customers in Romania, and, since early 2021, in Germany and Belgium, can use their banking app to
access Dealwise, ING’s smart shopping platform. Dealwise promotes healthier financial behaviour and
encourages users to save on their daily spending by gathering the best shopping deals and giving
them cash back on purchases. More than 1.1 million users have generated €30 million in transactions
so far, which in turn has helped customers save almost €1.72 million in cashbacks. Merchants too can
benefit from the insights they gain into customer behaviour on the platform. Over 1,100 brands
offering fashion, accessories, electronics and even travel deals have partnered with Dealwise.
In the Netherlands, ING has a similar programme where customers can earn points from their daily
banking activities, which they can use in ING’s online shop to buy a wide range of fashion, beauty,
household and other products at discount prices. Initiated in 2006, ING Points was added to the
OneApp in 2021, delivering a turnover of €75 million on 2.4 million products sold to 812,000 customers.
As a result of our financial health activities, 72.2% of our customer base felt financially empowered by
ING in 2021 (71% in 2020). In absolute numbers this is 27.5 million people, compared to 27.8 million
people in 2020, due to the discontinuation of our Retail activities in Austria and the Czech Republic in
2021. More details on the scope and reporting methodology can be found on ing.com.
Achieving our business goals
Achieving our business goals is about growing our primary relationships by providing a differentiating
experience that’s safe and secure while driving capital and cost efficiency. We achieve this by
deploying our resources effectively on activities that deliver sustainable returns, diversifying our
income, driving an engaging and personalised experience through end-to-end digitalisation and data
analytics, and developing new propositions that meet our customers’ needs in areas such as
insurance, investments and consumer lending.
To really stand out, we need to focus on our strengths. We have strong brand recognition. A higher-
than-average Net Promoter Score (NPS) in many of our markets is indicative of customer satisfaction.
We’ve built a solid Tech foundation for digitalising and innovating to improve the customer experience,
make processes more efficient and effective, and bring new solutions to our markets faster. And not
forgetting our people – even in a digital world ours is a relationship business – our people are crucial to
our success.
Healthy business
To remain a financially healthy company, we have to put our people, capital and investments to work
in markets and activities that provide the best growth opportunities and sustainable returns. Retail
markets where ING has mostly savings and current accounts put pressure on our business model,
especially in the negative interest rate environment. Rather than remain in markets where we do not
see growth opportunities, we prefer to reallocate our resources to markets where we are growing. This
led to our decision in 2021 to discontinue our Retail Banking businesses in several countries that we
believe have insufficient scale to maintain a reasonable franchise.
In Austria, we transferred our Retail operations to bank99, the digital banking arm of the Austrian
postal service, and in the Czech Republic around half of ING’s Retail customers and 60% of client
balances were transferred to Raiffeisenbank. In December, following a strategic review of our activities,
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we announced we would also exit the French Retail Banking market where ING has been active as an
online bank since 2000. In all these markets our Wholesale Banking activities will continue.
Diversifying our income: investment products
With customers looking for alternatives to savings accounts in the negative interest market, we’re
empowering them with smart digital investment tools like My Money Coach in Italy, Naranja+ in Spain
and Easy Invest in the Netherlands. At the same time, growing our fee and commission income, and
increasing its share in our overall income mix, remain very important as our net income is impacted by
the negative or low interest rate environment. In 2021, fee income rose 17% in 2021, contributing 19%
to our full-year income.
In 2021, we introduced Komfort-Anlage (Comfort Investing) in Germany, a low-threshold entry point
for new investors. From as little as one euro, customers can invest in one of seven ING World funds
according to their risk appetite. Komfort-Anlage is based on ING Spain’s Naranja+ product and owes its
scalability to reusable Touchpoint components that enable it to be rolled out in other countries. Since
its introduction in June 2021, it has attracted 10,000 investors and €120 million in assets under
management. Of these customers, 85% have a recurrent investment plan.
Also in Germany we offer securities savings plans that allow customers to invest small amounts in over
1,800 securities (shares, exchange-traded funds or mutual plans). More than half a million savings
plans were activated in 2021, growing this service from 0.6 million savings plans at end-2020 to 1.3
million at end-2021. For more experienced investors, we have self-directed accounts as well as robo-
advice from our fintech partner Scalable Capital, which has attracted more than €1.6 billion in assets
under management.
This demand for digital investment products helped to boost our fee income to record levels in 2021,
attracting €79 billion in assets under management (AuM) in Germany at year-end (39% higher than
end-2020) and close to €15 billion in Spain (€12.3 billion in 2020). In Belgium and the Netherlands,
investment product balances increased respectively to €42.6 billion (from €36.8 billion in 2020) and
€40.1 billion (from €32.2 billion in 2020).
Insurance
In various Retail markets ING has teamed up with insurance partners to offer our customers insurance
products via the ING app or website, based on the local needs within those markets. With insurer NN
we’re offering insurance linked to loans in Belgium, Poland, Romania, Turkey and Spain, as well as a
range of standalone non-life insurance policies in Belgium, the Netherlands and Poland. In some
countries we also team up with other insurers for additional protection needs. For example, in 2021 we
introduced a new health insurance product in Romania and device protection in Turkey, as well as
distributing pensions and offering insurance-based investment products in several countries.
Through our bancassurance offering in partnership with insurer AXA we’ve launched 20 products in five
countries to date. Given the reduced number of markets now covered by the partnership (following
ING’s exit from the Retail Banking markets in the Czech Republic and Austria), which decreases the level
of scalability, we announced our intention in November 2021 to refocus the scope of the partnership
from a central platform approach to the local delivery of existing insurance propositions.
Daily banking and savings
Everyday Roundup (ERU) is a digital product that aims to make saving simpler at a time when
customers may be financially vulnerable (due to the economic disruption caused by Covid-19). Used by
more than 1 million customers in five countries (Poland, Australia, Germany, Romania and Turkey), it
works by rounding up every transaction on a customer’s current account and automatically
transferring the difference to their savings account. ING in Australia also has a roundup option for
mortgages while in Germany customers can use the service to make donations to support the UN’s
sustainable development goals. The next step will be investments.
Increased emphasis on fighting financial economic crime has necessitated investments in areas like
know your customer and data protection over the past years with the aim of ensuring our
relationships with our clients meet the highest due-diligence standards. In light of this, ING introduced
a banking service fee for Wholesale Banking clients in 2021. It includes access to our CoorpID digital
vault where they can store, manage and share their know your customer documentation, to make this
often time-consuming process easier. Although there was some resistance to the fee, many clients see
the benefits of making banking safer and more secure.
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Similarly, banking fees for Retail customers in the Netherlands and Belgium were increased in 2021 in
the context of higher regulatory costs combined with increasing investments in digitalisation, with a
further rise announced for Dutch customers from January 2022. In Germany, where we introduced a
monthly fee for current accounts linked to non-primary customers, we will also now charge a €0.99 fee
a month for the girocard debit card from March 2022, reflecting a trend towards payment cards that
are more suited to e-commerce and contactless payments. The fee will apply to all new customers.
Existing customers will be approached for consent.
The negative interest rate environment is disadvantageous for savers and for banks. Some banks,
including ING, are already charging a negative interest rate fee for savings above a certain threshold.
At ING, this threshold is currently set at different levels across our euro markets, depending on local
market dynamics and regulatory frameworks.
In October 2021, we reached an agreement with the Dutch consumer association to compensate
certain Dutch Retail customers for past interest charges on revolving consumer loans that allegedly did
not sufficiently follow market rates. We expect any such compensation to be paid before the end of
2022. Read more in the ‘Legal proceedings’ paragraph of the additional notes to the consolidated
financial statements.
Digitalisation
We aim to digitalise our processes in order to increase productivity and decrease the time customers
have to spend on banking. The Covid-19 pandemic accelerated the shift to mobile and online banking,
with customers increasingly using their phones to connect to apps for shopping, making contactless
payments, opening a bank account and getting instant financing.
Although ING has been a frontrunner in online banking (we were one of the first direct banks in
Europe), we’re no longer the only bank with digital ambitions. As we saw during the many Covid
lockdowns, the demand for digital and contactless banking has grown exponentially, making digital
delivery an essential requirement for all banks. Here, operational excellence matters.
Operational excellence leads to a better customer experience. It ensures effective and efficient
processes that improve productivity and enable us to deliver high-quality services more easily.
Operations management is therefore one of the Big 6 capabilities ING has identified for success, along
with related capabilities such as customer experience, non-financial risk management and data
fluency. Looking back at past years, we’ve learnt that by sharing our expertise and strengths across
our countries we can be more effective in reducing duplication of business services and
processes,developing new solutions and achieving end-to-end digitalisation.
ING Business Shared Services BV (IBSS) is a fully owned service company employing around 13% of
ING’s global workforce. Its shared service centres in Bratislava, Manila, Poland (Katowice and Warsaw)
and Bucharest contribute to ING’s digital transformation and cross-border scalability by providing
shared operational and technology services in areas such as business operations, tech development,
non-financial risk and compliance, KYC, data analytics and modelling.
Scalable technology
Given the costs and complexities of cross-border integration, we stopped the Maggie transformation
programme (that aimed to standardise our Retail offering in four countries) in late 2020. Instead we’re
focusing on using our scalable technology – shared data lakes, infrastructure and reusable app
components– to implement global products locally. In this way we can build on what we already have
and scale it to our markets, adapting it to local needs as necessary.
To enable us to build and share standardised IT components and reusable services we developed
Touchpoint, our open banking technology platform. It provides access to 31.8 million customers (over
80% of our customer base) using common architecture and shared application programming
interfaces (APIs).
Related to Touchpoint, ING has built a private cloud (IPC) where we store and manage applications and
data such as channel applications, core bank systems and other banking applications. Given its
flexibility and scalability, cloud computing is an important component for scaling our digital
capabilities. To keep up with global usage, scalability, availability and delivery speed, ING uses public
cloud computing in addition to the IPC. By end-2021, 34.2% of our global infrastructure was running on
IPC (up from 25% in 2020) following the migration to IPC of ING in the Netherlands, Belgium and Spain.
One of the many advantages of a cloud-based infrastructure is that security-patching of databases
can be done globally, with near-to-zero downtime. This new feature was added to IPC in 4Q 2021 and
in the future will allow for the rapid global roll-out of other new cloud-based improvements.
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As an early adopter of cloud technology, ING joined forces with other banks in 2021 to establish the
European Cloud User Coalition (ECUC). It aims to develop common security standards and best
practices to mitigate security risks and address regulatory requirements around data privacy and
sovereignty.
To consistently manage and protect data across ING we have built a set of data repositories: the data
lake. By using a universal data language called ING Esperanto we make it easier to share and use data
across the company.
OnePipeline is the third element of our scalable technology, providing engineers with a consistent and
secure capability to develop, test and deploy fully automated software across ING. Around 74% of our
engineers were using OnePipeline at the end of 2021.
Scalable technology allows us to create global and local propositions that can be shared across our
business quickly and easily. We are focusing on products in three areas: investment products,
consumer finance and insurance.
Open banking
In an age of disruption and changing customer expectations, banks have to keep adapting their
services to become safer, more personalised, easier and more accessible for customers. Moreover, the
introduction of the second European Payment Service Directive (PSD2) in 2019 changed the
competitive landscape of banks dramatically, opening it up to non-traditional payments providers. This
has created an uneven playing field disadvantaging more heavily regulated traditional banks. At the
same time, it’s the catalyst for banks to rethink traditional products and services and create new
customer experiences using application programming interfaces (APIs).
More than compliance or regulated access via PSD2, open banking is about connecting with customers
directly or through a third party (API banking) and adding value with new banking and ‘beyond
banking’ propositions (embedded finance). Additionally, there are opportunities for Banking-as-a-
Service (BaaS), which enables businesses to integrate banking processes into their own non-bank
products through a secure and regulated infrastructure.
Open banking offers opportunities for us to meet the needs of our customers by connecting to the
apps where they’re shopping and socialising. This is supported by our open banking platform, which
provides the capabilities we need to establish secure, scalable, compliant and uniform connectivity
with external parties using APIs. These API-based propositions can often be used in multiple ways in
new and traditional channels, apps, and platforms.
At the same time, there are inherent risks to sharing sensitive data and it’s critical to protect the
privacy and security of our customers’ data. Each participant in the open banking ecosystem has a
duty to treat data with the utmost care and to educate users on data permissions and privacy. Under
European data privacy laws explicit consent is required from the account holder before sharing their
data. For consumers, where their data is stored could also be a concern.
API-enabled services such as Minna (subscription management via OneApp) and small and medium-
sized enterprise (SME) loans via Amazon’s sellers platform showcase how open banking is digitalising
our customer and partner relationships. The pandemic accelerated the need for end-to-end
digitalisation and we’ve found that these ambitions go hand-in-hand with realising our open banking
objectives. By breaking down our back office into modular, reusable, real-time services we can
ultimately offer them externally to our customers and partners. Internal applications using API services
to exchange data are built with this external reuse in mind. The recent go-live of our transaction
screening API shows how we’re putting this vision into practice. Now, payment service providers can
integrate ING’s capabilities for screening transactions into their systems of choice or customer
journeys. We believe open banking and APIs are a great way to foster innovation, accelerate
digitalisation and integrate and co-create with others, and are pursuing this across the bank and with
our partners.
Given the rising demand for open banking services, we decided in 2021 to discontinue smart money
app Yolt and focus our attention on growing its business-to-business open banking platform Yolt
Technology Services. It provides businesses across Europe with the APIs they need to connect to users’
bank accounts and initiate payments. In this way we are helping to speed up the adoption of open
banking and empowering businesses to grow. Yolt Technology Services offers businesses API coverage
to over 95% of bank accounts in the Netherlands, France and the UK, and its API infrastructure can
connect to 80% of bank accounts in Belgium, Italy and Spain. By end-2021, it had made over two
billion API calls – single uses of its API.
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Payments
Open banking has changed the way people pay, giving consumers more options and opening up this
service to non-traditional providers. This has accelerated the trend for instant payments executed in
real time 24/7, 365 days a year. ING makes it possible for customers to make instant payments from
the Netherlands, Belgium and Spain to the rest of Europe and is expanding this capability to other
countries. Customers can instantly request and receive money from friends and family via mobile
phone apps. We’re now working with major Dutch retailers to extend peer-to-peer payments (apps
enabling users to request and receive payments instantly) so merchants can send their customers a
mobile payment request on delivery of goods.
To speed up international money transfers, ING uses SWIFT gpi (global payments innovation) in 11
countries. SWIFT – the Society for Worldwide Interbank Financial Telecommunication – facilitates
payments between financial institutions. Around 80% of SWIFT gpi transfers are completed on the
same day, as compared with three to five days previously. Our ‘proof of payment’ module on
InsideBusiness now includes gpi information that allows corporate clients to track and trace their
international transfers, including fees and FX conversions made during processing through our network
of correspondent banks. For our Business Banking customers, we provide a bulk payment functionality
API that makes it possible to pay up to 5,000 recipients simultaneously and which supports multiple
strong customer authentication for all types of payments requiring two or more authorisations.
We announced in October 2021 that we are phasing out the services of our Payvision subsidiary by the
second quarter of 2022. Acquired by ING in 2018 to grow our share in the e-commerce/online
merchant payments market, Payvision offers business clients an omni-channel payments platform.
However, this market has evolved faster than we anticipated, and is increasingly competitive and
capital intensive. After thoroughly evaluating all options we concluded it’s not feasible for ING to
achieve its ambitions with Payvision. Until it’s wound down, Payvision will continue to fulfil its
contractual obligations and assist clients in the move to a new service provider. ING will continue to
serve business clients in the offline point-of-sale market and in e-commerce payments, for example
through providers such as iDeal in the Netherlands. Given iDeal’s dominance in the local payments
market, ING and other Dutch banks decided to discontinue the Payconiq payments app in the
Netherlands from January 2022. Conceived by ING in 2014 and a stand-alone company since 2018,
Payconiq remains active in other markets such as Belgium (via ING’s OneApp) and Luxembourg.
Earning the primary relationship
Earning the primary relationship is an important driver for profitable growth. It leads to deeper
relationships, greater customer satisfaction and ultimately customers choosing us for more of their
banking needs. We want our customers to do more than just some of their banking with us; we want
to be their first partner, where they deposit their salary, handle their payments, manage their assets,
take out loans and do most of their other banking business.
In Retail Banking, primary customers have at least two active ING products. One of these should be a
current account into which they deposit regular income. In Wholesale Banking, these are clients with
lending and daily banking products and at least one other product generating recurring revenues.
ING grew the number of primary customers by 481,000 to 14.3 million in 2021, 3.5% higher than at
end-2020.
Measuring customer satisfaction
One of the ways we measure our progress is through the Net Promoter Score (NPS), which indicates
customer satisfaction and loyalty (whether they would recommend ING to others) compared to
selected peers in each market. The score is calculated as the difference between the percentage of
promoters (who rate ING as 9 or 10 out of 10) and detractors (those scoring ING below 6). Our aim is to
achieve a number one NPS ranking in all our Retail markets, with a 10-point lead over our main
competitors.
Retail Banking
Based on a rolling average of our NPS scores in 2021, ING ranked number one at year-end in five of our
11 Retail markets (six out 14 markets in 2020, which then had included Austria, the Czech Republic and
France). In four of these we are more than 10 points ahead of our nearest competitor. In Australia,
Spain and Germany we widened the gap on the number two player and maintained our number one
position in Poland and Romania. In the Netherlands, where we rank second, our NPS score improved to
close the gap on the top scorer, while in Italy we moved up two positions in the ranking.
Business Banking
In this segment, serving self-employed and micro businesses, small and medium-sized enterprises and
mid-corporate companies, we measure NPS in four markets (on a scale of -100 to +100):
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●
Netherlands
: NPS for mid-corporate clients improved to +30.5 (from +18.4 in 4Q 2020), well
above our competitors (-19.2), based on feedback from clients who do business with multiple
banks. In particular clients appreciate ING’s sector knowledge combined with regional presence,
with satisfaction highest in the services, industry and transport and logistics sectors. For Real
Estate Finance clients there is a relational and transactional survey in place with a healthy +39
outcome in 2021. However, there is room to improve the digital customer experience for small
and medium-sized businesses and for self-employed clients where NPS respectively declined to
-39 (from -26 in 4Q 2020) and -23 (from -18).
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Poland
: combined NPS for SME and mid-corporate clients improved to +47 (from +43 in 4Q
2020) and the relationship NPS for the self-employed and micro segment the NPS was +49.1.
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Romania
: NPS for mid-corporates rose to +64 (from +54 in 2020) and for micro clients and SMEs
it increased to +51 (from +43 in 2020), putting ING in joint first place in both categories.
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Belgium
: NPS for mid-corporate and institutional clients (MCIs) improved to -33 in December
2021 (from -40 in January 2021), with an average score of -31 over the year. The NPS for self-
employed and micro clients (SEMs) decreased to -55 from -32 at the start of 2021, scoring an
average of -47 over the year. This can be attributed to several factors including a new loans
policy, branch closures, proximity to clients and ease of contact.
Wholesale Banking
In Wholesale Banking we measure both relational and transactional NPS. The relational NPS
programme runs in 32 Wholesale Banking markets and is a qualitative measure of client satisfaction
and how likely they are to recommend ING. The transactional NPS programme measures satisfaction
with regards to specific transactions and services and the ease of doing business with ING. This is run in
23 countries.
In 2021, ING’s relationship NPS score rose to +59.2 (on a scale of -100 to +100), from +56.3 in 2020, and
26% ahead of the industry average of +46.9 (+49 in 2020). The response rate increased to 62% from
60.4% and is based on clients representing more than 55% of Wholesale Banking revenue. In three of
our four client segments (Platinum, Gold and Silver) NPS was higher; among Sapphire clients it
retracted by 5% to 64.7. Six out of seven sectors registered stronger NPS, with Financial Institutions
joining for the first time in a pilot programme. The higher scores suggest that clients appreciate our
approach and that Wholesale Banking is succeeding in its strategy to focus on core clients, with as a
result more resources allocated to a smaller group of clients and higher client satisfaction.
On the transactional side, the number of invites increased by ~68% compared to 2020, with an overall
response rate of ~45%. A Client Services survey in June 2021 included a Transaction Services-related
question. Here the response rate was ~48% and client services/transaction services scored above
target with an overall satisfaction of 8.6 and a customer efforts score (measuring ease of doing
business with ING) of 8.5. Also in June 2021, a Trade Financial Services survey was carried out in EMEA
and APAC, with these clients rating ING above target with overall satisfaction of 8.8 and customer
efforts score of 8.6.
External recognition
ING’s digital leadership, customer experience and innovative products were recognised with several
‘best bank’ awards in 2021:
●
Best bank in Spain at the 2021 HelpMyCash awards. ING was rated 4.4 out of 5 by customers.
The sector average was 3.6.
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Euromoney named ING best bank in Poland and best bank for SMEs in Central and Eastern
Europe, based on digital leadership, client-centricity and support for businesses during the
pandemic.
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First in the Polish Banking Stars 2021 ranking by financial newspaper Dziennik Gazeta Prawna
and PwC for the sixth consecutive year.
●
ING in the Philippines named best digital bank for customer experience (Digital Banker
magazine), and best savings bank, fastest-growing retail bank and most innovative mobile
savings app (Global Banking & Finance Review).
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Recognised as most supportive bank through the Covid-19 crisis by trade commodity finance
media outlet TXF.
Innovating to stay a step ahead
Innovation is a prerequisite for remaining relevant to our customers and living up to our purpose in a
fast-changing world. It’s how we can create new and differentiating experiences that deepen our
engagement with customers and improve our own operational excellence. Ever since the introduction
of direct banking in 1997, ING has been finding ways to make banking easier, smarter and more
personal for our customers. Many of these advances stem from twinning the latest technologies with
data insights. Growing demand for digital solutions is also spurring new ideas.
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To increase the speed and impact of our innovation, at the start of 2021 we merged all of our
innovation activities into one business area called ING Neo, which reports directly to the chief executive
officer. This includes our beyond banking and platform activities in Retail Banking, Wholesale Banking
innovation, the chief innovation office, ING Labs and our investment vehicle ING Ventures.
We’re concentrating our innovation efforts on five value spaces chosen for their relative market size,
potential to disrupt, and ING’s right to play in those markets: housing, trade, disrupt lending, financial
health, and safe and compliant. Closely related to our core business, these value spaces address trends
that we believe will impact our customers and our business in areas such as customer convenience
and access, sustainability, automation and digitalisation.
We’ve learnt that it takes time for an innovation to be widely adopted and reach the scale it needs to
have an impact. This requires longer horizons and different ways of measuring success while still within
a reasonable time frame for ING. New, non-traditional products and services also require a different
approach to evaluating risk. ING Neo therefore has its own second line of defence (which reports into
the group line), ensuring compliance by design and the right risk and control frameworks for our
innovation activities.
How we innovate
Innovative ideas come from inside and outside ING. We encourage our employees to think creatively
and turn their ideas into opportunities through hackathons and initiatives like CX Day (to improve
customer experience). In addition, ING’s Innovation Summit aims to raise awareness among all
employees of innovation trends and activities, and innovation ambassadors link our activities more
closely to our business goals. In November, ING’s second virtual Innovation Summit was streamed to
26 countries and reached more than 2,000 users.
ING also has its own customised innovation methodology called PACE, which emphasises customers
validation to ensure we’re only developing what they really want. So far over 12,500 employees have
been trained in PACE. In 2021, we set up a digital PACE Academy to move the training from the
classroom to online and reach more colleagues. The PACE programme was recognised at the 2021
Stevie Awards for Great Employers in the categories Skills Training and Problem-solving Training.
Partner, invest and build
No-one knows what the future may hold, nor what technologies may emerge and we recognise we
don’t always have all the knowledge and skills in-house. That’s why we partner with academic
institutions like the Dutch Technical University of Delft on technologies like artificial intelligence, with
consortiums like R3 on blockchain initiatives that are modernising commodity and trade finance, and
with fintechs and others who look at banking from a different perspective.
ING Labs is our incubator for potential scale-ups where we work with various partners to validate and
build new businesses for ING and our customers, such as Stemly, an AI-driven forecasting tool for
supply chain managers, and Cobase, a cloud-based multi-bank platform for corporate clients. One of
the first initiatives to be incubated in our Singapore Labs in 2018, Stemly was spun out as an
independent venture in 2021, while Cobase, which was spun out earlier, became a minority
shareholding in 2020. We believe combining corporate innovation with entrepreneurial experience
contributes to a higher success and greater impact than either partner could achieve alone. In our four
ING labs in Amsterdam, London, Singapore and Brussels we currently have 18 initiatives in the
innovation funnel in our five value spaces. Global Finance magazine named ING as one of the best
bank-sponsored innovation labs in its 2021 Innovators awards.
Through ING Ventures, our corporate venture capital fund, we make minority investments in early-
stage companies with a strategic relevance for ING. These are mainly fintechs developing disruptive
technologies that will ensure our customers get access to best-in-class services. In 2021, the size of the
fund was €350 million.
In total, ING had 114 active fintech partnerships at end-2021, of which 17 are among 34 ING Ventures
investments. These include eXate (data privacy and security fintech); Divido (buy-now-pay-later
platform); Flowcast (AI-powered credit decisions); PRODA (commercial real estate automation); and
Stemly (AI forecasting tool for supply chain managers).
In the housing value space, ING partnered with property valuation firm Sprengnetter on Scoperty, a
digital marketplace that aims to make Germany’s real-estate market more transparent. With valuation
estimates for more than 35 million residential properties, it creates a ‘pre-market’ where buyers can
make a bid directly to the seller before the property is officially listed. Scoperty also provides related
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services such as sales support and mortgage qualification, which is aligned with ING’s independent
mortgage brokerage platform Interhyp, offering access to 400 lenders.
In the safe and compliant value space, Blacksmith KYC and CoorpID are two initiatives being
implemented globally for KYC processes. Blacksmith’s digital policy management is designed to help
banks digitalise and accelerate know your customer workflows, provide insight into industry practices
and better monitor financial economic crime risk exposure, while CoorpID gives corporate clients a
platform to easily store, manage and synchronise KYC documents.
For our Business Banking clients, various fintech partnerships are opening up new sources of financing
to help companies find the right loans for their businesses. Countingup is a mobile banking app for self-
employed entrepreneurs and freelancers that combines accounting and banking features into one
seamless solution to reduce operating complexity and cost.
Not all our collaborations lead to new products or services. We’ve stopped over 90 partnerships so far,
mostly after unsuccessful or unsatisfactory proofs of concept.
Distributed ledger technology and blockchain
When it comes to distributed ledger technology (DLT) and blockchain, ING was an early adopter of the
technology and is considered an industry leader, consistently ranked among Forbes magazine’s top-50
companies active in this area (for the third consecutive year in 2021).
Komgo – previously called Easy Trading Connect – is a former ING Innovation Bootcamp winner and
one of the first to use DLT to digitalise commodities trade financing in 2017. In May 2021, ING-backed
Komgo raised CHF26 million (€24.9 million) in its third funding round from a consortium of investors
including ING Ventures. Spurred by demand for digital services during the pandemic, Komgo saw a
50% increase in trade finance transactions on its platform and a 65% increase in clients in the past
year. Other DLT solutions include Contour, enabling letters of credit to be processed in under 24 hours
(from 10 days); and HQLAx, facilitating trades in high-quality liquid assets, which was commercially
launched in December 2020.
We amplify our DLT impact by addressing how our solutions can solve key problems in the finance
industry and work with others to produce open-source assets that can serve and influence the wider
community. Among others, ING contributed to the development of open-source blockchain platform
Corda (with R3) and Ethereum, as well as zero-knowledge proof solutions to improve privacy and
security of DLT-based transactions.
We continue to support the adoption of the technology in different areas of the bank and to explore
additional opportunities as client demand, regulation and the technology evolve.
Data, AI and advanced analytics
In our competitive industry, data analytics stands to give us an edge. It goes hand-in-hand with
digitalisation and we can use analytics to create actionable insights about customers and improve our
daily decision-making. Advanced analytics techniques (machine learning and big data) can be applied
to automate processes, making them faster and better; create better products and services; and fight
financial crime. In 2021, we initiated a programme to further develop and strengthen our global
analytics strategy and align it with our business goals, moving analytics closer to customer
experience-related activities and creating a global community of data and analytics experts.
ING Analytics delivers solutions in areas such as customer interaction, smart pricing strategies and risk
management, innovation, anti-money laundering, people analytics, automation and for Wholesale
Banking. In 2021, we further invested in an analytics platform to service the analytics needs of ING. It
has over 2,000 users working on more than 300 unique projects across the bank.
One of the ways we use AI to improve the customer experience is with chatbots, which are available
24/7 to answer questions and interact with customers. In Germany, our virtual assistant pING was able
to answer 7.6 million customer queries in 2021; the recogniton rate for current account questions, for
example, improved to 95.7% from 94.2% the previous year. INGo in Turkey has a 92% accuracy score
on customer queries and can also assist with money transfers, loan applications, changing passwords
and locating the nearest ATM. Since its introduction in 2018, it has been further improved and
‘humanised’ to make small talk and jokes with customers and proactively reach out on birthdays and
other special occasions. In 2021, INGo had around 900,000 users in 5.1 million chat sessions and
approved 476 million lira worth of loans.
Some of our fintech partnerships enhance our data capabilities, such as London-based data security
company Exate, which makes it possible to securely share data with greater speed and efficiency. This
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will allow ING to test new software on real data to ensure effectiveness in production and enable closer
collaboration with external partners across borders. Other solutions delivered by ING Analytics in 2021
were Nadia, a robot that automates repetitive tasks in our non-financial risk database in seven ING
countries and SAIO, which automates financial and other administrative processes for business
customers in Poland.
Sustainable business
Being sustainable is not just about reducing our own environmental footprint. We see it as an
opportunity to use our experience and knowledge to support our clients on their own sustainability
journeys. Our biggest impact is through our financing, via the loans we provide. That’s why in 2018 we
committed to steering our lending portfolio towards meeting the well-below two-degree goal of the
Paris Agreement – an ambition we sharpened in 2021 when we joined the Net-Zero Banking Alliance.
We use our Terra approach to align our portfolio with our ambitions, as well as to measure and report
on our progress.
Recognising the merit of disclosing absolute greenhouse gas emissions we started doing so in our
integrated climate report published in September 2021 (available on ing.com). This report also gives a
broader overview of all the elements of our climate action approach, including how we assess climate
risks and take action to mitigate them.
Terra approach
Terra helps us to steer our portfolio away from high-carbon technology towards the new low-carbon
technology needed to reach these net-zero goals in the nine sectors most responsible for climate
change. These are power generation, fossil fuels, automotive, shipping, aviation, steel, cement,
residential mortgages and commercial real estate. To measure our progress, Terra uses the most
appropriate methodology available per sector, given that each has its own transition pathway, and
that some sectors are further along on their journeys.
One of the methodologies is PACTA for Banks, which ING co-created with 2DII (the 2° Investing
Initiative). It looks at the technology shift that’s needed across certain sectors to slow global warming
and then measures this against the actual technology clients are using or plan to use in the future. For
example, in the automotive sector we measure the number of internal combustion engines our clients
are making compared to electric vehicles and based on science-based transition pathways, we can
then see what needs to shift, by how much and when. This is where financing comes in, and where ING
can have an impact in the real economy.
Reporting process
The process for reporting on Terra consists of a number of steps, most of them carried out by ING’s
Global Sustainability department in conjunction with colleagues in the front office. Required internal
data relating to our portfolio composition is made available soon after ING’s year-end close in
February. External data relating to climate performances is collected around April. The external data is
checked for consistency and matched with our internal data. A year-on-year portfolio comparison is
made to analyse fluctuations at company or asset level for each sector. This helps us understand the
drivers behind any changes, which are usually attributable to the climate performance of our clients,
the composition of our sector portfolios or data improvements. When necessary, scenarios and targets
are updated in conjunction with external parties.
Once the data is validated we draft our progress report, which since 2021 has been incorporated into
the integrated climate report. The report is approved at board level and published in September of the
reporting year. As such, all progress reported in 2021 relates to 2020. Reporting on progress in the
shipping sector is linked to and aligned with the Poseidon Principles timelines. The report on 2020 year-
end data was published in December 2021.
Targets and progress
Of the nine sectors in scope for Terra, five – power generation, automotive, residential real estate,
shipping and fossil fuel – were on track with existing climate-alignment pathways in 2020.
Steel, cement and commercial real estate were all within 5% of their scenario and we consider these
sectors able to improve their performance in the short term. Aviation was not on track. Covid-19 had
an extraordinary impact on the sector in 2020, when restrictions on international travel led to a
significant reduction in absolute emissions but also impacted efficiency owing to the global fall in
passenger loads. Read more in our integrated climate report on ing.com.
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We are currently working on incorporating our updated ambition into our Terra approach and aim to
have the steps and intermediate targets needed for a net-zero pathway for all nine sectors by end-
2022. Detailed information on our transition plans is available in our integrated climate report on
ing.com.
As a first step, we’ve updated our target for upstream oil and gas in line with the International Energy
Agency’s net-zero scenario. Our aim is to reduce financing to upstream oil and gas by 12% by 2025
(from the around €4 billion we loaned the industry in 2019) by decreasing our exposure in the sector
and engaging with clients to help them shift to low-carbon technology. This new target reflects the
accelerated pace that’s needed to bring about change. Previously we had aimed to reduce financing in
this sector by 19% by 2040.
To measure our progress we use the 2DII PACTA ‘economic activities’ methodology, which has two
metrics to identify the carbon intensity of the Energy sector. For ‘power generation’ the alignment
metric we use is emissions intensity. For ’fossil fuels’ (coal, oil & gas) we use the ‘portfolio financing
trend’, which requires an absolute reduction in the financing of primary energy production by reducing
the size of our upstream oil & gas and thermal coal mining portfolios. Both metrics use the
assumptions of International Energy Agency’s net-zero scenario pathway to reduce the carbon
intensity of global power generation.
Financing and advising our clients
As a financial institution we see it as our role to support the transition to net zero through our financing
and by using our knowledge and insights to support our clients in their own transitions towards a
greener future. We believe we can have more impact with what we do finance than what we don’t
finance. So while we say ‘no’ to financing certain businesses and sectors, in others we say ‘yes but’,
outlining sustainability changes clients have to make to reach net zero.
Our integrated climate strategy helps us decide what activities we’ll support and those we’ll no longer
finance. Our approach is closely aligned with the climate goals of the Paris Agreement, as well as the
objectives of the European Commission’s (EC’s) Green Deal, which provides a framework for Europe’s
journey to achieve net-zero greenhouse gas emissions by 2050. It also aims to decouple economic
growth from resource use and ensure economic inclusivity so no person or place is left behind.
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Energy policy in practice
Reducing society’s reliance on fossil fuels is a vital contributor to the energy transmission and for
reducing the emission of greenhouse gases. As part of our integrated sustainability strategy, we’re
working to align our energy portfolio (and other major CO2-emitting sectors) with net zero by 2050
targets through our Terra approach. However, transitioning from fossil-based fuels to low-carbon and
renewable power sources requires massive investment in cleaner technologies and infrastructure to
meet the growing demand for energy. This is a complex process that will not happen overnight and in
the meantime the real economy still relies on fossil fuels. The least environmentally damaging of these
is natural gas.
We believe that simply reallocating capital from high-carbon clients and assets to low-carbon ones
does not support the transition we want to see in the real economy because it does not reduce the
actual global CO2 emissions as the same assets can be financed through other means. Rather, we
believe in working with our clients to support them in the transition towards reaching climate goals
together. In the Terra approach, we’ve developed a distinct method for steering our portfolio by
identifying carbon intensity metrics that reflect the shift that needs to happen in each specific sector
to achieve climate goals.
To reflect on the composition of our power generation portfolio we measure our outstandings on 31
December 2021, as shown in the graphic ‘Total power generation lending’ below. This portfolio includes
both renewable and non-renewable sources, which should – over time – contribute to the overall
transition by reallocating our exposure to renewables in the global energy supply mix.
Overall, financing of our power-generating activities increased by 22% to €12.2 billion in 2021, which is
largely attributable to renewables, including solar and wind. This sector saw an increase of 26% to €7.3
billion in 2021. Over the last five years, ING’s exposure in renewables has more than doubled and now
makes up 60% of our power generation portfolio. Our exposure to power generation through natural
gas – the least damaging fossil fuel in the transition to a net-zero economy - remained roughly stable
in 2021 at €1.5 billion while we have zero exposure to power generated by oil. In line with stated target
to reduce coal financing to zero by 2025, financing for coal-fired power plants decreased by 29% to
€87 million (from €122 million in 2020). In addition, financing for thermal coal mining (which is not
shown in the power generation graphic) decreased by 26% to €107 million in 2021 from €144 million in
2020.
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Financing the transition
Since ING introduced the first sustainability-linked loan (SLL) for Philips in 2017, where rates are linked
to the client’s sustainability performance, the popularity of these products has increased as more and
more companies push sustainability to the top of their strategic agendas. ING closed 147
sustainability-linked transactions in 2021. These included the world’s biggest-yet SLL and the first in its
sector for brewer AB InBev ($10.1 billion revolving credit facility linked to water-efficiency
improvements, PET packaging recycling, renewable energy use and reduced emissions targets).
In addition, ING received four consecutive sustainability-related mandates from US data centre
provider Aligned, acting as sole sustainability coordinator and sole green structuring advisor on the
first SLL and first green securitisation in the data centre space.
Pioneering for the future
We also invest in the technology needed to reach a net-zero world, things like battery storage and
solar power. In 2021, ING’s innovative financing method to make inland shipping in the Netherlands
more sustainable with a pay-per-use structure for renewable batteries, Zero Emissions Services (ZES),
was recognised by the International Association of Ports and Harbours (IAPH) with a sustainability
award in the climate and energy category. ING founded ZES along with consortium partners the Port of
Rotterdam, energy company ENGIE, Finnish maritime technology company Wärtsilä and its first
customer, Dutch brewer Heineken. The first vessel started sailing in September 2021.
ZES is also an example of how ING is exploring circular business models with various partners. The
circular economy is a way for companies to reduce waste and emissions by rethinking their use of raw
materials and resources from a ‘take, make and waste’ approach to ‘reduce, reuse and recycle’.
Companies like ZES stimulate other use models for depleted battery packs, giving them a second or
even a third life after they are exchanged.
Another ING investment in green transport, electric bus company Ebusco made its debut on the
Amsterdam stock exchange in October 2021. The initial public offering raised €300 million to fund
Ebusco’s international expansion and growth strategy and valued the company at around €1.3 billion.
ING Corporate Investments continues to hold a 21% stake in Ebusco (initially acquired in 2016).
Accelerating the green economy
To accelerate a green and sustainable economy we provide financing for projects such as wind or solar
energy and sustainability-linked financing that supports companies on their own sustainability
journeys. In 2021, we closed 317 sustainable finance transactions (139 in 2020). These include 45
green and social loans, 147 sustainability-linked loans and 95 green, social, sustainability(-linked) and
transition bonds. The remaining 30 transactions were spread among green and sustainability-linked
schuldscheins (an investment form predominantly used in Germany), other sustainable investments,
sustainable structured finance transactions and ESG advisory and green guarantees.
Sustainable bonds are an integral part of our sustainble finance offering and are supported by ING’s
Green Bond Framework, which is in line with the Green Bond Principles of the International Capital
Market Association. Among these are a euro-denominated green bond (two-part €1.1 billion) for US IT
and data centre provider Equinix, which builds on the green finance framework ING created for them in
2020; and a $3.2 billion equivalent dual-currency bond offering for FedEx, part of which was a
sustainability bond offering. ING was sole structuring advisor on the sustainability financing framework.
Through our social impact finance portfolio we lend to projects that lead to, for example, basic
infrastructure improvements, community development or essential services. In December 2021, ING
acted as joint coordinator of a social loan for the Ghanaian Ministry of Finance to set up national
vocational training institutes across Ghana. The export credit facility is aligned with the standards of
the Social Loan Principles. We also aim to make a positive contribution to human rights as financier,
employer, taxpayer and as a driver of progress and prosperity. This is in line with the United Nations’
Principles for Responsible Banking, of which ING was a founding signatory in 2019.
Who we finance is as important as what we finance. In 2021, lending to industry ESG leaders (based on
the scores of independent ESG ratings provider Sustainalytics) grew to €37.8 billion from €28.5 billion in
2020. (This amount may overlap with the amounts reported under climate and social impact finance.)
The tables below provide a breakdown of our direct lending for environmental and social activities at
year-end 2021, which show our total climate finance and social impact portfolio increased by
€3.1 billion to €20.2 billion. Of this, the climate finance portfolio, which supports clients and projects
helping the transition to a low-carbon economy, rose to €19.5 billion (from €16.5 billion in 2020). Social
impact financing increased by €0.1 billion to €0.7 billion.
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ING Bank Annual Report 2021
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Climate finance
in EUR million
2021
2020
Energy
1
5,923
5,322
Construction and real estate activities
10,536
9,865
Transport
2,063
1,087
Water supply, sewerage, waste management and remediation
218
117
Information and communication
497
53
Circular economy
2
28
Green loans (multi-purpose)
3
288
Other
4
26
Total
19,524
16,498
1
Assessment methodology has been updated and comparatives aligned accordingly
2
Category ‘Waste management’ has been merged with ‘Circular economy’
3
Includes green loans that are aligned with more than one Green Loan Principles category
4
‘Other’ category has been removed in 2021
Social impact finance
in EUR million
2021
2020
Basic Infrastructure
377
275
Community development
49
Essential services
193
209
Healthcare
82
Total
652
533
In the Bloomberg league tables, ING ranked second for green, social and sustainability euro bond
issues with more than €7.5 billion in bonds issued in 2021 (fourth with €3.8 billion in 2020), and fifth for
green and sustainability-linked loans valued at €5.4 billion (fifth with €3.3 billion in 2020).
Greener homes
A significant part of our loan book – 42% – consists of residential mortgages, accounting for 68% of our
Retail Banking loans. Houses generally account for about 22% of direct and indirect CO2 emissions in
the EU. Our long-term vision is to empower our mortgage customers to reach net-zero emissions in
their homes and to achieve the same for our mortgage portfolio by 2050. We’re therefore working with
our customers to improve the energy consumption of the houses we finance as a way of achieving our
net-zero goals. However, there’s a long way to go to help all our clients improve the energy efficiency
of their homes.
Not knowing what renovations are most effective or what financing or subsidies are available to do so
is one of the factors we’ve seen that is stopping people from taking action. Here banks can play a role.
In addition, the energy mix varies from country to country and the energy intensity of homes is quite
broad. To be able to understand how energy efficient homes are and make comparisons across
markets a robust and standardised approach to data is necessary at country and European level and
ambitious regulation will be critical to encourage a faster transition.
Our current carbon intensity measurement covers our Dutch, German, Belgian and Polish mortgage
portfolios, with a combined outstanding lending amount of roughly €232 billion (78% of total
mortgage outstandings) and more than 1.5 million financed homes. More countries will be added as
the data becomes available. See our integrated climate report on ing.com for information on the
underlying measurement, which, like the rest of Terra reporting, relates to 2020 data.
Across our mortgage markets we provide a range of products, services and advice to help homeowners
make their houses more sustainable. These include eco loans to finance renovations to improve energy
efficiency such as insulation, solar panels and double glazing. In Belgium, we offer interest-free eco
renovation mortgages in collaboration with the Flemish government. We also provide access to
subsidies in countries where these are available. In Germany, we work with development bank KfW to
integrate subsidy programmes into our mortgage offering for energy-efficient new-builds and for
modernising existing homes, for example with energy-efficient heating systems.
In the Netherlands, ING became a co-financier of the Dutch government’s ‘Warmtefonds’ (Heat fund) in
May, contributing €50 million in financing. The fund provides loans on favourable terms to make
homes more sustainable. Since 2014, it has provided around €600 million in financing for this purpose.
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In November, a local hub of the European Energy Efficient Mortgages (EEM) initiative was set up in the
Netherlands, with ING as a founding member, to support and promote the acceleration of energy-
efficient housing by developing a framework for green mortgages.
To engage customers on their sustainability journeys our Dutch and German websites provide
information and advice about energy-efficient living and financing available. In the Netherlands,
customers can also check the energy profile of their homes as well as the options to improve in this
area. To help them take the first step, we provided a free energy rating for homeowners wanting to
invest in upgrading their energy label. Around 60% of our Dutch portfolio currently has an ‘A’, ‘B’ or ‘C’
energy label, with more homes moving into the most energy-efficient ‘A’ band (17.4% compared to
15% the previous year) and fewer homes in the ‘C’ band (27.2% v 28.3%). In addition, the CO2 intensity
of this portfolio reduced from 35kg CO2/m2 to 31.3kg at end-2020, helped by the Netherlands’ growing
use of renewable energy sources in its electricity network. See ‘Reporting process’ above for more
information on how we monitor and report on our progress.
Managing climate and environmental risks
Our integrated climate approach considers both how ING can impact climate change through our
financing as well as how climate change can impact our business. We’re working to be more resilient
to climate risks, both physical risks, such as the risk of flooding on our mortgage portfolio, and
transition risks, such as stranded assets, for example when carmakers don’t make electric vehicles.
These risks and their financial implications can potentially also impact our clients and ultimately our
balance sheet. A critical process is therefore required to identify and understand these risks and
integrate them into our risk management framework, including credit, market, liquidity and
operational risks.
A climate risk assessment of around 65% of our mortgage portfolio identified flooding as the biggest
physical risk where the impact would vary extensively. We have decided to develop this pilot further
and increase the geographical scope and data granularity to grow our understanding of the financial
impact of climate hazards for our portfolio management. We expect to report more on this in 2022. As
part of this initiative we’re collecting location data for the Belgian mortgage book to identify physical
climate risk to our collateral. An initial assessment of the impact on Business Banking clients on a
sector level will be used as input for ING’s global heatmap. In line with its local regulatory requirements,
ING in Belgium will also collect the energy efficiency levels of immovable property collaterals, both
residential and commercial.
We apply strict social, ethical and environmental criteria in our financing and investment policies and
practices to ensure they’re in line with our sustainability goals. Every client and transaction is assessed,
monitored and evaluated against the requirements of our environmental and social risk (ESR)
framework to ensure compliance and limit negative impact on the environment and communities.
That way, climate and environmental impact are taken into account every time we make financing or
investment decisions.
Sustainable investment services
ING offers sustainable investment (SI) services to its Retail Banking customers in the Netherlands,
Belgium, Luxembourg and Germany. These include brokerage, advisory and discretionary
management. We provide dedicated portfolios, structured products and investment funds and cover
all asset classes. In 2021, ING’s Retail investment division recorded €19.2 billion in sustainability assets
(from €13.2 billion in 2020). This also underlines our clients’ appetite for products and services that
integrate sustainability criteria.
To provide these clients with a portfolio that’s in line with their values and interests we use a diverse
set of environmental, social and governance criteria to assess all investments. Both companies and
investment funds are screened against these criteria. For companies we take a two-step approach.
First, we look at their policies and achievements on sustainability and score relative to their peers,
choosing to invest in those companies with the best ESG profile per sector. Second, we exclude
companies whose products or services have negative impacts or which are engaged in undesirable
corporate conduct, for example conduct that infringes human rights. In selecting investment funds, we
carry out quantitative and qualitative screening to understand the ESG profile of the asset and the
asset manager. This includes interviewing fund managers and ensuring the underlying holdings also
meet our sustainability criteria. For more information on the selection process please refer to ing.com.
ING is a signatory to the UN-backed Principles for Responsible Investment as a service provider and
we’ve committed to incorporating ESG into our investment decisions, policies and processes
underpinning our investment services.
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Our performance and capital
management
Capital management
Risk and capital management remain central to the stability and continuity of the bank. Maintaining
our risk profile within our risk appetite and strengthening our capital base is how we grow a sustainable
business and achieve our strategic objectives.
Our overall approach to capital management is to ensure that we have enough capital to cover our
(economic) risks at all levels, including the risks from the ongoing pandemic, and comply with local and
global regulations, while delivering a return for our shareholders and investing in innovation to
accelerate the Think Forward Strategy.
ING Bank’s capital ratios at the end of the year improved compared to 2020 primarily due to the partial
addition of the 2021 net profit to CET1 capital and lower regulatory adjustments. This was only partly
offset by higher risk-weighted assets that were mainly driven by model impacts, reflecting the ongoing
redevelopment of internal models and EBA guidelines. ING Bank continues to maintain a strong and
high quality capital level.
ING Bank N.V. has a CET1 ratio of 14.3% at 31 December 2021, versus an overall CET1 requirement
(including buffer requirements) of 7.03%. The Tier 1 ratio (including grandfathered securities) increased
from 15.9% to 16.5% compared to last year. The Banks’s total capital ratio (including grandfathered
securities) increased to 19.5%.
See ‘Note 49 Capital management’ in the ‘Consolidated Financial Statements’ for more information.
Financial developments
In 2021, ING Bank achieved good results, despite the challenging conditions, impacting customers,
business clients and society from the ongoing Covid-19 pandemic. ING Bank’s net result rose to €4,770
million from €2,415 million in 2020. The effective tax rate in 2021 was 27.7%, down from 34.6% in
2020. The lower effective tax rate was mainly caused by the reduced impact of non-deductible
amounts, whereas 2020 had included the non-deductible impairments on goodwill and on our stake in
TTB (previously reference was made to as TMB).
The result before tax increased 77.8% to €6,774 million in 2021 from €3,810 million in 2020,
predominantly due to lower risk costs reflecting improved macroeconomic indicators, as well as higher
income. Net core lending growth (adjusted for currency impacts, and excluding Treasury and the run-
off portfolios) was €30.6 billion, and net core deposits growth was €10.3 billion. At year-end, the global
retail customer base declined to 38.2 million, mainly by exiting the Austrian and Czech retail banking
markets. The number of primary customers, however, rose during the year by 481,000 to 14.3 million.
Income rose 4.8% to €18,485 million in 2021 from €17,645 million in 2020. Income was supported by
the recognition of a €483 million conditional TLTRO III benefit, which also included the impact of the
retroactive adjustment in the ECB funding rate as from 24 June 2020. The increase in income was
mainly in Wholesale Banking, due to higher revenues in all product groups, while the higher income in
Corporate Line was supported by the recognition of €72 million receivable related to the insolvency of
a financial institution in the Netherlands and higher interest results from foreign currency ratio
hedging. Income at Retail Banking slightly increased as strong growth in fee income and the impact of
the impairment on ING’s equity stake in TTB recorded in 2020, was largely offset by the continued
margin pressure on liabilities.
Net interest income increased 0.1% to €13,615 million, and was supported by the €483 million
conditional TLTRO III benefit. Higher interest results were recorded on lending products (driven by a
higher total lending margin), but also in Treasury, Financial Markets and Corporate Line. These
increases were offset by lower revenues on current accounts and savings, reflecting continued liability
margin pressure. ING Bank’s overall net interest margin declined to 1.39% from 1.43% in 2020.
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Net fee and commission income increased 16.8% to €3,517 million from €3,011 million in 2020. In
Retail Banking, net fee and commission income rose by €374 million, or 19.2%. This increase was
mainly in daily banking, reflecting higher packages fees, recovery of payment transactions and new
fee introductions, as well as higher fees from investment products due to new account openings, a
higher number of trades and higher assets under management. Total fee income in Wholesale Banking
increased by €128 million, or 12.0%, mainly in Trade & Commodity Finance as a result of higher
average oil prices as well as increased daily banking fees and higher fee income in Global Capital
Markets and Corporate Finance.
Total investment and other income rose to €1,354 million in 2021 from €1,034 million in 2020. The
increase was mainly caused by the recognition of a €72 million receivable (recorded in Corporate Line)
related to the expected recovery of the insolvency of a financial institution in the Netherlands, while
previous year included the €230 million impairment on ING’s equity stake in TTB (recorded in Retail
Banking) as well as a €58 million decrease of the NN Group indemnity receivable following the
settlement of a tax dispute in Australia, which was offset by an comparable amount in the tax line
(recorded in Corporate Line).
Operating expenses increased by €35 million, or 0.3%, to €11,195 million. Expenses in 2021 included
€1,265 million of regulatory costs, up from €1,105 million in previous year, among others due to an
incidental 50% increase in the Dutch bank tax for 2021. Expenses in 2021 furthermore included €522
million of incidental items, mainly reflecting a €180 million provision for compensation to Dutch
customers with certain consumer credit products, redundancy provisions and impairments related to
the announced exit of the retail banking markets in France and Czech Republic, the accelerated closure
of branches in the Netherlands, and some other impairments. Incidental items in 2020 amounted to
€673 million, mainly reflecting €310 million of goodwill impairments and several restructuring
provisions and impairments related to the review of activities and measures announced (including
those on Wholesale Banking and the Maggie project). Expenses excluding regulatory costs and
incidental items increased by €25 million, or 0.3%, as the impact of collective-labour-agreement (CLA)
salary increases and higher performance-related expenses and IT costs was largely offset by the
impact of continued cost-efficiency measures. The cost/income ratio was 60.6% versus 63.2% in 2020.
Net additions to loan loss provisions declined to €516 million, or 8 basis points of average customer
lending, compared with €2,675 million, or 43 basis points, in 2020. Risk costs in 2021 were primarily
driven by additions to Stage 3 provisions and included several model updates in Retail Belgium as well
as additional provisioning from updated recovery scenarios of existing, mainly Wholesale Banking
clients, reflecting uncertainty on recovery scenarios and valuation in certain asset classes. Provisioning
in Stage 1 and 2 was reduced, mainly due to releases from management adjustments taken in
previous year. It further reflects clients being removed from the watch list and moving back to Stage 1.
The return on IFRS-EU equity of ING Bank increased to 10.1% in 2021 from 5.1% in 2020.
Retail Banking
Total Retail Banking
In 2021, Retail Banking results strongly improved compared with 2020 which was negatively affected
by the impact of the Covid-19 pandemic. The net result rose 33.4% to €3,042 million from €2,281
million in 2020, driven by lower risk costs and higher fee income, while expenses excluding regulatory
costs and incidental items declined. Net interest income, however, decreased due to the continued
margin pressure on liabilities.
The result before tax rose 27.0% to €4,253 million. Income rose by €126 million, or 1.0%, supported by
€152 million of conditional TLTRO III benefits while 2020 had included a €230 million impairment on
ING’s equity stake in TTB. Excluding both items, income fell 2.1%, as strong growth in fee income and
the increased impact of charging negative interest rates to clients was more than offset by lower
interest margins on liabilities. In 2021, total customer lending rose by €11.0 billion to €447.8 billion.
Adjusted for currency impacts, Treasury and the run-off in WestlandUtrecht Bank (WUB) and Austria,
Retail’s net core lending book grew by €17.5 billion, of which €15.0 billion was in residential mortgages,
primarily in Germany, Spain and Poland. Net core deposits growth (also adjusted for the run-off in the
Czech Republic) was €12.9 billion in 2021.
Operating expenses increased by €144 million, or 1.9%, of which €69 million was caused by higher
regulatory costs. In 2021, expenses furthermore included €455 million of incidental items, primarily
reflecting redundancy provisions and impairments related to the decisions to exit the retail banking
markets in France and the Czech Republic, the closure of branches in the Netherlands, and a provision
for compensation to customers on certain Dutch consumer credit products. In 2020, incidental items
amounted to €281 million, mainly reflecting impairments and restructuring provisions related to the
Maggie programme and our retail branch network as well as a goodwill impairment in Retail Belgium.
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Expenses excluding regulatory costs and incidental items declined 1.5%; this was primarily driven by
Retail Netherlands. The cost/income ratio was 62.3% in 2021 compared with 61.8% in 2020.
Risk costs declined to €399 million, or 9 basis points of average customer lending, from €1,322 million,
or 30 basis points, in 2020. Risk costs in 2021 included €702 million of Stage 3 provisioning. This was
partly offset by releases in Stage 1 and 2 provisioning due to releases of management adjustments
taken in 2020 and further reflect clients being removed from the watch list or moving back to Stage 1.
Market Leaders
Retail Netherlands
The result before tax of Retail Netherlands declined 6.8% to €1,936 million from €2,078 million in 2020.
This decline was caused by lower income mainly due to lower margins on customer deposits combined
with higher expenses which included several incidental cost items, partly offset by lower risk costs.
Total income declined by €209 million, or 4.7%, to €4,262 million compared with €4,471 million in
2020. Net interest income declined 6.3%, despite the recognition of a €53 million conditional TLTRO III
benefit and an increased charging on negative interest rates. This decline was predominantly due to
continued margin pressure on savings and current accounts combined with lower interest results from
lending products. Net core lending (which excludes Treasury products and a €1.1 billion decline in the
WUB run-off portfolio) grew by €0.8 billion in 2021, of which €1.5 billion was in residential mortgages
and €-0.7 billion in other lending. Net core deposits growth (excluding Treasury) was €14.8 billion,
predominantly in current accounts. Net fee and commission income increased by €90 million, or
13.2%, mainly due to higher fee income in daily banking products, supported by increased fees for
payment packages, and higher fees on investment products. Investment and other income was €78
million lower, mainly attributable to lower results from Treasury-related products.
Operating expenses rose by €167 million, or 7.5%, to €2,403 million from €2,236 million in 2020. The
increase was mainly due to a €180 million provision for compensation to customers with certain
consumer credit products, and €109 million of redundancy provisions and costs related to the retail
advice organization in the Netherlands and the accelerated closure of branches, while 2020 included
€29 million of provisions. Excluding these incidental items, expenses declined by €93 million, or 4.2%,
mainly due to lower external staff costs and lower allocated group overhead expenses, partly offset by
increased regulatory costs.
The addition to loan loss provisions was a net release of €76 million, or -5 basis points of average
customer lending, compared with a net addition of €157 million, or 10 basis points, in previous year. In
2021, net releases in the mortgage and business lending portfolios, more than offset a net addition in
the consumer lending portfolio.
Retail Belgium
Retail Belgium includes ING in Luxembourg.
The result before tax of Retail Belgium rose to €583 million, compared with €122 million in 2020. The
increase was attributable to lower risk costs, combined with higher income and lower expenses.
Income rose by €102 million, or 4.3%, to €2,475 million from €2,373 million in 2020. Net interest
income was 3.8% lower at €1,747 million, despite the recognition of a €76 million conditional TLTRO III
benefit and the introduction of negative interest rates. The decline reflects lower margins on savings
and current accounts and lower interest result from lending products. Net core lending (excluding
Treasury) increased by €0.4 billion in 2021, of which €0.9 billion was in mortgages, and €-0.5 billion in
other lending. Net core deposits (excluding Treasury) declined by €2.6 billion, predominantly in savings
and deposits. Net fee and commission income rose by €106 million, or 25.7%, mainly driven by higher
daily banking fees and the strong performance in investment products. Investment and other income
increased by €64 million, mainly due to positive treasury-related fair value adjustments and a €25
million capital gain on the sale of an associate.
Operating expenses declined by €70 million, mainly due to a €43 million goodwill impairment and €40
million of restructuring costs, both recorded in 2020. Excluding these incidental items, expenses
increased by 0.8%, mainly due to higher regulatory costs, partly offset by lower staff expenses.
The addition to the provision for loan losses declined to €225 million, or 25 basis points of average
customer lending, from €514 million, or 57 basis points, in 2020. Risk costs in 2021 mainly included
collective provisioning to accommodate for an update of models and Stage 3 additions for specific files,
partly offset by a partial release of management adjustments applied in 2020.
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Challengers & Growth Markets
Retail Germany
Retail Germany includes ING in Austria.
The result before tax declined 17.3% to €786 million, compared with €950 million in 2020, mainly due
to lower income and increased expenses.
Total income fell 5.1% to €2,009 million from €2,117 million in 2020. Net interest income declined 8.8%
as higher revenues from lending products and the recognition of a €16 million conditional TLTRO III
benefit was more than offset by the impact of the continued margin pressure on savings and current
accounts. In 2021, net core lending growth (which excludes Treasury products, and the Austrian run-off
portfolio as from the second quarter of 2021) was €7.8 billion, of which €6.8 billion was in residential
mortgages and €0.9 billion in consumer lending. Net core deposits declined by €3.8 billion due to net
outflows in the second half of the year, primarily reflecting the impact of the introduction of negative
interest rate charging to clients with liability balances above €50,000 as of November 2021. Net fee
income rose by €60 million, or 13.7%, predominantly on investment products, reflecting higher assets
under management, new account openings and higher number of brokerage trades. Investment and
other income declined by €28 million due to a €26 million one-off loss related to the transfer of the
Austrian retail banking activities to bank99 in December 2021.
Operating expenses increased by €64 million, or 5.8%, to €1,174 million in 2021, of which €36 million
was due to higher regulatory costs, which included a catch-up following the Greensill insolvency. The
remaining cost increase was mainly due to higher staff expenses and costs related to the
discontinuation of the Austrian retail banking activities.
The addition to the provision for loan losses was €49 million, or 5 basis points of average customer
lending, compared with €57 million, or 6 basis points, in 2020.
Retail Other
Retail Other consists of the Other Challengers & Growth Markets, including the bank stakes in Asia.
Retail Others’ result before tax rose to €949 million, from €199 million in 2020, mainly reflecting higher
income, driven by strong fee income growth, whereas 2020 included a €230 million impairment on
ING’s equity stake in TTB (Thailand) and lower risk costs.
Total income rose by €341 million to €3,602 million from €3,261 million in 2020. Excluding the
impairment on TTB, total income increased by €111 million, or 3.2%. Net interest income was down
1.7% to €2,712 million, mainly reflecting lower margins on savings and current accounts, partly offset
by higher interest results from lending products and a €7 million conditional TLTRO III benefit. Net
customer lending (adjusted for currency effects and Treasury) grew by €8.5 billion in 2021, with growth
in all countries, except Italy. Net core deposits growth, also adjusted for currency impacts and Treasury
as well as the Czech Republic run-off portfolio, was €4.4 billion, driven by net inflows in the non-
eurozone countries with the largest increase in Poland. Net fee and commission income rose by €118
million, or 28.6%, to €530 million in 2021. The increase was mainly due to higher fee income from daily
banking, investment and insurance products, and was mainly visible in Spain, Poland and Romania.
Excluding the aforementioned impairment on TTB in 2020, investment and other income increased by
€42 million, mainly due to higher revenues from Financial Markets-related products.
Operating expenses declined by €17 million, or 0.7%, to €2,452 million from €2,469 million in 2020. In
2021, expenses included €166 million of incidental items, mainly consisting of restructuring provisions
and impairments related to the announcements that ING will exit the retail banking markets in France
and the Czech Republic, while 2020 included €167 million of impairments and restructuring provisions
mainly related to the Maggie programme. Excluding these incidental items, expenses declined by €16
million as higher staff expenses and legal provisions, were more than offset by among others lower IT
and marketing expenses as well as lower regulatory costs.
The addition to loan loss provisions declined by €391 million on 2020 to €202 million, or 20 basis points
of average customer lending. The 2021 risk costs mainly reflect net additions in Poland and Spain,
partly offset by a net release in Australia.
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Wholesale Banking
The 2021 result of Wholesale Banking also strongly recovered from the previous year when results
were negatively affected by the impact of the Covid-19 pandemic. The net result increased to €2,144
million from €512 million in 2020. The result before tax rose 247.5% to €2,874 million from €827 million
in 2020. The increase was predominantly due to lower risk costs and higher income, while operating
expenses declined due to lower incidental cost items.
Total income rose 9.6% to €5,916 million in 2021, compared with €5,396 million in 2020, reflecting
higher revenues in all product groups, with the largest increases in Lending, and Daily Banking & Trade
Finance. Net interest income increased by €433 million, or 11.6%, and was supported by a €188 million
conditional TLTRO III benefit. The increase was mainly due to higher margins on lending products and
increased interest results from Treasury and Financial Markets, while the margin on customer deposits
stabilised due to the increased charging of negative interest rates. The net core lending book (adjusted
for currency impacts and excluding Treasury and the Lease run-off portfolio) grew by €13.1 billion in
2021, mainly in Lending, primarily reflecting growth in term loans, and higher short-term facilities in
Financial Markets. Net core deposits (excluding currency impacts and Treasury) decreased by €2.6
billion. Net fee and commission income rose by €128 million, or 12.0%, on 2020, mainly due to higher
fee income in Trade & Commodity Finance on the back of higher oil prices, various fee and pricing
initiatives in Payments & Cash Management and higher deal flows in Global Capital Markets and
Corporate Finance. Investment and other income decreased by €41 million, primarily due to lower
valuation results in Financial Markets, partly offset by higher income in Corporate Investments.
Operating expenses declined 9.1% to €2,926 million from €3,218 million in 2020. Expenses in 2021
included a €44 million impairment on Payvision, while 2020 included a €260 million goodwill
impairment and €124 million of restructuring provisions and impairments. Excluding these incidental
items, expenses increased 1.7%, mainly due to higher performance-related staff expenses and
increased costs for legal provisions and IT, partly offset by the impact of continued cost-efficiency
measures.
The net addition to loan loss provisions fell to €117 million, or 7 basis points of average customer
lending, compared with €1,351 million, or 75 basis points, in 2020. Risk costs in 2021 mainly reflect
individual Stage 3 provisioning for existing files, including the impact of updated scenarios reflecting
uncertainty in recovery scenarios and valuations in certain asset classes. This was partly offset by
releases in management adjustments caused by improved macroeconomic indicators.
Lending posted a result before tax of €2,141 million, up from €691 million in 2020, predominantly due
to lower risk costs compared with the elevated level in 2020. Lending income rose by €231 million, or
8.0%, and was supported by the recognition of a €100 million conditional TLTRO III benefit. The
increase was mainly due to higher lending margins and increased syndicated deal activity. Expenses
increased 0.4% to €983 million as higher performance-related staff expenses were offset by the
impact of cost-efficiency measures.
The result before tax from Daily Banking & Trade Finance rose to €375 million from €246 million in
2020. This increase was due to higher income, supported by the recognition of a €24 million
conditional TLTRO III benefit, partly offset by higher expenses and risk costs. Income increased 13.3%,
mainly in Trade & Commodity Finance on the back of higher average oil prices and in Payments & Cash
Management following various fee and pricing initiatives. Expenses rose 2.6%, mainly due to higher
regulatory costs, partly offset by lower staff and IT expenses.
Financial Markets recorded a result before tax of €278 million, compared with €230 million in 2020. The
increase was mainly due to higher income, which was supported by the recognition of a €60 million
conditional TLTRO III benefit and higher net fee income, partly offset by lower valuation results. The
increase in income was partly offset by higher expenses, mainly due to higher performance-related
staff expenses.
The result before tax of Treasury & Other was €80 million compared with a loss of €339 million in 2020.
The improvement was mainly due to lower expenses, as 2020 included a €260 million goodwill
impairment and €95 million of restructuring provisions and related impairments following the
announced refocusing of activities. Excluding these incidental items, result before tax rose by €64
million, mainly due to higher Treasury income as well as higher income in Corporate Investments,
which was supported by a €28 million gain on an investment in an associate, and Corporate Finance.
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Our people
Although banking is ever more digitalised, it’s still built on relationships.
Our people are at the heart of our business and we rely on them to
support our customers and deliver on our purpose. At the same time,
we strive to provide a differentiating employee experience that keeps
our people motivated and engaged, and a diverse and inclusive
workplace where they feel free to be themselves.
Who we are
ING has over 57,000 employees worldwide and 130 nationalities. Our biggest workforce is in the
Netherlands.
Our people offer
Our people are at the heart of our business and we rely on them to deliver on a differentiating
customer experience. In our people offer, introduced in 2020, we set out what we expect from our
people and what ING offers in return, forming the basis of our employer brand.
Preparing for a hybrid way of working
For most of 2021, the majority of ING employees continued to work from home due to ongoing Covid-
19 restrictions. However, in some countries it was possible to cautiously return to the office in a hybrid
mode, which combines the advantages of working from home on several days of the week with the
benefits of collaborating with colleagues in the office on the other days. The aim is to offer flexibility in
balancing work and private life while taking into consideration the lessons over the past year in relation
to people’s physical and mental wellbeing, engagement, collaboration and efficiency. However, a
strong degree of flexibility is required, given the constantly changing situation as new outbreaks occur
and the emergence of new variants continues to test the resilience of our people. In implementing
what we call ‘Hybrid Mode’, we’re taking a step-by-step approach that provides flexibility for local
implementation and respects local health and safety guidelines and labour laws. We’ll adapt and
improve as we go along, weighing up personal, team, company and customer interests when
determining what works best.
ING strongly encourages employees to be vaccinated in line with local government advice, to protect
themselves, their colleagues and their communities. Recognising there are employees who may not
want to be vaccinated (for example for medical reasons or because of personal beliefs), we will do our
best to accommodate them, while acknowledging that in some situations, or countries, proof of
vaccine may be required by external parties such as business partners or clients for instance, or for
travel purposes. In this regard, ING always follows local government regulations, which can differ from
country to country.
Our global and local crisis teams keep a close eye on developments and we strive to maintain the
highest health and safety standards in our offices and branches. This includes restricting business
travel to high-risk countries when necessary and following local protocols around social distancing and
the number of people allowed to attend meetings and events. These often differ from country to
country.
Supporting vitality
The wellbeing (or vitality as it’s known in ING) of employees remained of crucial importance in 2021 as
Covid-related challenges continued. Apart from finding new ways to collaborate, managers developed
methods to motivate and engage their teams from a distance, while also managing their own
wellbeing. For colleagues who were unable to work from home, we made space available in our offices.
Our local businesses came up with various initiatives to help employees maintain their physical and
mental vitality. These ranged from providing ergonomic home working stations to psychological
support (in the Czech Republic and Poland); wellbeing coaching in the Netherlands and Belgium; and a
health budget in Germany for preventative care. The Netherlands also launched a platform called My
Vitality where colleagues can team up for runs, walks and other activities. The Wellbeing Quotient
(WQ) programme, now fully digital, continued to run courses on energy management, performing
under pressure and mental power for individuals and teams in the Netherlands, Belgium and across
Wholesale Banking. Around 10,000 people have completed the WQ programme since 2018.
In 2021, 2.2% of our total workforce was absent through sickness, compared to 3.22% in 2020.
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Culture and capabilities: our core drivers
ING’s culture and capabilities define who we are. Together, they drive our success and enable us to
fulfil our purpose of empowering people to stay a step ahead in life and in business. Our culture,
including our risk culture, starts with the Orange Code values and behaviours we share across our
organisation, helping us to make responsible decisions – for ourselves and for our customers. Our
capabilities are what enable us to deliver on our strategy, by ensuring we have what we need as
individuals and as an organisation to succeed now, and in the future. It’s how we build strong
leadership, become a data-driven digital bank that’s safe, secure and compliant, and create long-term
value for our stakeholders.
Orange Code
Our business centres on people and trust. People trust us with their money and with their data.
Maintaining this trust is crucial. Everything we do at ING is guided by our Orange Code, a manifesto
that describes our way of working, putting integrity above all. It is comprised of our values – the
principles we stick to, no matter what – and our behaviours, which are the commitments we make to
each other and the standards by which we measure each other’s performance. We expect everyone to
demonstrate our Orange Code values and behaviours every day. Not doing so could potentially put our
customers at risk, erode the public’s confidence in our bank and damage our reputation. That’s why
integrity is the foundation of our culture.
Closely linked to this is our Global Code of Conduct, which outlines the 10 core principles we expect
from employees. These principles build on the values and behaviours of the Orange Code and are
based on ING’s existing policies, minimum standards and guidelines. The Global Code of Conduct is in
addition to local codes of conduct in various countries. Important elements are the ‘speak-up’ principle,
encouraging employees to report any misconduct, and the principle that every ING employee is
entitled to a safe working environment. ING does not tolerate discrimination, harassment, bullying,
sexual or other forms of intimidation, aggression or violence.
All employees (including senior managers) are appraised annually against the requirements of the
Orange Code as part of ING’s performance management process. As of 2022, all employees will also be
required to acknowledge and commit to the Global Code of Conduct.
Ethics and business culture
Having a strong and sound risk culture is essential for performing our role in society responsibly and
keeping the bank safe, secure and compliant. Our risk culture is built on our Orange Code and
comprises the knowledge, attitude, behaviour and understanding of risk shared by everyone at ING.
We strive to have a sound risk culture in which all employees know and understand our core values,
where there’s an environment of open communication and effective challenge in decision-making, and
where management leads by example.
To continuously strengthen our risk culture, we defined our seven risk culture principles – putting
integrity first – and introduced a risk culture programme in 2021. It aims to ensure our people are
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equipped to make responsible decisions when it comes to managing risk and is an action plan for
monitoring our progress towards our envisioned risk culture. This follows a self-assessment of our risk
culture. Enhancements of our monitoring activities include a risk culture health index and risk culture
dashboard.
Our Big 6 capabilities
For ING to be successful now and in the future, we have identified six capabilities our employees need
to have in order to deliver on our purpose. These include capabilities that will help us provide a
differentiating and seamless digital customer experience – data fluency, customer experience,
operations management and leadership – and capabilities tokeep our bank safe, secure and compliant
– cybersecurity and non-financial risk management.
The ‘Big 6’ capabilities were introduced in the Netherlands and Belgium in 2020 and rolled out to the
rest of ING during 2021. While not every capability is relevant to every job, and not everyone is
expected to master all six, the idea is that every employee understands the basics of each.
To promote these capabilities, ING has set up a number of specialised training facilities via its My
Learning digital platform. This includes an Analytics Academy to promote data fluency and strengthen
our analytics delivery, and Risk and KYC Academies to equip employees with the skills and knowledge
they need to protect our customers and our bank against financial economic crime.
Recognising the need for a strong engineering culture to achieve our digital ambitions, we strive to
develop and grow a global workforce of highly skilled engineers. ING’s Tech Academy provides both
learning and network opportunities for engineers to remain up to date and share knowledge and
expertise. Initiatives such as the ING Women in Engineering days aim to increase the diversity of our
teams. To provide additional growth and development opportunities we organise global performance
days for the Tech community where we assess and calibrate engineering maturity based on ING’s
global job profiles.
Diversity and inclusion
ING strives to create a diverse and inclusive workplace in which everyone feels free to be themselves.
We promote diversity not just because it is the right thing to do, but because we can't deliver on our
strategy without it. We believe that teams with a healthy mix of contrasting perspectives and
backgrounds are more creative, adapt faster and are more inventive with their solutions; they avoid
‘group think’ and, by reflecting the diversity of our customers, allow us greater insights into how we
can best meet their needs.
Our approach
At ING we strive for no group or level to comprise more than 70% of the same gender, nationality or
age group. Managers are ultimately responsible for building mixed teams and choosing the dimensions
of diversity they focus on. They are guided as far as possible by the 70% principle and our global
priorities: gender, nationality and age. Of course, diversity is about more than these three areas and
we’ll continue our efforts to include all people, regardless of religion, race, ethnicity, ability, sexual
orientation etc.
How are we doing?
Looking at the global make-up of ING we collectively meet the 70% principle across all three
dimensions. However, within individual teams and on a country level there are different, often complex
challenges in creating the mixed teams we strive for, and we are not always making progress at the
speed we would like.
We have dashboards to help us understand where the challenges lie, identify the gaps and monitor
progress towards building mixed teams, at different levels of the organisation. The HR teams use these
dashboards in their discussions with local management teams.
Diversity at the top
Like many other financial organisations, getting the right mix of people – especially in leadership
positions – remains a challenge and we are committed to making progress in this area.
When looking at the composition of our Supervisory, Executive and Management Boards, we look at
diversity in a broad sense, striving not only for factors such as, gender, nationality and age, but also,
for example, education and work background.
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The appointment in 2021 of Ljiljana
Č
ortan as ING’s chief risk officer and member of the Executive
Board means that both our Executive and Supervisory Boards now comprise 33% women. ING was one
of only 16 companies in the Dutch Female Board index to achieve this in 2021, the highest ranked
Dutch bank.
As of 1 January 2022, we will be required under new Dutch legislation, the Gender Diversity Act, to set
‘appropriate and ambitious’ targets for improving gender diversity on our Management Board Banking
(MBB) and at senior management level and to report annually on our progress. The Act also introduces
a quota for new Supervisory Board appointments to ensure at least one third of seats are held by
women and one third by men.
At MBB and senior management level there is still work to be done to make the necessary progress,
particularly in terms of gender. We are committed to addressing the imbalances that still exist, for
example by accelerating the development of internal candidates for top roles and attracting more
diverse candidates from the external market. At MBB level, 25% of our leaders are women (33% in
2020). This follows the separation of the board roles for operations and technology in 2021, enlarging
the board with an additional (male) member. In terms of nationality there is more diversity at this level
with 63% of MBB members of non-Dutch nationality
.
Looking more broadly, the number of female
managers remained stable at 37% (37% in 2020) and 30% of managers of managers (30% in 2020).
Going forward we will report on gender diversity for senior management at job levels 22 and above in
our new global job architecture (GJA) classification that was introduced at end-2021.
Diversity and succession planning
Research with an external partner in 2021 helped us better understand our leadership pipeline and
identified actions that can help us to improve its diversity. These include to proactively build forward-
looking plans so that succession-planned candidates are appointed when opportunity arises.
To bring more diversity into succession planning we use a template that visualises the gender and
nationality of the current role-holder and their successors and we aim to create a more balanced
pipeline of candidates on succession lists for around 400 senior roles. Diversity is considered a key part
of our annual talent review process and we have integrated the 70% principle into the leadership
appointment process.
The introduction in December 2021 of a new global job classification called Global Job Architecture
(GJA) will also help us identify competencies and opportunities for every role at ING. Previously job
profiles were defined locally; now we can compare, match and understand jobs across borders and
business lines, enabling us to make more informed decisions about our organisational structure,
workforce planning, benchmarking and diversity.
Gender pay gap
The gender pay gap represents the average difference between the remuneration of men and women.
It’s a prevalent societal issue whereby women are generally considered to earn less than men.
According to the European Commission, at European level this is 14.1% less and at Dutch level 14.7%.
These pay differences may be due to a variety of reasons, most typically being that there are less
women within the (higher earning) senior management layer and women tend to work part time more
often.
We acknowledge this is likely to be the case at ING too and we are committed to annually assessing
and monitoring the gender pay gap in our organisation at a global level through the gender-neutral
pay project.
ING is committed to paying men and women equal pay for doing work of equal value. The ING
Remuneration Regulations Framework (IRRF) guides our remuneration policies in all ING countries. One
of its principles is that these policies are gender-neutral. All countries are required to review their
policies each year and certify that they adhere to the principle of equal pay for work of equal value.
The gender-neutral pay project will help them with this.
Gender-neutral pay project
Building on the introduction of the Global Job Architecture in 2021, which enables us to compare like-
for-like jobs, the gender-neutral pay project aims to define, build and deliver going forward a
standardised, replicable annual process and accompanying tool for determining whether men and
women at the same job level are receiving equal pay for equal work.
All employees in the same job family and at the same job level within a country will be compared
using gender-neutral characteristics (e.g. global job level, tenure, etc.). Where these characteristics are
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equal but the remuneration is not, and the reason for the pay difference is not supported by mitigating
circumstances (e.g. time spent outside of the workforce), we will take appropriate measures. The tool
will also calculate ING’s annual global gender pay gap. We’ve committed to publishing the average pay
of all men compared to the average pay of all women as a percentage in our 2022 Annual Report.
This year, ING improved its rating in the 2021 Bloomberg Gender Equality Index, scoring 70.35%
compared to 70.26% in 2020. The index tracks the performance of public companies in their efforts to
promote gender equality.
Inclusion
Inclusion is part of our Orange Code, which encourages us to help others to be successful. We have
more than 30 employee networks and employee-led diversity initiatives. The Lioness network, for
instance, aims to help women realise their ambitions; Enable is an inclusion network for all abilities;
BEING is ING’s Black Employee Inclusion Group; while Experience aims to achieve senior inclusion and
RING is our community for young professionals under 36. ING is a founding partner of Workplace Pride,
an international platform for LGBT+ inclusion at work. In 2021, we were again recognised as an
‘Ambassador’ by the Workplace Pride global benchmark, which scores companies in eight areas and
identifies best practices. ING scored 77.2% (72.3% in 2020).
To create an environment where people can truly feel free to be themselves and where people
decisions are made objectively and fairly, we need to reduce our biases. One way is through a ‘Banking
on inclusion’ training programme for managers and HR professionals. A total of 214 managers
participated in the training sessions for senior leadership in 2021. In addition, an e-learning on
unconscious bias has been available to all employees globally since 2019
.
To reduce biases in our hiring processes, we’re rolling out a three-step evidence-based approach that
aims to ensure a fair and objective process for every candidate. It’s about predictive validity and
overcoming unconscious biases and involves analysing jobs to establish the competencies required,
structured interviews and diverse interview panels, and calibrating before making a decision.
To strengthen the inclusive culture across our organisation, we organised a global D&I day with over
100 global initiatives. This year’s theme invited employees to ask, ‘How inclusive are we really?’, inviting
them to think about their unconscious biases.
Inclusiveness also means making sure everyone has equal access to our services and products,
regardless of their ability, and that all our employees have equal access to our facilities and
development opportunities. But more than this, it’s about creating equity within our organisation to
achieve fairer outcomes based on people’s personal circumstances. Accessibility for our people means
supporting employees to do their own thing and facilitating the means to do it.
As an inclusive employer, we want our benefits to be inclusive too. A 2020 review of our benefits
packages globally concluded that overall these are of a good standard, particularly with regard to
inclusive themes such as equal paternity/maternity leave, financial education and wellbeing. We’ll
further investigate how to maintain these standards in the long term.
In the Financial Times’ Diversity Leaders 2021 report, an independent study focusing specifically on
gender, age, ethnicity, disability and sexual orientation, ING was listed in 225th place out of 850
companies, up 100 places on 2020.
Our stance on discrimination
Discrimination includes any distinction, exclusion or preference made on the basis of gender, cultural
background, experience, religion, race, ethnicity, disability, family responsibility, political opinion,
sexual orientation, social origin or any other status, that has the effect of nullifying or impairing equal
opportunity or treatment in employment. Any distinction, exclusion or preference not based on the
inherent requirements of the job is deemed to be discrimination. We are working together to create an
inclusive workplace and, in turn, play our part in building an inclusive world. To support our ongoing
efforts to create meaningful change, we have measures such as our Global Code of Conduct that aim
to keep discrimination from happening within our company – towards both our customers and
employees.
Talent development and learning
ING expects employees to take the lead in their own personal and professional development and
ensure that their skills and work experience stay relevant both within ING and in the external
environment.
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We offer several development tools to support employees in shaping their own career paths. These
include an Individual Development Plan (IDP) with a framework for identifying actions that will improve
their performance in their current role, the skills they might need for a next role, perhaps even outside
ING. The IDP is available in all countries and over a third of all employees have put a plan in place.
As with performance management, two formal moments are scheduled at mid-year and year-end to
check in on progress.
ING’s International Talent Programme (ITP) is designed for international graduates with high growth
potential, and we have various leadership programmes in place as well as a library of online trainings
via the My Learning platform.
My Learning
My Learning is ING’s open, digital learning platform that gives employees access to our complete
learning offering in one location. Launched in the Netherlands and Belgium in 2020, it was made
available to employees in most countries during 2021 (except Turkey, Germany and Luxembourg) and
learning content is now available in all nine ING languages.
My Learning contains both ING content as well as external content on topics that are important to the
bank. The learnings are selected specifically for the user; the better the platform ‘gets to know’ the
employee, the more the recommendations are based on the user’s role, interests, completed learnings
and search behaviour.
Leadership programmes
Leadership is one of our Big 6 capabilities. To strengthen the leadership skills within our organisation,
we introduced an online training in 2021 for new and aspiring leaders, to help them transition from an
individual contributor to an effective leader. Available via My Learning, the Leadership Fundamentals
Programme (LFP) is entirely self-steered and includes a self-assessment tool to help users identify their
learning goals and determine their own path through the online trainings. Some 968 people
participated. LFP replaces the First-Time Leader Programme. For leaders and managers, we offer one-
to-one coaching on remote leadership. Part of this focuses on encouraging them to steer on output
rather than time spent.
For more experienced leaders we offer group activities as well as self-steered learning initiatives. These
are largely focused on motivating employees, getting the most out of teams, and behaviours that
drive performance – topics that are even more more relevant in the context of working from home and
the acceleration in changes we’re all experiencing. All global leadership programmes have been
updated to reflect the context of leading in Hybrid Mode. This includes a series of webinars on topics
such as vitality and motivating a team from a distance.
In 2021, ING spent €47 million on training and development, equivalent to €820 per full-time
equivalent. In 2020 this was €43 million and €760 respectively.
Performance management
Called Step Up, our global performance management practice centres around so-called ‘continuous
conversations’. These are regular, informal chats between employees and their manager and
encompass the employee’s job, ‘stretch’ ambitions and our Orange Code behaviours. In addition there
are three formal check-ins during the year – target setting, mid-year review and year-end evaluation.
When assessing performance, we always encourage managers to look broadly at an employee’s
performance, considering all areas affecting their work and home life. With Covid-19 introducing
difficult circumstances for many employees – for example, juggling home-schooling or caring for
relatives while working – this balanced view continued to be relevant this year. We provided managers
with materials to support them in their performance assessments and in conducting continuous
conversations in the context of the pandemic. In 2021, 94% of employees took part in a performance
review, the same as in 2020.
Organisational health
It’s important to ING that employees feel heard and are able to voice their opinions. We use a
continuous listening framework to get an ongoing sense of how our people are doing and how they
perceive our strategic objectives – and make sure we act on that feedback. Every 12 to 18 months we
measure how healthy we are as an organisation and whether we’re ready for the future in terms of
our core organisational skills and capabilities. Between this full diagnostic Organisational Health Index
(OHI) survey we run smaller pulse surveys so we can respond more rapidly to employee feedback.
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Based on the outcomes of the last full OHI in 2019, we defined three focus areas: strategic direction,
leadership, and innovation and learning. These were the starting point for action plans we developed at
local, business and functional levels.
A full OHI was held again in May 2021, with a record number of participants: 40,000 people or 67% of
our total workforce. On a global level, our overall health score improved. More colleagues indicated
ING’s purpose was communicated clearly and that they better understood how they contribute to
ING's success. More colleagues also felt their views were included in decision-making and that leaders
showed concern for their welfare.
This was reiterated in the shorter pulse survey in November 2021, which showed improvements in key
practices around direction and leadership. We’ll use the outcomes of these surveys to define our action
plans and priorities for 2022.
Digitalisation: using data to improve the employee experience
Throughout 2021 we continued to deliver on our ambition to use data to ensure our employee
experience is on a par with our customer experience. This is founded on actionable insights to improve
the employee experience, and having the capabilities to lead initiatives that redesign the customer
experience and implement scalable digital solutions.
We use the Employee Experience Index© to gain more insight into the touchpoints that impact
employee engagement. Piloted in four countries in 2020, the survey was rolled out to five additional
countries in 2021 and has become a recurring initiative offering actionable insights into the
experiences of ING employees throughout the employee lifecycle.
Starting a new job is one of the crucial stages in the employee lifecycle. In 2021, we scaled up our
digital onboarding tool that guides new hires and their managers through the onboarding journey,
helping to make new colleagues feel welcome at a time when they can’t meet their teams in person.
Launched in the Philippines and the Netherlands in 2020, the tool was live in 13 additional countries by
the end of 2021.
To sustain an enhanced employee experience and strengthen our HR foundation, we implemented the
HR unite retrofit programme in the Netherlands, France and Australia in July 2021. It comprises five
components: one HR system with standardised digital processes; consistent people services delivery
centralised in two hubs for major ING countries; redesigned international mobility and recruitment
services; technologies to support digital self-service and support (chatbots and livechat for employee
queries); and enhanced data management and reporting. The HR unite programme will be rolled out in
three phases to all ING countries (except Russia and Turkey) by end 2024 .
Supporting this data-driven digital HR foundation, we’ve implemented a roadmap for improving the
way we collect, store and use employee data. As part of this, we deployed a global HR data lake zone
that will be used for staff reporting from early 2022, drawing employee data from multiple sources and
countries. This will lead to improved data governance and compliance controls and improved data
quality due to standardised data definitions, ultimately leading to more reliable reporting and better
decision-making.
Organisational and people impact
The trends that have shaped our direction so far continue to influence our business and the
challenging external environment requires us to remain flexible in how and where we deliver on our
strategy. This can impact the way we operate and the skills and capabilities we need. It means we
sometimes need to make organisational changes or refocus our activities. These decisions can impact
our people; their roles can change or cease to exist.
As part of our ongoing and careful assessment of our activities and whether they’re likely to achieve
the preferred scale in their market within a reasonable time, we decided in 2021 to exit several Retail
Banking markets. In Austria, we transferred our Retail operations, including employees to bank99, the
digital bank of the Austrian postal services, and in the Czech Republic around half of our customers
were migrated to Raiffeisenbank. Around 225 colleagues were impacted. In France, we agreed a social
plan with the local unions for 460 affected employees. The plan is subject to approval by the French
Ministry of Labour.
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The decision to phase out the services of our Payvision subsidiary in the coming months will affect
around 160 Payvision employees. They will be supported through the transition in close consultation
with the works council and in line with Payvision’s employer practice standards.
In the Netherlands, where customers are increasingly choosing to use digital channels rather than
visiting ING in person, we announced the closure of 69 of our 134 branches in March, moving services
to other ING branches or service points. The vast majority of colleagues affected by the announced
changes are expected to find new roles in other parts of our business.
Furthermore, the 2020 decisions to simplify the geographical and client footprint of our Wholesale
Banking business and stop the Maggie transformation programme resulted in a headcount reduction
of approximately 1,000 full-time equivalents (FTEs) mainly over the course of 2021.
ING does not make decisions like these lightly. We are committed to treating employees impacted by
the changes with respect and care. We aim, as far as possible, to help them develop their skills or find
new job opportunities inside and outside ING.
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ING Bank Risk management
ING Bank Annual Report 2021
45
Risk management
The Covid-19 pandemic continued to have a negative impact on the
global economy. Although economic activity continued to recover in
2021, strains on supply chains and inflation hamper the recovery. This
section explains ING’s approach towards risk management and how this
was impacted by the Covid-19 pandemic.
As a global financial institution with a strong European base, offering banking services, ING is exposed
to a variety of risks. We manage these risks through a comprehensive risk management framework
that integrates risk management into daily business activities and strategic planning. This aims to
safeguard ING’s financial strength and reputation by promoting the identification, measurement and
management of risks at all levels of the organisation. Taking measured risks aligned with its Risk
Appetite is core to ING’s business.
The risk management function supports the Executive Board in formulating the risk appetite,
strategies, policies and limits. It provides oversight, challenges and controls throughout ING on risk-
related items.
This section sets out how ING manages its risks on a day-to-day basis. It explains how the risk
management function is embedded within the organisation based on the ‘three lines of defence’
model. It describes the key risks that arise from ING’s business model and how these are managed by
dedicated risk management departments, with various specific areas of expertise. The section provides
qualitative and quantitative disclosures about solvency, credit, market, funding and liquidity, ESG and
climate change, business, operational, IT, compliance and model risks.
Risk profile
This chart provides high-level information on the risks arising from ING’s business activities:
Risk profile
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Risk categories
ING’s main risks are described in the categories below. The chapters in the risk management section are based on how risks are managed internally. Operational and IT risk are part of the NFR chapter.
Overview of Risk Categories
Risk Categories
Sub-categories
defined as:
Financial Risk
Solvency risk
The risk of lacking sufficient capital to fulfil business objectives, regulatory requirements or market expectations. A bank that is completely insolvent is unable to pay its
debts and will be forced into bankruptcy.
Credit risk
The risk of potential loss due to default by ING’s debtors (including bond issuers) or trading counterparties.
Market risk
The risk of potential loss due to adverse movements in market variables.
Funding and liquidity risk
The risk that ING cannot meet financial liabilities when they become due at reasonable cost and in a timely manner.
Non-Financial Risks
Operational risk
The risk of direct or indirect loss arising from inadequate or failed internal processes, people and systems or from external events.
Information (Technology) risk
The risk of financial loss, regulatory sanction and/or reputational damage due to ineffectively utilising information, or inappropriately protecting information.
Compliance risk
A threat posed to ING’s standing resulting from failure to act in line with applicable laws and regulations, internal rules (including ING’s Orange Code and global Code of
Conduct) and/or societal expectations.
Overarching Risks
ESG risk (including climate
risk)
ESG is the risk that environmental, social and governance issues stemming from the banks clients result in reputational damages and/or financial losses for ING. Climate
risk is the risk that a financial loss will be incurred due to climate change events, either through physical risk (eg flooding) or transition risk (eg solar energy instead of
gas).
Business and strategy risk
The value or earnings loss due to business and strategic decisions that do not materialise as planned. This risk can be expressed in terms of volumes, margins, expenses
and fees and commissions.
Model risk
The risk that the financial or reputational position of ING is negatively impacted as a consequence of the use of models. Model risk can arise from errors in the
development, implementation, use or interpretation of models, or from incomplete or wrong data etc., leading to inaccurate, noncompliant or misinterpreted model
outputs.
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Top and emerging risks
The risks listed below are defined as existing and emerging risks which could cause the actual results to
differ, in some instances materially, from those anticipated. They may have a material impact on the
reputation of the company, introduce volatility in future operating results, or impact ING’s medium and
long-term strategy including the ability to pay dividends, maintain appropriate levels of capital or meet
liquidity and funding targets. An emerging risk is defined as a risk that has the potential to have a
significant negative effect on our performance, but whose impact on the organisation is currently
more difficult to assess than other risk factors that are not identified as emerging risks.
The topics have emerged as part of the annual risk assessment that is performed as part of the Stress
Testing Framework and the Risk Appetite Framework. The sequence in which the risks are presented
below is not indicative of their likelihood of occurrence or the potential magnitude of their financial
consequences.
The 2021 risk assessment confirmed our top and emerging risks. The top risks in 2021 are related to
cybercrime, data risk management and a persistent low interest rate environment. On top of that, the
Covid-19 pandemic continued to impact our business environment. Climate change risk remains an
emerging risk, reflecting the impact that climate change may have for the financial position and/or
reputation of ING.
The Russian invasion of Ukraine
The Russian invasion of Ukraine and rapidly escalating events in late February and early March 2022 is
a significant tragedy to the people and is causing disruption to business and economic activity in the
region and worldwide. Subsequently, the United States, United Kingdom and Europe initiated sanctions
against Russia in late February and early March 2022. In response, the Russian central bank enforced
liquidity and currency controls.
On sanctions
The international community is leveraging their sanction tools in response to the escalation of Russia’s
invasion of Ukraine. Accordingly, as part of ING’s know your customer and compliance risk governance
and procedures, ING is continuously monitoring the situation to stay abreast on all relevant updates to
implement effective and appropriate additional control measures and to manage the increased risk
and financial impacts of these developments.
Our exposures
ING has wholesale banking activities in both Russia and Ukraine, as well as investments in Russia, some
of which are denominated in local currency. As a result of the Russian invasion of Ukraine and related
international response measures, including sanctions and capital controls, we may be exposed to
increased risk of default of counterparties located in Russia and Ukraine, counterparties of which the
ultimate parent is located in Russia or may be considered effectively controlled or influenced through
Russian involvement, and other counterparties in sectors affected by the international response
measures. Furthermore, we have counterparty exposure to Russian entities in connection with foreign
exchange derivatives for future receipt of foreign currencies against RUB.
As of 28 February 2022, ING’s total Russia-related exposure was approximately €6.7 billion (~0.9% of
our total loan book), mainly consisting of liquidity facilities and pre-export financing. In Ukraine, our
Basis of disclosures (*)
The risk management section contains information relating to the nature and extent of the
risks of financial instruments as required by International Financial Reporting Standards
(IFRS) 7 'Financial Instruments: Disclosures'. These disclosures are an integral part of ING
Bank Consolidated financial statements and are indicated by the symbol (*). This is
applicable for the chapters, paragraphs, graphs or tables within the risk management
section that are indicated with this symbol in the respective headings or table header.
This risk management section also includes additional disclosures beyond those required by
IFRS standards, such as certain legal and regulatory disclosures. Not all information in this
section can be reconciled back to the primary financial statements and corresponding notes,
as it has been prepared using risk data that differs to the accounting basis of measurement.
Examples of such differences include the exclusion of accrued interest and certain costs and
fees from risk data, and timing differences in exposure values (IFRS 9 models report expected
credit loss on underlying exposures). Disclosures in accordance with Part Eight of the CRR2
and CRD V, and as required by the supervisory authority, are published in our ‘Additional
Pillar III Report’, which can be found on our corporate website ing.com.
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exposure was approximately €500 million mainly with liquidity facilities and other lending. Around
€700 million exposure to Russian clients was affected by new sanctions. Early March 2022, we
announced our decision to not do any new business with Russian companies.
The impact on our business is being monitored on a continuous basis. A central team was established
for daily monitoring and we intensified monitoring of our counterparties. Furthermore, we are working
together with counterparties, both onshore and offshore, to limit risks associated with derivatives
exposures.
Below table illustrates our exposure to Russia per 28 February 2022. Compared to year-end 2021, as
disclosed in the credit risk portfolio section, the exposure to Russian borrowers of €4.8 billion increased
with approximately €500 million due to central bank placements of deposits received and (limited)
drawings under committed facilities.
Russia exposure
1
in EUR billion
28 Feb
2022
Russian borrowers
2
5.3
Non-Russian borrowers with Russian ownership
1.5
Total
6.7
Of which covered by ECA (0.9), CPRI (1.3) and European parent guarantees (0.3)
3
2.5
Total booked at ING in Russia
4
1.3
Of which covered by European parent guarantees
0.3
1 Credit outstandings of lending, pre-settlement (including lending related derivatives), money market and investment
activities, excluding off-balance sheet positions such as undrawn committed exposures of €0.6 billion
2 Includes Russian borrowers with non-Russian (ultimate) ownership
3 Refers to Export Credit Agency (ECA) and Credit and Political Risk Insurance (CPRI)
4 Exposures booked at ING in Russia are partly supported by Legal lending limit guarantees from ING Bank N.V.. These
guarantees cover current outstandings of approximately €150 million
Below table illustrates our exposure to Ukraine per 28 February 2022.
Ukraine exposure
1
in EUR billion
28 Feb
2022
Booked at ING in Ukraine
0.4
Booked at other ING entities
0.2
Total
0.5
Of which covered by (European) parent guarantees
0.2
1 Credit outstandings of lending, pre settlement, money market and investment activities. Off-balance positions are not
included but are negligible
Covid-19 pandemic
In 2021, the Covid-19 pandemic continued to have an impact on people, businesses and the economy.
While vaccination rates continued to increase and Covid-19 related restrictions were lifted in some
jurisdictions in the first part of 2021, the end of 2021 was again marked by new waves of infections.
Uncertainty concerning the ongoing pandemic remains and we therefore continue to be cautious and
remain ready to support our clients when they need it. Further, the economic environment in 2021
was marked by supply chain disruptions, rising energy and commodity prices, significantly increasing
house prices and increasing inflation impacting companies and consumers.
ING is carefully monitoring the Covid-19 pandemic and the impact on its people and business. A central
ING team monitors the situation globally and provides guidance on health and safety measures, travel
advice, and business continuity for our company. In addition, a situation in which most or some of
ING’s employees continue working from home may raise operational risks, including with respect to
information security, data protection, availability of key systems and infrastructure integrity.
Increased attention is being paid to our financial risks. ING performed several types of stress tests and
sectoral reviews to assess the potential impact of the covid-19 pandemic and the uncertainties of the
current economic environment (e.g. inflation risk stress test) on its financial position. These stress tests
and reviews helped ING to get further insights into the potential impact and to define appropriate
mitigating actions.
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Potential economic implications for the countries and sectors where ING is active, which could have a
material adverse effect on ING’s business and operations, are continuously being identified, assessed
and monitored in order to execute possible mitigating actions.
Financial crime
We’re committed to fulfilling our role as a gatekeeper to the financial system, in order to protect our
customers, society and our bank from the corrosive effects of financial crimes such as money
laundering, terrorist financing, bribery and corruption, sanctions evasion and tax offences. It’s our
intention to not just comply with applicable laws and regulations in relation to financial crime, but also
to continue to strengthen our financial crime control framework in a robust and sustainable way to
prevent, detect and respond to illicit activity. We continue to seek to harness new and innovative
technological capabilities in order to create a safer environment for our customers, our bank and
society. In 2021, we adjusted our financial crime risk appetite and framework of policies and
procedures to reflect changes in the risk environment and responded to external developments;
including the Pandora Papers release. We also sought to further empower our people with the skills
and knowledge to fight financial crime; sharing insights with them about emerging and evolving
threats (including in relation to financial crime risks linked to or heightened by the Covid-19 pandemic)
and enhancing our training framework.
However, fighting financial crime and protecting the integrity of the financial system is a challenge for
all banks, given the constantly changing environment and pace at which criminals evolve their
methods. We believe we can be more effective in our efforts if we collectively join forces and share
intelligence with other banks and with national, European and international authorities and law
enforcement to combat financial crime. We therefore continue to proactively participate in public-
private partnerships, such as Transaction Monitoring Netherlands and Germany’s Anti-Financial Crime
Alliance, and to collaborate with other banks.
Cybercrime
Cybercrime remains a continuous threat to companies in general and to financial institutions in
particular. Both the frequency and the intensity of attacks are increasing on a global scale. The
sophistication and implications of ransomware attacks are a growing concern in the threat landscape.
The continuous enhancement of the control environment to protect from, and detect and respond to,
e-banking fraud, DDoS, targeted attacks and more specific ransomware attacks is of the highest
priority. Additional controls continue to be embedded in the organisation as part of the overall internal
control framework and are continuously re-assessed against existing and new threats. In addition, ING
continues to strengthen its global cybercrime and fraud resilience through extensive collaboration
across the globe with financial industry peers, law enforcement authorities, government (e.g. National
Cybersecurity Center) and Internet Service Providers (ISPs).
Data risk management
Data, whether customer, financial, risk or other busines data, is at the core of the ING’s purpose: data
leads to insights and insights empower people to stay a step ahead in life and in business. The ING
Data Strategy is creating a single vision and governance, empowering business users and building a
harmonised foundation regarding data. This encompasses further embedding data functions and
improving (bank-wide) data operations, and simplifying, standardising and modernising its technology
and data platforms. Recognising that data risk is one of the top risks of the bank, ING is creating a
holistic view on how ING manages risk around data including personal data protection, data security,
data quality and data ethics.
Low/negative interest rate environment
The persistent low/negative interest rate environment, with central banks holding their rates at
negative or low levels, continued to negatively impact short-term as well as long-term market rates.
The Covid-19 pandemic intensified the low/negative interest rate environment. Interest rates are
expected to remain at current levels for some time. This is posing a challenge for bank business models
that earn net interest income from traditional savings activities. In addition, loans are being repriced at
lower rates which is putting more pressure on margins and impacting long-term profitability. ING is
continuously assessing this market environment. ING has introduced negative interest rate charging
and is reducing thresholds for charging negative interest rates. Further, ING is expanding other sources
of income such as net fee and commission income.
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Sourcing risk
The scope of functions and services that ING businesses source to third parties and internal parties has
risen in recent years. As such sourcing has evolved from being a means to control costs to a
mechanism for building centres of excellence internally and external partnerships that can add real
strategic value. Apart from the clear tangible benefits sourcing adds to ING, it also raises new risks for
the bank. Primarily these are operational risks associated with third parties performing (parts of)
functions and services, and range from underperformance and data privacy to business continuity and
cybercrime.
With growing reliance on sourcing, ING’s Sourcing Policy is baselining the requirements in terms of
controls when sourcing. The Sourcing Policy which is, at least in part, based on regulatory requirements
allows ING to implement the required control assurance over the functions and activities sourced to
third parties and internal parties, throughout the entire sourcing lifecycle.
Climate change risk
ING is increasingly aware of the risks associated with climate change and how these can impact our
clients and their financial stability. This includes physical risk and transition risk. Physical risk can be
acute, such as flood and wildfires, or chronic, such as increased temperature and rising sea levels.
Transition risk can be driven by policy, technological or market changes as we shift towards a low-
carbon global economy and potentially lead to stranded assets.
In addition to our Climate Expert Group (CEG) and Climate Change Committee (CCC), an internal
programme was launched in 2020 to address the impacts resulting from climate change. In 2021, this
programme was brought under ING’s global oversight of regulatory programs. The governance of the
programme was recently strengthened with clear allocation of responsibilities for oversight and
execution. As such, climate risk will be included in our risk management framework in a forward-
looking approach. In our integrated climate report on ing.com we report on our progress until end-
2020. The report details our approach and sector-specific insights.
Risk governance (*)
Effective risk management requires firm-wide risk governance. ING’s risk and control structure is based
on the ‘three lines of defence’ governance model. Each line has a specific role and defined
responsibilities, with the execution of tasks being distinct from the control of these same tasks. The
three lines work closely together to identify, assess, and mitigate risks.
This governance framework is designed in such a way that risk is managed in line with the risk appetite
approved by the Management Board Banking (MBB), the Executive Board (EB) and the Supervisory
Board (SB); and this approach is cascaded throughout ING. The MBB is composed of the EB of ING
Group, the heads of the business lines, the chief technology officer (CTO) and the chief operations and
transformations officer (COO).
The heads of ING’s banking business and support functions and the heads of the country units, or their
delegates, are the first line of defence. They have primary ownership, and accountability and
responsibility for assessing, controlling and mitigating all financial and non-financial risks affecting
their businesses, as well as for the completeness and accuracy of the financial statements and risk
reports with respect to their responsible areas. The CTO is responsible and accountable for proper
security and controls on global applications and IT platforms servicing the bank and implementing
proper processes.
The second line of defence consists of oversight and specialised functions in risk management and
compliance. They (i) have co-responsibility for risk management, through articulating and translating
the risk appetite into methodologies and policies to support and monitor business management's
control of risk, (ii) objectively challenge risk management execution and control processes and
coordinate the reporting of risks and controls by the first line of defence, (iii) advise management on
risk management and compliance and have decision-making power in relation to business activities
that are judged to present unacceptable risks to ING and (iv) can set minimum requirements in terms
of quality and quantity of global resourcing in the risk management and compliance functions.
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The internal audit function forms the third line of defence. It provides independent assurance to the
Audit Committee (part of the SB), the EB and the MBB on the quality and effectiveness of ING’s internal
control, risk management, governance and implemented systems and processes in both the first and
second lines of defence. To protect its independent nature, decisions regarding the appointment, re-
appointment or dismissal from office as well as the remuneration package of the head of the internal
audit function require SB approval.
Board-level risk oversight (*)
ING has a two-tier board structure consisting of a management board (EB for ING Group and MBB for
ING Bank), and an SB; both tiers play an important role in managing and monitoring the risk
management framework.
◾
The SB is for risk management purposes advised mainly by the Risk Committee, which assists
and advises in monitoring the risk profile and approving the overarching risk appetite of the
company as well as the structure and effective operation of the internal risk management and
control systems.
◾
The EB is responsible for managing risks associated with all activities of ING Group, whereas the
MBB is responsible for managing risks associated with all activities of ING Bank. The EB and MBB
responsibilities include ensuring that internal risk management and control systems are
effective and that ING Group and ING Bank comply with relevant legislation and regulations. On
a regular basis, the EB and MBB report on these issues and discuss the internal risk
management and control systems with the SB. On a quarterly basis, the EB and MBB report on
ING’s risk profile versus its risk appetite to the Risk Committee, explaining changes in the risk
profile.
As a member of the EB and the MBB, the CRO is responsible for ensuring that risk management issues
are heard and discussed at the highest level. The CRO steers a risk organisation both at head-office and
business-unit levels, which participates in commercial decision-making, bringing countervailing power
to keep the risk profile within the agreed risk tolerance. The CRO reports to the SB risk committee on
ING’s risk appetite levels and on ING’s risk profile at least quarterly. In addition, the CRO briefs them on
developments in internal and external risk-related issues and seeks to ensure they understand specific
risk concepts.
Executive level (*)
The key risk committees described below act within the overall risk policy and delegated authorities
granted by the MBB:
◾
Global Credit and Trading Policy Committee (GCTP) discusses and approves policies,
methodologies, and procedures related to credit, trading, country, and reputation (i.e.
environmental and social risk or ESR) risks. The GCTP meets monthly. After the MBB and the
GCTP, the Credit and Trading Risk Committee (CTRC) is the highest level body authorised to
discuss and approve policies, methodologies, and procedures related to credit and trading risk.
◾
Global Credit Committee – Transaction Approval (GCC(TA)) discusses and approves transactions
that entail taking credit risk (including investment risk), country, legal, and environmental and
social risk. The GCC(TA) meets twice a week.
◾
Asset and Liability Committee Bank (ALCO Bank) discusses and steers, on a monthly basis, the
overall risk profile of all ING Bank’s balance sheet and capital management risks. ALCO Bank
discusses and approves policies, methodologies and procedures regarding solvency, market
risk in the banking book and funding and liquidity risks.
◾
Non-Financial Risk Committee Bank (NFRC Bank) is accountable for the design and
maintenance of the Non-financial risk management framework including operational risk
management, compliance and legal policies, minimum standards, procedures and guidelines,
development of tools, methods, and key parameters (including major changes) for risk
identification, measurement, mitigating and monitoring/reporting. NFRC Bank meetings are
held at least quarterly.
◾
The Model Risk Management Committee (MoRMC) discusses and steers, on a monthly basis, the
overall model strategy. MoRMC discusses and approves policies and methodologies related to
model risk management.
◾
Climate Change Committee (CCC) is responsible for mandating processes for identifying and
managing climate-related risks and opportunities, guiding climate-related policies, strategy,
objective-setting and performance monitoring. Further, it is responsible for monitoring and
overseeing progress on relevant goals and targets. The CCC meets six times a year.
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Regional and business unit level (*)
ING’s regional and/or business unit management have primary responsibility for the management of
risks (credit, market, funding and liquidity, operational, IT, compliance and model) that arise in their
daily operations. They are accountable for the implementation and execution of appropriate risk
frameworks affecting their businesses in compliance with procedures and processes at the corporate
level. Where necessary, the implementation is adapted to local requirements.
The regional and/or business unit (BU) CROs are involved in these activities. The local (regional and BU)
CRO is responsible for the analysis, monitoring and management of risks across the whole value chain
(from front to back office). The local risks are discussed in local risk committees that roll up to the key
risk committees at executive level. Local Client Integrity Risk Committees (CIRCs) assess client integrity
risk and they have a final decision on client acceptance or client off-boarding, from a risk-based
perspective, in the areas of financial crime, Foreign Account Tax Compliance Act (FATCA), Common
Reporting Standard (CRS) and ESR.
Organisational structure (*)
The Risk Management function consists of corporate risk departments headed by General Managers
directly reporting to the CRO and regional/business unit CROs functionally reporting to the CRO. The
corporate risk departments support the CRO to set the Bank's risk appetite, develop the corporate
policies, rules and global procedures and infrastructures.
In 2021, the CRO for ING in Germany started to report functionally to the Group CRO, instead of the
CRO C&G, seen the importance of the German market. The following organisation chart illustrates the
reporting lines in 2021 for the risk management organisation:
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The banking industry has been re-assessing the business environment it operates in and the pandemic
has accelerated a number of trends, which have an impact on the types of risks we manage as a bank.
Consequently, ING has reviewed its risk organisational structure, looking to improve governance with a
more holistic and integrated approach towards risk management by strengthening group risk steering
and further simplification and automation of processes.
With the strategic review of the risk organisational structure, that will start as of March 2022, the
following corporate departments will be created:
●
‘Credit risk’
restructuring will be managed from an overarching point of view, rather than per business line.
●
‘Integrated risk’
related to one risk type, in order to ensure that a consistent approach and interdependencies
between the various risk types are taken into account. The current Risk & Capital Integration
department will move into Integrated Risk, just as Model Development from Financial Risk and
the Professional Practice Unit from NFR. An Environment, Society & Governance Risk team will
also be introduced.
●
‘Risk Culture & Behavioural risk’
provides a clear vision, aligned strategy and methodological approach in order to identify,
assess and bring change with regards to how ING employees act on risks.
Risk policies, procedures and standards (*)
ING has a framework of risk management policies, procedures, and minimum standards in place to
create consistency throughout the organisation, and to define requirements that are binding for all
business units. The goal of the governance framework of the local business units is to align with ING’s
framework and to meet local (regulatory) requirements. Senior management is responsible for the
implementation of and adherence to policies, procedures and standards. Policies, procedures and
standards are regularly reviewed and updated via the relevant risk committees to reflect changes in
requirements, markets, products and practices.
Internal control framework
In its Enterprise Risk Management (ERM) Framework, ING has explained the approach to mitigate risk
outside ING’s risk appetite. The internal control framework (ICF) is thereby translating regulations and
internal requirements into policies articulating specific risks and control objectives. These policies form
the basis for translation into process control standards, which are used by the business to support and
promote an effective risk and control environment. The ICF includes binding principles, definitions,
process steps, and roles and responsibilities to create consistent bank-wide policies and control
standards.
Global policies and control standards are developed and maintained or updated within the ICF. These
global documents are designed by head-office functions and are to be adhered to by all ING entities
and support functions. In line with the ERM approach, ownership for policies will be with the 2nd line of
defence (2
nd
st
policy and control standard documents are approved by relevant approval bodies (e.g. SB, EB, MBB and
Bank NFRC).
The policies are based on the risk taxonomy, which is designed to prevent overlaps in policy control
objectives. The control standard owners are responsible for defining the key controls that mitigate the
critical and high inherent risks in the business processes.
The process of developing policy and process control standard documents includes the following steps:
identify the document owner, determine the relevant stakeholders, define a risk-based approach,
perform an impact assessment, involve relevant stakeholders and (local) entities for sounding on key
and expected controls, and determine an approval body.
The principal role of the gatekeepers is to provide quality assurance and to advise on the relevant
approval bodies. The ICF gatekeepers challenge document owners on the alignment of internal control
documents with the agreed methodology and risk taxonomy, and verify that the development and
communication of those documents are in line with the agreed process. All policies, control standards,
and procedures are published on ING’s intranet. New and updated documents are periodically
communicated by means of a dedicated policy update bulletin to the country managers and senior
heads of business departments.
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Risk culture
At ING we attach great importance to a sound risk culture, which is essential for performing our role in
society responsibly and to keep the bank safe, secure and compliant. Our risk culture determines the
way in which employees identify, understand, discuss, and act on the risks we are confronted with and
the risks we take. In 2021, we drove several enhancement projects based on our 2020 assessment of
our risk culture. Most notably, enhancing our risk culture monitoring activities and bringing non-
financial risk to life.
Orange Code and the global Code of Conduct
The Orange Code and the global Code of Conduct are the foundation of ING’s risk culture. The global
Code of Conduct defines the most essential conduct principles expected from ING employees in their
daily activities, to create additional risk awareness and better meet expectations stated in external
rules and guidelines. In 2021, the global Code of Conduct has been embedded into our employees’
performance management cycle to ensure continuous attention to the Global Code of Conduct, and
dialogue on how to apply it in our daily work practice.
The Orange Code is a declaration of who we are. It describes what we can expect from each other
when we turn up to work each day. It is a set of standards that we collectively value, strive to live up to,
and invite others to measure us by.
The Orange Code is the sum of two parts, the ING values and ING behaviours, with integrity being the
overarching principle. The ING values (being honest, prudent and responsible) are non-negotiable
promises we make to the world, principles we seek to stick to, no matter what. The ING behaviours
(take it on and make it happen, help others to be successful, and always be a step ahead) represent
our way to differentiate ourselves. The Orange Code is embedded in commitments we make to each
other and the standards by which we measure each other’s performance.
Orange Code decision-making
To enhance risk awareness, we continued to support monitoring risk culture and compliance risk in the
business. This included training by compliance and data experts to enhance balanced decision-making
in line with the Orange Code decision-making model to support moral learning and well-balanced
decision-making. A four-step model aims to find out where the moral weight lies for a potential
decision.
Following the incorporation of the model in the global Product and Approval Process (PARP) policy in
2020 it has been embedded in several local PARP policies in 2021. Compliance is continuing to train
experts in this area within the local Compliance teams to support the organisation in properly applying
the model in practice in their respective countries.
Learning
In 2021, we continued to strengthen and expand our learning offering on risk topics and the
governance around this. The learning focuses on compliance, non-financial risk and financial risk.
We established a board to approve and monitor progress on the required learning that is taken by all
staff. This will ensure more attendance by the learners, bank-wide alignment, and connection between
learning, business impact and management actions. It has also improved feedback and evidencing of
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outputs. The board brings together content owners, learning experts and corporate communications to
ensure the best fit for the training need.
We also took steps to expand our learning for risk professionals, with the Risk Academy which provides
focused learning for Risk staff. These take the form of various online learning modules and frameworks
that support employees in developing their knowledge, skills and behaviours.
Dutch Banker’s Oath
In the Netherlands, all employees of ING take the Bankers’ Oath and pledge this promise in a
meaningful ceremony. The Oath came into force in the Netherlands on April 1st of 2015, as part of a
joint approach from all banks, aimed at introducing social regulations, a revised Dutch Banking Code
implementing an oath with associated rules of conduct and disciplinary law. This way the Dutch banks
show society what they stand for and are accountable for, both as individual banks and as a sector. In
2021, due to the Covid-19 pandemic, ING NL changed to virtual Bankers’ Oath ceremonies via Teams,
instead of the former physical ones, to ensure that all new employees (around 400 a month) can still
take the Bankers’ Oath in time and in a meaningful ceremony. Before taking the Oath, an e-learning is
followed and the importance of the Oath is discussed. Also, dilemmas that the employees may come
across in their daily work are shown, to ensure careful balancing of the interests of all our stakeholders,
in the decisions we make. In 2020 and 2021 the whole Bankers’ Oath programme for new joiners was
revised and updated, to ensure that all elements still align with the current developments, both
internally and externally.
Remuneration
ING aims to align its remuneration policy with its risk profile and the interests of all stakeholders. For
more information on ING’s compensation and benefits policies and its relation to the risk taken, please
refer to the Capital Requirements Regulation (CRR) Remuneration Disclosure published on the
corporate website ing.com.
Centre of Expertise on Behavioural Risk Management (BRM)
Behavioural risk is an increasingly important risk area for ING and across the financial industry. It arises
when behavioural patterns are at the root of financial and non-financial risks in the organisation.
The complexity of this type of risk is that it is less tangible compared to other risk areas because it
focuses on behavioural patterns and their drivers. There are patterns in how decisions are made, how
people communicate and whether they can take ownership. Behaviour is driven by formal and
informal mechanisms. Examples of formal drivers are the processes ING applies and how its
governance is structured. Informal drivers are less tangible; such as group dynamics or underlying
beliefs that influence behaviour.
At ING, BRM is positioned in the second line of defence, reporting directly to the CRO. The global BRM
Centre of Expertise not only assesses behavioural risk in the organisation, but also has the mandate to
direct, challenge and support business owners to intervene on behavioural patterns and their
underlying drivers.
Behavioural risk assessments
Behavioural risk assessments (BRAs) identify and analyse undesired behaviours within ING and provide
management with specific direction on how to change these behaviours. They focus on the
effectiveness of groups rather than individuals, the role of leadership and on less visible aspects such
as team dynamics and unwritten social norms. The goal is to understand and systematically assess
what drives undesired habits at ING. The BRM model of behavioural risk is used as the standard across
ING to signal behavioural risks going forward.
Behavioural risk interventions
Based on the results of the executed behavioural risk assessments, BRM mitigates behavioural risk in a
focused manner. Effective mitigation requires a deep understanding of what drives undesired
behaviours. Behavioural and organisational science theories and evidence-based techniques and tools
play an important role in designing and facilitating interventions. Given the crucial role of leaders in
creating the right conditions for employees, interventions are first initiated at leadership level. These
include leadership labs, which address topics such as ‘connection, alignment and trust’, as well as
bringing together the ‘whole system in the room’. Here senior leaders delve into the outcomes of the
assessments, identifying deeply rooted and often complex issues for improvement.
In addition, interventions are also set in motion that focus on enabling employees to build awareness
on behavioural risk and support them in initiating solutions to mitigate the potential behavioural risks.
After each assessment the results are shared with the management teams of the assessed units and
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with the participants of the BRA in a feedback session. This is followed up with a dialogue starter toolkit,
enabling teams to reflect on the results, discuss opportunities for improvement and call for first steps
towards sustainable solutions.
In 2021, BRM pioneered a new approach to address behavioural risk challenges related to decision-
making, ownership and group dynamics behavioural challenges on a wider scale. The used approach is
a 'World Cafe' – a large group intervention that drives common understanding, engagement and
ownership and enhances learning and behavioural change.
The BRM team works closely with the business units and departments such as HR, Internal Audit, and
Compliance to align on and embed desired leadership and risk behaviours (i.e. speak up, psychological
safety, communication, guiding leadership).
Risk cycle process
ING uses a step-by-step risk management approach to identify, manage and mitigate its financial and
non-financial risks. The approach consists of a cycle of five recurrent activities: risk identification, risk
assessment, risk control, risk monitoring, and risk reporting. The cycle is designed to determine what
the risks are, assess which of these risks can really do harm, take mitigating measures to control these
risks, monitor the development of the risk to see if the measures taken are effective, and report the
findings to management at all relevant levels to enable them to take action when needed.
The cycle recurs in two ways. First, the identification, assessment, review, and update of mitigating
measures are repeated periodically. Second, this periodic monitoring exercise may indicate emerging
risks, known risks that are changing, risk levels that are changing, or current control measures that are
not effective enough. Further analyses of these findings may then result in renewed and more
frequent risk identification, and/or assessment, and/or change of mitigating measures.
Risk identification
Risk identification is a joint effort of the business and the risk management functions. Its goal is to
detect potential new risks and determine changes in known risks. Regular risk identification is essential
for effective risk management. Potential risks that are not identified, will not be controlled and
monitored and may lead to surprises later. Known risks may have changed over time and as a
consequence the existing mitigating measures and monitoring may be inadequate or obsolete.
Risk identification is performed periodically. In case of material internal or external change, additional
ad hoc risk identification can be performed.
Risk assessment
Each identified risk is assessed qualitatively or quantitatively to determine its importance. This enables
ING to decide which of the identified risks need control measures and how strict or tolerant these
measures should be. Known risks are re-assessed to detect any change in the risk level.
The importance of a risk is based on both the likelihood that the risk materialises and the subsequent
financial or reputational impact that may occur should the risk arise. Unlikely risks with a potentially
high impact need to be controlled. A risk that is likely to happen regularly but expected to have a
modest financial impact may not need to be mitigated if the consequences are accepted by
management.
Risk control
Risks can be controlled by mitigating measures that lower the likelihood the risk occurs, lower the
impact when it occurs or both. The ultimate measure to lower a risk is to stop the activity or service
that causes the risk (risk avoidance). Risk control and mitigation measures are defined and maintained
both bank-wide and at the local level.
Monitoring and reporting
ING monitors the risk-control measures by checking if they are executed, complied with and have the
expected mitigating effects and by following the development of the risks and their risk levels. Risk
reporting provides senior and local management with the information they need to manage risks.
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Risk Appetite Framework
The Risk Appetite Framework (RAF) is one of the foundation pillars of the ERM Framework. Its objective
is to set the appropriate risk appetite at the consolidated level across the different risk categories and
to allocate the risk appetite throughout the organisation.
Policy
The RAF policy states the overarching global risk appetite. Within the RAF, ING monitors a range of
financial and non-financial risk metrics to ensure that our risk profile is in line with our risk appetite
while executing our strategy. ING’s RAF, which is approved by the SB, defines the desired risk profile
that is to be integrated in the strategic decision-making and financial planning process. It is designed
to be able to withstand market volatility and stress, while meeting regulatory requirements. The
framework, including underlying assumptions and metrics, is regularly reviewed so that it remains
relevant. The RAF combines various financial and non-financial risk appetite statements (RASs) into a
single, coordinated approach to provide the business with a clear overview of the relevant risks and the
tools to manage them. This view allows the EB, the MBB and senior management to form an opinion
on the adequacy of internal risk management and control systems for the risks ING faces while
pursuing its strategy.
Process
The RAF is focused on setting the risk appetite at the consolidated level and across the different risk
categories, and provides the principles for cascading this risk appetite down into the organisation. The
RAF and underlying limit allocation are reviewed on an annual basis, or more frequently if necessary,
based on their quarterly review in the EB, the MBB and the SB. It is therefore a top-down process, which
bases itself on the ambition of the bank in terms of its risk profile, the regulatory environment and the
economic context. The set of limits used is split according to the approval levels needed for them.
Limits that need SB approval are called boundaries and the underlying metrics supporting the
boundaries which need EB and MBB approval are called instruments.
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Step 1. Identify and assess ING’s key risks
The outcome of the risk identification and risk assessment process is used as the starting point for the
review of the RAF. Within this step, the risks ING faces when executing its strategy are identified in the
context of the current economic, political, social, regulatory and technological environment. The
assessment identifies whether the potential impact is material and if it is sufficiently controlled within
ING’s risk management function. It benchmarks the current risk framework against regulatory
developments. Known risks are re-assessed either to confirm risk levels or to take account of potential
changes. The assessment is contextualised by the current set of risk appetite statements.
Step 2. Set Risk Appetite Framework
Based on ING’s risk assessment and risk purpose, boundaries for the overarching risk frameworks are
set. Once the overarching risk appetite thresholds have been set and approved by EB/MBB and
subsequently by SB, the statements are translated into risk-type-specific statements and lower level
thresholds which are set and approved by senior risk committees, ALCO Bank, GCTP and Bank NFRC.
Cascading is done via a number of detailed risk appetite statements which have been defined per risk
type, the combination of which ensures compliance with the overarching solvency, concentration and
funding and liquidity RASs.
Examples of underlying risk metrics include:
◾
Solvency and Profitability (e.g. IFRS P&L-at-Risk and FX translation risk)
◾
Funding and liquidity (e.g. Liquidity coverage ratio (LCR) and Net Stable Funding Ratio (NSFR))
◾
Credit risk (Exposure at Default (EAD) and Risk Weighted Assets (RWA))
◾
Market risk trading book (e.g. Event risk, historical value at risk (HVaR))
◾
Market risk banking book (Net interest income (NII)-at-Risk and Revaluation-Reserve-at Risk)
◾
Non-financial risk (eg. Expected loss tolerance and management of audit issues)
◾
Business risk (e.g. IFRS P&L-at-Risk and Economic Capital)
◾
Model risk (e.g. Number of inadequate Pillar 1 models)
ING has started including climate risk into its Risk Appetite Framework by a.o. introducing climate risk
as one of the dimensions to determine sector concentration as part of the credit risk appetite
statements. In the coming years, ING will extend the climate risk impact to other risk types to ensure
that the potential risks stemming from e.g. transition risk and physical risk are properly captured in the
Risk Appetite Framework.
Step 3. Cascade into statements per risk type and business unit
The bank-wide risk appetite is translated per risk type, which is further cascaded into the organisation.
Risk appetite statements are then translated into dedicated underlying risk limits that are used for the
day-to-day monitoring and management of ING’s risks. The risk appetite statements serve as inputs
for the quarterly planning process as well as for the establishment of key performance indicators and
targets for senior management.
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Step 4. Monitor and manage underlying risk limits
To verify that it remains within the Risk Appetite Framework, ING reports its risk positions vis-
à
-vis its
limits on a regular basis to senior management committees. The Quarterly Risk Update reflecting the
exposure of ING against the risk appetite is submitted quarterly to the EB and the MBB and to the (Risk
Committee of the) SB. Moreover every quarter the financial plan is checked for potential limit breaches
within a one-year horizon, where in the strategic dialogue the MBB can take mitigating measures or
adjustments to the dynamic plan can be made.
Stress testing
Stress testing is an important risk management tool that provides input for strategic decisions and
capital planning. The purpose of stress testing is to assess the impact of plausible but severe stress
scenarios on ING’s capital and liquidity position. Stress tests provide complementary and forward-
looking insights into the vulnerabilities of certain portfolios, with regards to adverse macroeconomic
circumstances, stressed financial markets, and changes in the (geo)political climate. Since the
outbreak of the Covid-19 pandemic, ING assessed the potential impact on its financial position via
different types of stress tests. In addition to assessing P&L, capital and liquidity position of ING for a
range of different scenarios, idiosyncratic risks were also included. The outcome of these Covid-19
stress tests helped management to get insight into the potential impact and to define actions to
mitigate this potential impact.
In the second half of 2021, ING started preparing for the regulatory climate risks stress test scenario,
which will be assessed in 2022 as part of the bi-annual ECB Single Supervisory Mechanism (SSM) stress
test. This regulatory stress test, combined with internal analyses done on climate risk, will be used to
enhance ING’s internal climate risk stress testing.
Types of stress tests
Within ING, different types of stress tests are performed. The most comprehensive type of stress tests
are the firm-wide scenario analyses, which involve setting scenario assumptions for all the relevant
macroeconomic and financial market variables in all countries relevant to ING. These assumptions
usually follow a qualitative narrative that provides a background to the scenario. In addition to firm-
wide scenario analyses, ING executes scenario analyses for specific countries or portfolios.
Furthermore, sensitivity analyses are performed, which focus on stressing one or more risk drivers;
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usually without an underlying scenario narrative. Finally, ING performs reverse stress tests, which aim
to determine scenarios that could lead to a pre-defined severe adverse outcome.
Process
The stress testing process of ING consists of several stages, which are:
Risk identification and risk assessment: It identifies and assesses the risks ING or the relevant
entity is facing when executing its strategy based on the current and possible future economic,
political, regulatory and technological environment. It provides a description of the main risks
and risk drivers related to the nature of ING’s business, activities and vulnerabilities.
Scenario definition and parameterisation: Based on the outcome of the previous step, a set of
scenarios is determined with the relevant scope and set of risk drivers for each scenario, as well
as its severity, the key assumptions and input parameters. The output of this phase includes a
quantitative description of the stress scenarios to be analysed, the relevant output metrics and,
when applicable, a narrative description.
Impact calculation and aggregation: Based on the quantitative description of the stress
scenarios determined in the previous step, the impact is determined for the relevant scenario,
scope and horizon. The impact calculation and aggregation can be part of a recurring process
or part of a specific process set-up for one-off stress tests.
Scenario reporting: For each stress test, a report is prepared after each calculation which
describes the results of the scenario and gives a recap of the scenario with its main
assumptions and parameters. The stress-test report is sent to the relevant risk committees
and/or senior management. It is complemented, if needed, with advice for management action
based on the stress-testing results.
Scenario control and management assessment: Depending on the outcomes of the stress test
and the likelihood of the scenario, mitigating actions may be proposed. Mitigating actions may
include, but are not limited to, sales or transfers of assets and reductions of risk limits.
Methodology
Detailed and comprehensive models are used to calculate the impact of the scenarios. In these
models, statistical analysis is combined with expert opinion to make sure that the results adequately
reflect the scenario assumptions. The methodologies are granular and portfolio-specific and use
different macroeconomic and market variables as input variables. The calculations are in line with our
financial and regulatory reporting frameworks. The stress-testing models are subject to review by
Model Risk Management.
Developments in the regulatory environment
Basel III revisions and upcoming regulations
In December 2017, revisions to Basel III were formally announced by the Basel Committee. These
revisions to Basel III establish new prudential rules for banks, including a revision to the standardised
approach to credit risk, the introduction of a capital floor based on standardised approaches, the use of
internal models, limitation of options for modelling operating risks, and new rules for the establishment
of risk-weighted items and unused credit lines at the banks. Such revisions have a long implementation
phase and are not yet fully transposed into EU regulation. The revisions are commonly referred to as
Banking Reform package. In Europe, this has been partly implemented in the CRR II / CRD V (see below)
and it will be implemented further through the CRR III / CRD VI in the coming years. A draft was
published in October 2021 and implementation is expected as of 1 January 2025.
CRRII/CRDV and BRRDII
On 27 June 2019, a series of measures referred to as the Banking Reform Package (including certain
amendments to CRR and CRD IV, commonly referred to as CRR II and CRD V) came into force, subject to
various transitional and staged timetables. The adoption of the Banking Reform Package concluded a
process that began in November 2016 and marks an important step toward the completion of the
European post-crisis regulatory reforms, drawing on international standards agreed by the Basel
Committee, the Financial Stability Board and the G20. CRD V was implemented in Dutch law in 2020.
The Banking Reform Package updates the framework of harmonised rules established following the
financial crisis of 2008 and introduces changes to the CRR, CRD IV, the Bank Recovery and Resolution
Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR). The Banking Reform Package
covers multiple areas, including the Pillar 2 framework, the introduction of a leverage ratio requirement
of 3% and a leverage ratio buffer requirement of 50% of the global systemically important banks (G-
SIB) buffer requirement (applicable per 1 January 2023), a sectoral systemic risk buffer, a binding NSFR
ratio based on the Basel NSFR standard but including adjustments with regard to e.g. pass-through
models and covered bonds issuance, mandatory restrictions on distributions, permission for reducing
own funds and eligible liabilities, macroprudential tools, a new category of ‘non-preferred’ senior debt,
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the minimum requirement for own funds and eligible liabilities (MREL) and the integration of the TLAC
standard into EU legislation. Further, the EBA obtained a mandate to investigate how to incorporate
ESG risks into the supervisory process and what the prudential treatment of assets associated with
environmental or social objectives should look like.
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Solvency risk
Introduction
Solvency risk is the risk of lacking sufficient capital to fulfil the business objectives, regulatory
requirements or market expectations. A bank that is insolvent is unable to pay its debts and will be
forced into bankruptcy.
The level and quality of capital is crucial for the resilience of individual banks. Banks are expected to
assess the risks they face, and in a forward-looking manner ensure that all material risks are identified,
managed and covered sufficiently by loss-absorbing capital to ensure continuity in case of
materialisation of unexpected risks in times of stress. Given the interdependencies to other financial
and non-financial risks this balancing act of capital adequacy needs to be done within a sound and
integrated management approach coherently linking all moving parts of the bank in line with the long-
term business strategy.
Solvency risk management
ICAAP Framework
ING’s Internal Capital Adequacy Assessment Processes (ICAAP) aims to ensure that capital levels are
adequate to cover all material risks at all levels and to ensure compliance with regulations. ING follows
an integrated approach to assess the adequacy of its capital position in relation to its business
activities, underlying business strategy, market positioning risk profile and operating environment. This
implies taking account of the interests of its various stakeholders such as regulators, shareholders,
investors, rating agencies and customers.
The continued strength of ING’s capital position, the adequacy of the financial position and risk
management effectiveness are essential for achieving the strategy. ING’s ICAAP ultimately supports
this strategy and contributes thereby to the continuity of ING Group, ING Bank and all its business
units.
Managing ING’s capital requirements and allocation entails finding a balance between the forces
governing supply and demand. The uncertainties surrounding these factors reflect changing market
circumstances and continuous unpredictability in regulatory and macroeconomic
forces. The process of balancing these strategic goals is captured in the ICAAP framework and enabled
by the building blocks and elements facilitating the ICAAP. The following building blocks have been
defined in the ICAAP Framework, which are applied for both the ‘normative’ and ‘economic’ perspective
as defined in the ECB Guide to ICAAP, published in November 2018:
●
Risk identification and assessment
●
Risk appetite
●
Capital planning
●
Capital management
●
Stress testing
●
Continuity
Solvency risk related to Covid-19
Since the outbreak of Covid-19 several stress-test analyses have been done to assess the potential
impact of the virus on the actual and future solvency position, whereby also potential risks are taken
into account. For instance, in 2021 ING performed stress tests whereby the combination of inflation
and Covid-19 risks was assessed in several scenarios and sensitivity analyses. These stress tests were
used to prepare potential mitigating actions, but also served as starting point for the review of ING’s
risk appetite and of the financial and capital planning. In light of this, ING also updated the
management actions in the Contingency Capital and Funding Plan and the Recovery Plan and assessed
potential additional mitigating actions to counter this very specific crisis.
Risk identification and assessment
ING’s capital management and solvency risk management starts with the risk identification and risk
assessment process. Its main purpose is to detect potential new risks and to identify changes in the
potential impact of known risks. On an annual basis, ING performs a thorough review of its solvency
risks or risks to capital. Within this assessment, bottom-up assessments are combined with top-down
assessments, including a questionnaire and interviews with senior management. The results of the risk
assessment are discussed in ALCO Bank which comprises almost the full MBB. Once approved, the
conclusions of the risk assessment feed into the annual review of the Risk Appetite Framework, the
Stress Testing Framework and the Economic Capital Framework. In addition to this annual process, ING
also re-assesses its risks as part of its Capital Adequacy Statement, a quarterly process to assess ING’s
capital adequacy.
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Solvency risk appetite
As explained in the Risk Appetite Framework section in the previous chapter, ING has established
overarching solvency risk boundaries. Boundaries are risk appetite statements that are essential for
risk management activity, making it of paramount importance to keep these boundaries within the
defined level. The SB is responsible for approving and monitoring the boundaries. These boundaries are
complemented by a sequence of risk-type-specific instruments (risk appetite statements). These
underlying risk appetite statements are cascaded down into the organisation and dedicated risk
thresholds are set that are used for day-to-day monitoring and management of ING’s risks. ING has
solvency risk appetite statements in place for the following metrics: CET1 ratio, total capital ratio,
leverage ratio, total loss-absorbing capacity (TLAC ) & minimum requirement for own funds and eligible
liabilities (MREL) based on RWA/leverage ratio and economic capital adequacy.
Capital planning
The capital and funding plan is an integral part of the dynamic plan, ING’s financial and business
planning process. Its objective is to inform and advise the management on the capital development
and need of ING Group and ING Bank, under base case and adverse scenarios. It describes how ING
shall finance the expected capital constraints taking into consideration growth projections, capital and
risk evolution, macro and market conditions, both under the normative and economic perspective. The
capital and funding plan is discussed and approved by ALCO Bank and updated at least twice a year.
Within these updates, ING takes account of recent market and risk developments and ensures that
capital planning adheres to the solvency risk appetite set by the SB.
Capital management
Formulation of the CET1 ambition is a key element in solvency risk management. The target ratio,
based on the management buffer concept, enables ING’s senior management to steer, benchmark and
assess the bank’s current and future capital levels much more efficiently while the ambition level
clearly supports trust building among ING’s key stakeholders (e.g. regulators, investors and customers).
The capital management buffer aims to protect the interests of key stakeholders and plays an
important role in the overall capital adequacy governance. The rationale behind the concept of the
management buffer is that it provides an additional cushion on top of the (local) regulatory minimum
requirements (e.g. Supervisory Review and Evaluation Process (SREP) requirements) to withstand a
certain level of stress and to facilitate awareness and preparedness to take management actions. ING
reviews its capital management buffer on a regular basis to determine its effectiveness and
robustness, updating it as appropriate.
Stress testing
Solvency stress testing allows ING to examine the effect of plausible but severe stress scenarios on the
solvency position and provides insight into which entities or portfolios are vulnerable to which type of
risks or in which type of scenarios. Solvency stress testing is an important tool in identifying, assessing,
measuring and controlling risks to capital, providing a complementary and forward-looking perspective
to other solvency risk management tools. For solvency stress testing, ING follows the same process
steps that are described in the overall section on stress testing.
ING distinguishes the following three types of stress test analyses:
●
Sensitivity analysis: Within these analyses, ING assesses the impact of a pre-defined shock in
one or more risk drivers. The key purpose of sensitivity analyses is to monitor the impact of this
pre-defined (or standardised) shock over time to get an understanding of how the risk profile of
the bank has developed.
●
Scenario analysis: Scenario analyses are used to assess an integral impact of historical,
statistical and/or hypothetical circumstances on the financial position of ING. These stress tests
often build on a qualitative scenario narrative and reflect risk topics that are deemed relevant
for ING given, for example, its business model. Scenarios can be derived from historical
realisations, but also reflect e.g. potential macroeconomic, geopolitical or climate risk related
events. These scenarios can be used for one-off analyses. They can also be translated into a set
of regular or standardised stress tests that are assessed on a quarterly basis.
●
Reverse stress testing: The purpose of reverse stress testing is to identify scenarios that could
lead to a pre-defined outcome. This could for example be a pre-defined solvency level. The
added value of reverse stress testing is to explore risk drivers and stress scenarios outside the
existing range.
The outcomes of solvency stress test analyses are taken into account in capital planning, but also for
setting risk appetite statements and the capital management buffer.
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Contingency and Recovery Planning
Contingent capital events are unexpected situations or business conditions that may increase the risk
with respect to ING’s capital position. These events may be ING-specific, or arise from external factors.
The Contingency Capital and Funding Plan (CCFP) sets out the organisation and actions in case of
contingency events. The CCFP has a suite of monitoring metrics that are aligned with the risk appetite
statements that are in place for managing ING’s capital, liquidity and funding position. The Recovery
Plan is designed by ING to detect and act upon possible major and unforeseen deterioration of its
solvency position in a timely fashion. This plan has integrated several risk appetite statements to allow
timely identification of possible stress on the company. Incorporating risk appetite statements into
both plans ensures a seamless continuum between the ING’s business-as-usual management and its
contingency or recovery management.
Assessing capital adequacy: Capital Adequacy Statement (CAS)
The CAS is ING Group’s quarterly assessment of its capital adequacy and takes into account different
elements with respect to its capital position. The degree to which ING’s capital position is considered
adequate depends on a variety of internal and external drivers:
●
Current supervisory requirements and (expected) requirements going forward;
●
Current internal requirements and (expected) requirements going forward;
●
Coherence of the available capital with the (realisation of) strategic plans; and
●
The ability to meet internal and external requirements in the case of stressed events or should
a risk materialise.
The CAS assesses the adequacy of ING’s capital position in relation to above-mentioned drivers and
states the extent to which the capital position consequently is considered as adequate. On a quarterly
basis the CAS document is prepared. Additionally each year, the EB/MBB signs and provides a
comprehensive assessment of ING’s capital adequacy, supported by the ICAAP outcomes, in the form
of a Capital Adequacy Statement.
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Credit risk
Introduction
Credit risk is the risk of loss from the default and/or credit rating deterioration of clients. Credit risks
arise in ING's lending, financial markets and investment activities. The credit risk section provides
information on how ING measures, monitors and manages credit risk and gives an insight into the
portfolio from a credit risk perspective.
Governance (*)
ING’s credit risk strategy is to maintain an internationally diversified loan and bond portfolio, while
avoiding large risk concentrations. The emphasis is on managing business developments within the
business lines by means of a top-down risk appetite framework, which sets concentration limits for
countries, individual clients, sectors, products, secondary risk (collateral/guarantees) and investment
activities. The aim is to support relationship-banking activities, while maintaining internal risk/reward
guidelines and controls.
ING has organised support functions at two levels: Tier 1, operational unit level, and Tier 2, head office
level. Credit risk is a Tier 1 level risk function within ING and is part of the second line of defence. It is
managed by regional and/or business unit CROs. The CRO Wholesale Banking (WB), CRO Challengers &
Growth Markets (C&G), CRO Netherlands, CRO Belux and CRO Germany focus on specific risks in the
geographical and/or business areas of their responsibilities. The Financial Risk department is a Tier 2
level risk function, which is responsible for the consolidated risk appetite setting, risk frameworks,
model development and policies.
The credit risk function encompasses the following activities:
◾
Measuring, monitoring and managing credit risks in the bank’s portfolio, including the
measures taken since the start of the Covid-19 crisis;
◾
Challenging and approving new and modified transactions and borrower reviews;
◾
Managing the levels of provisioning and risk costs, and advising on impairments; and
◾
Providing consistent credit risk policies, systems and tools to manage the credit lifecycle of all
activities.
Credit risk categories (*)
Credit risk uses the following risk categories to differentiate between the different types of credit risk:
◾
Lending risk:
principal, interest or fees on a loan when they are due, or on demand for letters of credit (LCs)
and guarantees provided by ING.
◾
Investment risk
: is the credit default and risk rating migration risk that is associated with ING’s
investments in bonds, commercial paper, equities, securitisations, and other similar publicly
traded securities. This can be viewed as the potential loss that ING may incur from holding a
position in underlying securities whose issuer's credit quality deteriorates or defaults. All
investments in the banking book are classified in the investment risk category. The primary
purpose of ING’s investments in the banking books is for liquidity management.
◾
Money market risk
: arises when ING places short-term deposits with a counterparty in order to
manage excess liquidity. In the event of a counterparty default, ING may lose the deposit
placed.
◾
Pre-settlement risk
: arises when a client defaults on a transaction before settlement and ING
must replace the contract by a trade with another counterparty at the then prevailing (possibly
unfavourable) market price. This credit risk category is associated with derivatives transactions
(exchange-traded derivatives, over-the-counter (OTC) derivatives and securities financing
transactions).
◾
Settlement risk
: arises when there is an exchange of value (funds or instruments) and receipt
from its counterparty is not verified or expected until after ING has given irrevocable
instructions to pay or has paid or delivered its side of the trade. The risk is that ING delivers but
does not receive delivery from its counterparty. ING manages settlement risk in the same way
as other credit risks by setting a risk limit per client. Due to the short-term nature (typically one
day), ING does not hold provisions for settlement risk. Although a relatively low risk, ING
increasingly uses DVP (delivery versus payment) and safe settlement payment techniques to
reduce settlement risk.
For the reconciliation between credit risk outstandings categories and financial assets, refer to the
table below:
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66
Reconciliation between credit risk categories and financial position (*)
Credit risk categories
Mainly relates to:
Notes in the financial statements
Lending risk
-Cash and balances with central banks
Note
2
Cash and balances with central banks
-Loans and advances to banks
Note
3
Loans and advances to banks
-Loans and advances to customers
Note
4
Financial assets at fair value through profit or loss
-Off-balance sheet items e.g. obligations under financial guarantees and letters of credit and undrawn
Note
5
Financial assets at fair value through other comprehensive income
credit facilities
Note
7
Loans and advances to customers
Note
42
Contingent liabilities and commitments
Investment risk
-Debt securities
Note
4
Financial assets at fair value through profit or loss
-Equity securities
Note
5
Financial assets at fair value through other comprehensive income
Note
6
Securities at amortised cost
Money market risk
-Cash and balances with central banks
Note
2
Cash and balances with central banks
-Loans and advances to banks
Note
3
Loans and advances to banks
-Loans and advances to customers
Note
7
Loans and advances to customers
Pre-settlement risk
-Financial assets at fair value through profit or loss (trading assets and non-trading derivatives)
Note
4
Financial assets at fair value through profit or loss
-Financial liabilities at fair value through profit or loss (trading assets and non-trading derivatives)
Note
14
Financial liabilities at fair value through profit or loss
-Securities financing
Note
41
Offsetting financial assets and liabilities
Settlement risk
-Financial assets at fair value through profit or loss (trading assets and non-trading derivatives)
Note
4
Financial assets at fair value through profit or loss
-Financial liabilities at fair value through profit or loss (trading assets and non-trading derivatives)
Note
11
Other assets
-Amounts to be settled
Note
14
Financial liabilities at fair value through profit or loss
Note
16
Other liabilities
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67
Credit risk appetite and concentration risk framework (*)
The credit risk appetite and concentration risk framework is designed to prevent undesired high levels
of credit risk and credit concentrations within various levels of the ING portfolio. It is derived from the
concepts of boundaries and instruments as described in the ING Risk Appetite Framework.
Credit risk appetite is the maximum level of credit risk ING is willing to accept for growth and value
creation. The credit risk appetite is linked to the overall bank-wide risk appetite framework. The credit
risk appetite is expressed in quantitative and qualitative measures. Having a credit risk appetite
provides:
◾
Clarity about the credit risks that ING is prepared to assume, target setting and prudent risk
management;
◾
Consistent communication to different stakeholders;
◾
Guidelines on how to align reporting and monitoring tools with the organisational structure and
strategy; and
◾
Alignment of business strategies and key performance indicators of business units with ING’s
credit risk appetite through dynamic planning.
Credit risk appetite is set at different levels within ING and specifies the scope and focus of the credit
risk which ING takes, and the composition of the credit portfolio, including its concentration and
diversification objectives in relation to business lines, sectors and products. The introduction of climate
risk via sectors is a first important step with the objective to promote ING’s Terra approach, focusing on
sectors’ necessary pathway to contribute to a low-carbon world and also mitigate potential climate
and environmental risks to ING and its business environment.
The credit risk appetite and concentration risk framework is composed of:
◾
Country risk concentration
: Country risk is the risk that arises due to events in a specific
country (or group of countries). In order to manage the maximum country event loss ING is
willing to accept, boundaries are approved by the SB. The estimated level is correlated to the
risk rating assigned to a given country. Actual country limits are set by means of country
instruments, which are reviewed monthly and updated when needed. For countries with
elevated levels of geopolitical or severe economic cycle risk, monitoring is performed on a more
frequent basis with strict pipeline and exposure management.
◾
Single name and industry sector concentration
: ING has established a credit concentration
risk framework to identify, measure and monitor single name concentration and industry
sector concentration (systemic risk). The same concept of boundaries and instruments is
applicable.
◾
Product and secondary risk concentration
: ING has established a concentration framework to
identify, measure and monitor product concentration and secondary risk.
◾
Scenarios and stress tests
: Stress testing evaluates ING’s financial stability under severe, but
plausible stress scenarios, and supports decision-making that assures ING remains a financially
going concern even after a severe event occurs. In addition to the bank-wide stress testing
framework described above, ING performs sensitivity analyses regularly to assess portfolio risks
and concentrations. These sensitivity analyses are consistent with the stress scenario
established in the Group-wide credit risk appetite framework. In light of Covid-19 ING
incorporated pandemic specific scenarios for the stress tests to gain insight into the potential
effects of Covid-19 on the credit risk in the portfolios.
◾
Product approvals
: The product approval and review process (PARP) assesses and manages
risks associated with the introduction of new or modified products. It ensures that sound due
diligence is performed by relevant stakeholders and the relevant risks (credit, operational,
compliance, etc.) are addressed appropriately.
◾
Strategy and risk appetite papers
: These are detailed analyses of defined products and/or
industries. They identify the major risk drivers and mitigants, the internal business mandate,
and propose the risk (including business) parameters – and potentially the maximum product
and/or portfolio limit - to support that business. A strategy and risk appetite paper is always
prepared by the front office responsible for the internal business mandate and requires an
approval from the designated approval authority. Strategy and risk appetite papers may also
have geographical and/or business limitations (e.g. local vs. global).
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◾
Credit approval process
: The purpose of the credit approval process is that individual
transactions and the risk associated with these transactions are assessed on a name-by-name
basis. For each type of client there is a dedicated process with credit risk managers specialised
along the business lines of ING, including the use of automated decision-making in certain
cases. The credit approval process is supported by a risk rating system and exposure
monitoring system. Risk ratings are used to indicate a client’s creditworthiness which translates
into a probability of default. This is used as input to determine the maximum risk appetite that
ING has for a given type of client (reference benchmark). The determination of the delegated
authority (the amount that can be approved at various levels of the organisation) is a function
of the risk rating of the client and ING’s credit risk exposure on the client. Where necessary,
underwriting standards have been reviewed and refined to limit the credit risk to portfolios
particularly sensitive to Covid-19.
Credit risk models (*)
Within ING, internal Basel-compliant models are used to determine probability of default (PD),
exposure at default (EAD) and loss given default (LGD) for regulatory and economic capital purposes.
These models also form the basis of ING’s IFRS 9 loan loss provisioning (see ‘IFRS 9 models’ below).
Bank-wide, ING has implemented approximately 100 credit risk models, for regulatory capital,
economic capital and loan loss provisioning purposes.
There are two main types of PD, EAD and LGD models used throughout the Bank:
◾
Statistical models
They are characterised by sufficient data points to facilitate meaningful statistical estimation
of the model parameters. The model parameters are estimated with statistical techniques
based on the data set available;
◾
Hybrid models
experience of experts from risk management and front-office staff, literature from rating
agencies, supervisors and academics. These models are especially appropriate for ‘low default
portfolios’, where limited historical defaults exist.
Credit risk rating process (*)
In principle, all risk ratings are based on a Risk Rating (PD) Model that complies with the minimum
requirements detailed in CRR/CRDIV, ECB Supervisory Rules and European Banking Authority (EBA)
guidelines. This concerns all borrower types and segments.
ING’s PD rating models are based on a 1-22 scale (1=highest rating; 22=lowest rating) referred to as the
‘Master scale’, which roughly corresponds to the rating grades that are assigned by external rating
agencies, such as Standard & Poor’s, Moody’s and Fitch. For example, an ING rating of 1 corresponds to
an S&P/Fitch rating of AAA and a Moody’s rating of Aaa; an ING rating of 2 corresponds to an S&P/Fitch
rating of AA+ and a Moody’s rating of Aa1, and so on.
The 22 grades are composed of the following categories:
◾
Investment grade (risk rating 1-10);
◾
Non-investment grade (risk rating 11-17);
◾
Sub-standard (risk rating 18-19); and
◾
Non-performing (risk rating 20-22).
The first three categories (1-19) are risk ratings for performing loans. The ratings are calculated in IT
systems with internally developed models based on manually or automatically fed data. Under certain
conditions, the outcome of a manually fed model can be challenged through a rating appeal process.
Risk ratings for non-performing loans (NPL) (20-22) are set by the global or regional credit restructuring
department. For securitisation portfolios, the external ratings of the tranche in which ING has invested
are leading indicators.
Risk ratings assigned to clients are reviewed at least annually, with the performance of the underlying
models monitored regularly. Some of these models are global in nature, such as those for large
corporates, commercial banks, insurance companies, central governments, local governments, funds,
fund managers, project finance and leveraged companies. Other models are more regional- or
country-specific: there are PD models for small medium enterprise (SME) companies in Central Europe,
the Netherlands, Belgium, Luxembourg, as well as residential mortgage and consumer loan models in
the various retail markets.
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ING Bank Annual Report 2021
69
Rating models for retail clients are predominantly statistically driven and automated, such that ratings
can be updated on a monthly basis. Rating models for large corporates, institutions and banks include
both statistical characteristics and manual input, with the ratings being manually updated at least
annually. Since 2020, portfolios and clients most at risk of being affected by the pandemic were
subject to more frequent (e.g. quarterly) reviews.
After the introduction of IFRS9 in 2018 and introduction of the new definition of default (DoD) in 2020,
we’re now updating the credit models.
Credit risk systems
Credit risk tools and data standards
The acceptance, maintenance, measurement, management and reporting of credit risks at all levels of
ING is executed through single, common credit risk data standards using shared credit risk tools that
support standardised and transparent credit risk practices. ING has chosen to develop credit risk tools
centrally with the philosophy of using a single source of data in an integrated way. This includes
applying a combination of the ING policy, the regulatory environment in which we operate and the
daily processes that are active throughout the Group. Disciplined application in these three areas is
essential for achieving high data quality standards.
The Credit Risk Control Unit (CRCU), which is part of the Financial Risk department, ensures compliant
and continuously improving rating systems.
Credit risk portfolio (*)
ING’s credit exposure is mainly related to lending to individuals and businesses followed by
investments in bonds and securitised assets, and money market. Loans to individuals are mainly
mortgage loans secured by residential property. Loans (including guarantees issued) to businesses are
often collateralised, but may be unsecured based on the internal analysis of the borrower’s
creditworthiness. Bonds in the investment portfolio are generally unsecured, but predominantly
consist of bonds issued by central governments and EU and/or OECD based financial institutions.
Secured bonds, such as mortgage-backed securities and asset-backed securities are secured by the
underlying diversified pool of assets (commercial or residential mortgages, car loans and/or other
assets) held by the securities issuer. For money market, exposure is mainly deposits to Central Banks.
The last major credit risk source involves pre-settlement exposures which arise from trading activities,
including derivatives, repurchase transactions and securities lending/borrowing transactions. This is
also commonly referred to as counterparty credit risk.
>
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Portfolio analysis per business line (*)
Outstandings per line of business (*)
1, 2, 3
in EUR million
Wholesale Banking
Retail Benelux
Retail Challengers &
Growth Markets
Corporate Line
Total
Rating class
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Investment grade
1 (AAA)
81,615
74,735
331
357
27,089
34,782
2,363
2,375
111,398
112,248
2-4 (AA)
56,982
63,239
5,863
6,119
41,646
38,586
15
18
104,506
107,961
5-7 (A)
72,052
66,537
28,456
23,143
59,040
54,381
482
431
160,029
144,491
8-10 (BBB)
124,622
104,987
125,469
120,714
57,394
53,346
2,502
2,400
309,986
281,447
Non-Investment grade
11-13 (BB)
61,996
65,832
60,296
61,797
42,554
39,823
37
164,883
167,451
14-16 (B)
16,699
20,925
14,560
17,759
10,800
10,299
42,059
48,983
17 (CCC)
1,712
1,822
2,158
2,543
731
844
178
128
4,779
5,338
Substandard grade
18 (CC)
865
1,690
904
1,170
477
514
2,245
3,374
19 (C)
126
518
1,162
1,306
451
600
1,739
2,423
Non-performing loans
20-22 (D)
3,937
4,415
5,035
5,614
3,153
3,203
295
12,124
13,526
Total
420,606
404,699
244,232
240,520
243,334
236,377
5,577
5,647
913,749
887,243
Industry
Private Individuals
30
25
161,125
160,884
184,810
172,390
345,965
333,299
Central Banks
83,878
84,697
22,573
27,921
643
632
107,094
113,250
Real Estate
26,472
26,271
22,691
24,064
3,536
3,297
52,699
53,632
Commercial Banks
39,582
42,088
230
201
6,390
8,211
3,006
3,092
49,208
53,591
Central Governments
40,530
43,753
1,730
1,691
3,686
4,482
1,696
1,697
47,642
51,623
Natural Resources
51,937
43,905
1,225
1,090
692
553
53,855
45,549
Non-Bank Financial Institutions
46,597
40,581
1,473
1,488
395
323
124
164
48,590
42,556
Transportation & Logistics
24,123
24,692
4,206
3,571
1,269
696
29,597
28,960
Food, Beverages & Personal Care
14,003
14,706
6,926
6,162
2,411
1,975
23,340
22,843
Services
9,449
8,878
11,290
11,302
974
808
30
4
21,743
20,993
Lower Public Administration
6,163
5,698
5,079
4,756
8,029
9,010
19,271
19,464
Utilities
22,452
17,062
1,370
1,358
113
136
23,935
18,556
General Industries
11,487
10,943
5,554
4,346
3,086
2,359
20,127
17,648
Other
43,903
41,398
21,333
19,607
5,369
4,214
77
58
70,682
65,279
Total
420,606
404,699
244,232
240,520
243,334
236,377
5,577
5,647
913,749
887,243
>
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71
Outstandings per line of business (*) - continued
1, 2, 3
in EUR million
Wholesale Banking
Retail Benelux
Retail Challengers &
Growth Markets
Corporate Line
Total
Region
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Europe
Netherlands
74,175
72,236
152,597
149,686
173
645
2,826
3,047
229,771
225,614
Belgium
32,205
36,517
84,748
84,104
948
642
19
19
117,919
121,282
Germany
22,669
21,102
508
542
118,734
119,032
46
45
141,956
140,722
Poland
15,454
18,296
45
55
26,560
20,750
4
42,063
39,101
Spain
10,130
9,157
83
66
27,294
25,255
35
35
37,542
34,512
United Kingdom
28,193
30,582
187
193
109
170
78
73
28,567
31,018
Luxemburg
26,632
20,080
4,769
4,373
468
864
18
13
31,887
25,330
France
18,786
15,651
606
618
7,123
6,447
3
6
26,517
22,721
Rest of Europe
64,028
61,213
364
525
17,826
20,573
16
13
82,233
82,324
America
71,471
64,688
186
210
1,559
1,535
35
20
73,251
66,454
Asia
45,439
44,961
91
91
132
166
2,498
2,376
48,159
47,594
Australia
8,957
8,134
18
22
42,405
40,294
1
51,382
48,451
Africa
2,467
2,082
31
36
4
3
2,501
2,121
Total
420,606
404,699
244,232
240,520
243,334
236,377
5,577
5,647
913,749
887,243
1 Based on credit risk measurement contained in lending, pre-settlement, money market and investment activities.
2 Based on the total amount of credit risk in the respective column using ING’s internal credit risk measurement methodologies. Economic sectors (industry) below 2% are not shown separately but grouped in Other.
3 Geographical areas are based on country of residence, except for private individuals for which the geographical areas are based on the primary country of risk.
Overall portfolio (*)
During 2021, ING’s portfolio size increased by €26.5 billion (+ 2.99%) to €913.7 billion outstandings. The
net volume growth was concentrated in the Lending risk categories in Wholesale Banking and growth
in exposures to Private Individuals.
Foreign exchange rate changes had a positive impact on portfolio growth and increased total
outstanding by €11.5 billion. This was driven by the appreciation of the US Dollar (+8.3%), the British
Pound (+7.0%), and the Australian Dollar (+1.8%) partly offset by the depreciation of the Turkish Lira (-
40.2%) against the Euro.
Rating distribution (*)
Due to the Covid-19 pandemic, governments and banks introduced numerous measures to support
individuals and businesses financially. The overall rating distribution in the portfolio has not been
materially affected by Covid-19. For details on portfolios most sensitive to Covid-19 see the next
paragraph ‘Covid-19 sensitive sectors’.
Overall, the rating class concentration slightly improved in 2021. The share of investment grade rating
classes increased from 72.8% to 75.0%, while the share of non-investment grade decreased, from
25.0% to 23.2%. Sub-standard grade outstandings decreased from 0.7% to 0.4% of the total portfolio,
whereas non-performing loans decreased from 1.5% to 1.3%.
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With respect to the rating distribution within the business lines, in Wholesale Banking investment-
grade rated assets increased, mainly driven by Natural Resources, Non-Bank Financial Institutions and
Utilities, while for non-investment grade assets the outstandings decreased, across multiple sectors.
The rating distribution for Retail Benelux improved mostly because of Dutch residential mortgages,
shifting from rating class BB to BBB and A, driven by the continuing increase in the house price index
and improving Loan to Values. The rating distribution of residential mortgages in Belgium also
improved, reducing concentration in B ratings and lower, while increasing in BBB and BB.
In Retail Challengers & Growth Markets, the distribution across rating classes remained rather stable in
2021. Overall share of investment grade decreased from 76.6% to 76.1%. The increase in non-
investment grade is explained primarily by the portfolio in Poland.
Industry (*)
In line with our objective to give stakeholders insight into the portfolio, we present the business lending
portfolio per industry breakdown in accordance with the NAICS definition.
The industry composition within Retail is concentrated in private individuals with 66% for Retail Benelux
and 76% for Retail Challengers & Growth. In Market Leaders, the overall volumes remained stable
throughout 2021 in the Netherlands and in Belgium. In C&G, the increase in volume is in Private
Individuals, primarily in Germany, and to a lesser extent in Poland, Spain and Australia.
Within Wholesale Banking, an increase in exposures is noted in Natural Resources of €8.0 billion,
notably in Switzerland and in Belux (also as a consequence of higher commodity prices, i.e. financing of
same volume requires higher value LC's), in Non-Bank Financial Institutions and in Utilities,
compensated to a certain extent by a decrease in Central Governments and Commercial Banks.
Covid-19 sensitive sectors (*)
ING has assessed the elevated risk of our portfolio as a result of the continued impact of the Covid-19
pandemic and the related measures and restrictions. The following sectors are considered to be most
impacted (directly or indirectly) by the Covid-19 pandemic, resulting in management adjustments to
the model-based Loan Loss Provisions. Refer also to the explanation of the economic sector-based
management adjustment in the “management adjustments” section.
Aviation (Transportation & Logistics):
total portfolio). In terms of rating, the portfolio improved. Main concentration remains in BB and B
rating classes. The sub-standard grade outstanding decreased to 0.3% from 1.2% of the Aviation
portfolio, and the non-performing grade decreased to 1.9% from 4.5%.
Hospitality & Leisure (Services and Food, Beverages & Personal Care):
exposure decreased by €0.6
billion to €5.4 billion outstanding (0.59% of total portfolio). Of the total portfolio, 58.1% is in non-
Investment grade. Sub-standard grade decreased to 9.0% from 9.7%, whereas non-performing loans
increased to 7.4% from 6.2%.
Non-food retail (Other):
Outstanding in investment grade improved from 42.4% to 43.6%, non-investment grade decreased
from 53.1% to 50.8%. Sub-standard grade increased to 1.9% from 1.0%, while the non-performing
loans remained flat at 3.6%.
Real Estate
: credit outstandings slightly decreased and amounted to €52.7 billion as at 31 December
2021 (5.8% of total portfolio) from €53.6 billion (6.0% of total portfolio) in 2020. Rating distribution
improved with concentrations increasing in Investment grade and reducing in Speculative grade. The
NPL grade increased to 1.3% from 1.2% in 2020, while Substandard grade improved to 0.5% from
1.0%.
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Outstandings by economic sectors and geographical area (*)
in EUR million
Region
Total
Industry
Netherlands
Belgium
Germany
Poland
Spain
United
Kingdom
Luxemburg
France
Rest of
Europe
America
Asia
Australia
Africa
2021
Private Individuals
113,846
42,961
95,583
14,397
23,895
157
3,388
3,115
13,215
167
155
35,058
27
345,965
Central Banks
46,902
18,253
17,811
112
3,027
2,853
8,569
1,039
4,485
2,856
1,168
18
107,094
Real Estate
17,426
10,011
1,520
2,357
1,528
436
4,201
3,254
3,461
3,521
935
4,045
4
52,699
Commercial Banks
1,378
318
3,887
707
392
4,156
3,205
5,520
6,353
7,089
13,526
2,265
413
49,208
Central Governments
4,911
7,396
1,179
7,473
4,417
67
203
2,065
7,695
10,927
299
533
477
47,642
Natural Resources
3,734
1,180
1,208
722
291
4,487
2,497
405
15,471
9,473
12,593
1,013
780
53,855
Non-Bank Financial Institutions
3,043
921
3,146
1,718
72
7,764
4,798
1,790
3,947
17,772
3,209
411
48,590
Transportation & Logistics
4,572
2,209
506
1,177
723
1,760
582
982
6,837
3,410
5,682
645
514
29,597
Food, Beverages & Personal Care
6,581
2,869
616
2,146
489
711
1,600
1,232
2,580
3,131
1,140
235
12
23,340
Services
4,615
9,115
1,105
866
119
523
450
1,470
861
1,539
479
565
36
21,743
Lower Public Administration
343
5,158
5,787
636
296
2,732
467
1,197
46
2,608
19,271
Utilities
1,545
1,213
3,024
822
1,270
2,980
397
1,433
4,202
4,106
1,355
1,368
220
23,935
General Industries
5,389
2,891
1,011
2,612
381
395
532
271
3,363
2,116
1,151
15
20,127
Other
15,485
13,424
5,573
6,319
940
2,277
1,168
1,210
9,297
8,803
4,732
1,454
70,682
Total
229,771
117,919
141,956
42,063
37,542
28,567
31,887
26,517
82,233
73,251
48,159
51,382
2,501
913,749
Rating class
Investment grade
180,787
78,195
119,311
26,856
29,522
22,820
26,150
20,622
52,875
53,725
36,777
38,200
79
685,920
Non-Investment grade
45,530
35,600
21,250
14,148
7,647
5,234
5,568
5,774
27,993
18,184
10,534
11,998
2,259
211,721
Sub-standard grade
1,230
868
390
290
89
56
81
2
308
203
191
217
58
3,985
Non-performing loans
2,224
3,256
1,006
768
284
458
87
119
1,056
1,139
656
966
105
12,124
Total
229,771
117,919
141,956
42,063
37,542
28,567
31,887
26,517
82,233
73,251
48,159
51,382
2,501
913,749
1 Geographical areas are based on country of residence, except for private individuals for which the geographical areas are based on the primary country of risk.
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74
Outstandings by economic sectors and geographical area (*)
in EUR million
Region
Total
Industry
Netherlands
Belgium
Germany
Poland
Spain
United
Kingdom
Luxemburg
France
Rest of
Europe
America
Asia
Australia
Africa
2020
Private Individuals
114,219
42,443
88,178
12,216
21,775
186
3,203
2,644
14,717
169
173
33,346
29
333,299
Central Banks
43,615
22,840
23,601
31
3,058
6,247
3,855
811
3,655
0
4,090
1,424
23
113,250
Real Estate
18,349
10,540
1,374
2,478
1,460
313
3,846
3,511
3,839
2,889
828
4,197
7
53,632
Commercial Banks
1,722
265
4,546
607
468
6,931
3,478
6,218
6,926
7,434
13,222
1,476
298
53,591
Central Governments
6,636
6,762
2,010
8,956
4,435
55
175
2,130
10,020
8,949
344
712
439
51,623
Natural Resources
2,830
1,214
1,102
626
286
3,435
959
316
13,542
8,193
11,442
821
782
45,549
Non-Bank Financial Institutions
2,743
940
3,301
1,502
126
6,348
4,054
1,547
4,096
14,435
3,089
376
0
42,556
Transportation & Logistics
4,162
2,016
1,503
1,018
539
1,934
641
782
6,229
3,628
5,468
743
295
28,960
Food, Beverages & Personal Care
6,623
2,783
306
1,932
515
782
1,663
789
2,202
3,975
1,072
191
10
22,843
Services
4,281
9,307
584
783
159
520
454
411
1,054
2,314
612
515
0
20,993
Lower Public Administration
432
4,875
7,526
721
0
583
1,693
528
1,026
30
2,050
0
19,464
Utilities
1,731
1,277
1,815
618
610
2,105
583
402
2,975
3,196
1,716
1,292
237
18,556
General Industries
4,176
2,802
1,030
2,134
252
234
266
194
3,014
2,477
1,053
16
0
17,648
Other
14,094
13,218
3,843
5,478
829
1,926
1,572
1,273
9,527
7,769
4,456
1,293
0
65,279
Total
225,614
121,282
140,722
39,101
34,512
31,018
25,330
22,721
82,324
66,454
47,594
48,451
2,121
887,243
Rating class
Investment grade
169,193
78,294
118,082
26,045
26,622
25,924
19,528
16,688
51,233
43,987
35,879
34,545
127
646,147
Non-Investment grade
51,818
38,113
21,185
11,979
7,468
4,837
5,530
5,870
29,051
20,758
10,696
12,651
1,816
221,772
Sub-standard grade
1,794
1,159
516
215
102
101
191
37
679
476
94
349
83
5,798
Non-performing loans
2,808
3,715
939
862
320
156
81
126
1,360
1,232
925
905
95
13,526
Total
225,614
121,282
140,722
39,101
34,512
31,018
25,330
22,721
82,324
66,454
47,594
48,451
2,121
887,243
1 Geographical areas are based on country of residence, except for private individuals for which the geographical areas are based on the primary country of risk.
Portfolio analysis per geographical area (*)
The portfolio analysis per geographical area re-emphasises the international distribution of ING’s credit
portfolio. The share of the Netherlands in the overall portfolio decreased to 25.1% (25.4%).
The most noticeable trend in the Netherlands was the increase in exposure with Central Banks.
Outstandings to private individuals are stable at 62% (63%) of total outstandings (excl. Central Banks).
In Belgium no substantial moves were observed in the portfolio, apart from a decrease in Central Banks
(-€4.6 billion).
In Market Leaders, in terms of rating distribution, the share of investment grade increased in both the
Netherlands and Belgium. Apart from the increase in investment grade assets, the outstanding with
non-investment grade reduced in 2021 for both Netherlands and Belgium. Also, for both countries, the
share of sub-standard grade and NPL decreased in 2021. For sub-standard, from 0.8% to 0.5% and
from 1.0% to 0.7%. For non-performing loans (NPL), from 1.2% to 1.0% and from 3.1% to 2.8%
respectively.
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In Challenger & Growth Markets, ING has a strong market position in residential mortgages in
Germany, Poland and Spain. Residential mortgage exposures increased in these countries. In Germany,
an increase in mortgages is compensated by lower outstandings with the Central bank.
The top five countries within Rest of Europe based on outstanding were: Italy (€16.7 billion),
Switzerland (€11.1 billion), Romania (€9.5 billion), Turkey (€8.3 billion) and the Russian Federation (€4.8
billion). Outstandings in Rest of Europe were impacted by the sale of the retail portfolio in Austria (-€1.3
billion), and Turkey (FX impact), compensated by increased outstandings in Romania and Ireland.
In Europe, outside the Benelux, rating distribution in most countries improved. The share of non-
investment grade decreased in most countries, apart from Poland (mostly in Natural Resources and in
General Industries), and the United Kingdom (increase in Natural Resources). In the UK, a noticeable
increase in the share of NPL to 1.6% (from 0.5%), was due mainly to the Food, Beverages and Personal
Care sector impacted by a single file, whereas in the other European countries, share of NPL decreased
or remained flat.
The increase in exposure in the Americas was mainly driven by FX impact. In Australia, outstanding
increased, mostly driven by mortgages (Private individuals).
In terms of rating distribution for America region, an increase in investment grade to 73.0% (from
66.3%), non-investment grade decreased to 25.1% from 31.1%. Sub-standard grade decreased to
0.3%, while NPL slightly improved to 1.5% (from 1.8%).
Australia’s rating distribution improved with a shift of outstanding from non-investment to investment
grade.
Credit risk mitigation (*)
ING uses various credit risk mitigation techniques and instruments to mitigate the credit risk associated
with an exposure and to reduce the losses incurred subsequent to a default by a customer. The most
common terminology used in ING for credit risk protection is ‘cover’. While a cover may be an
important mitigant of credit risk and an alternative source of repayment, generally it is ING’s practice
to lend on the basis of the customer’s creditworthiness rather than exclusively relying on the value of
the cover.
Cover forms (*)
Within ING, there are two distinct forms of covers. First, where the asset has been pledged to ING as
collateral or security, ING has the right to liquidate it should the customer be unable to fulfil its financial
obligation. As such, the proceeds can be applied towards full or partial compensation of the customer's
outstanding exposure. This may be tangible (such as cash, securities, receivables, inventory, plant and
machinery, and mortgages on real estate properties) or intangible (such as patents, trademarks,
contract rights and licences). Second, where there is a third-party obligation, indemnification or
undertaking (either by contract and/or by law), ING has the right to claim from that third party an
amount if the customer fails on its obligations. The most common examples are guarantees (such as
parent guarantees and export credit insurances) or third-party pledged mortgages.
Cover valuation methodology (*)
General guidelines for cover valuation are established to ensure consistent application within ING.
These also require that the value of the cover is monitored on a regular basis. Covers are revalued
periodically and whenever there is reason to believe that the market is subject to significant changes in
conditions. The frequency of monitoring and revaluation depends on the type of cover.
The valuation method also depends on the type of covers. For asset collateral, the valuation sources
can be the customer’s balance sheet (e.g. inventory, machinery and equipment), nominal value (e.g.
cash and receivables), market value (e.g. securities and commodities), independent valuations (e.g.
commercial real estate) and market indices (e.g. residential real estate). For third-party obligations, the
valuation is based on the value that is attributed to the contract between ING and that third party.
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76
Where collateral values are used in the calculation of stage 3 individual Loan Loss provisions, haircuts
may be applied to the valuation in specific circumstances, to sufficiently include all relevant factors
impacting the future cash flows. ING increased the haircuts applied to collateral values used in stage 3
individual provisions as at 31 December 2021 to reflect the increased risk of inflated asset prices in
certain sectors of the economy. The haircut is applied on real estate, shipping and aviation collateral
values used in the calculation of the loss-given-default in recovery scenarios. The haircut reflects the
risks of adverse price developments between the moment of valuation of an asset and the actual
settlement/cash receipt.
Cover values (*)
This section provides insight into the types of cover and the extent to which exposures benefit from
collateral or guarantees. The disclosure differentiates between risk categories (lending, investment,
money market and pre-settlement). The most relevant types of cover include mortgages, financial
collateral (cash and securities) and guarantees. ING obtains cover that is eligible for credit risk
mitigation under CRR/CRDIV, as well as cover that is not eligible. Collateral covering financial market
transactions is valued on a daily basis, and as such not included in the following tables. To mitigate the
credit risk arising from Financial Markets transactions, the bank enters into legal agreements governing
the exchange of financial collateral (high-quality government bonds and cash).
The cover values are presented for the total portfolio of ING, both the performing and non-performing
portfolio. Our definition of non-performing is explained in detail in ‘Credit restructuring’ (below). For
additional insight, a breakdown of ING’s portfolio by industry and geography is provided.
Exposures are categorised into different value-to-loan (VTL) buckets that give insight in the level of
collateralisation of ING’s portfolio. VTL is calculated as the cover value divided by the outstandings at
the balance sheet date. The cover values are indexed where appropriate and exclude any cost of
liquidation. Covers can either be valid for all or some of a borrower’s exposures or particular
outstandings, the latter being the most common. For the purpose of aggregation, over-collateralisation
is ignored in the total overview and VTL coverage of more than 100% is reported as fully covered. For
VTL coverage in the tables for mortgages, consumer lending and business lending, each cover is
subsequently assigned to one of the six defined VTL buckets: no cover, >0% to 25%, >25% to 50%,
>50% to 75%, >75% to <100%, and ≥ 100%.
The next table gives an overview of the collateralisation of the ING’s total portfolio.
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77
Cover values including guarantees received (*)
in EUR million
Cover type
Value to Loan
2021
Outstandings
Mortgages
Financial
Collateral
Guarantees
Other covers
No Cover
Partially covered
Fully covered
Consumer Lending
344,188
690,752
6,533
25,688
40,618
6.3%
7.6%
86.1%
Business Lending
413,670
160,694
23,454
112,095
332,989
44.2%
20.2%
35.5%
Investment and Money Market
112,360
43
63
1,100
167
98.9%
0.8%
0.3%
Total Lending, Investment and Money Market
870,218
851,490
30,050
138,882
373,774
36.0%
12.8%
51.2%
Pre-settlement
43,531
Total Bank
913,749
Cover values including guarantees received (*)
in EUR million
Cover type
Value to Loan
2020
Outstandings
Mortgages
Financial
Collateral
Guarantees
Other
No Cover
Partially covered
Fully covered
Consumer Lending
331,288
609,967
6,208
26,117
38,438
6.7%
7.5%
85.8%
Business Lending
388,060
161,474
20,431
94,913
302,357
43.1%
21.2%
35.7%
Investment and Money Market
121,809
95
121
782
245
99.2%
0.1%
0.7%
Total Lending, Investment and Money Market
841,157
771,536
26,761
121,811
341,039
36.9%
12.7%
50.4%
Pre-settlement
46,086
Total Bank
887,243
In 2021, the collateralisation level of the portfolio increased as a result of an increase in the cover value
in lending to private individuals. Excluding the pre-settlement portfolio, 51.2% of ING’s outstandings
were fully collateralised in 2021 (2020: 50.4%). Since investments traditionally do not require covers,
the percentage for ‘no covers’ in this portfolio is above 90%. However, 99% of the investment
outstanding is investment grade. Improved economic conditions in ING’s main markets contributed to
improved collateral valuations, observed in consumer lending. Relative to the overall developments in
the housing markets and the impact on provisioning, note the paragraphs on ‘management
adjustments’ in the Loan Loss provisioning section, that were made to reflect potential impact of
higher inflation, higher rates and market uncertainty.
Consumer lending portfolio (*)
The consumer lending portfolio accounts for 37.7% (2020: 37.3%) of ING’s total outstanding, primarily
consisting of residential mortgage loans and other consumer lending loans, which mainly comprise
term loans, revolvers and personal loans to consumers. As a result, most of the collateral consists of
mortgages. The mortgage values are collected in an internal central database and in most cases
external data is used to index the market value. A significant part of ING’s residential mortgage
portfolio is in the Netherlands (35.3%), followed by Germany (26.9%), Belgium and Luxembourg
(13.2%) and Australia (10.9%).
Consumer lending portfolio – cover values (*)
The below tables show the values of different covers and the VTL split between performing and non-
performing loans.
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Cover values including guarantees received - Consumer lending portfolio (*)
in EUR million
Cover type
Value to Loan
2021
Outstandings
Mortgages
Financial
Collateral
Guarantees
Other covers
No Cover
>0% - 25%
>25%-50%
>50% - 75%
>75% - <100%
≥ 100%
Performing
Residential Mortgages (Private Individuals)
308,023
674,576
5,014
22,379
33,539
–
0.5%
7.6%
91.8%
Residential Mortgages (SME)
5,912
9,520
168
109
1,598
0.2%
0.6%
1.4%
5.4%
92.4%
Other Consumer Lending
25,537
200
1,317
3,085
4,009
79.7%
0.3%
0.1%
0.1%
0.3%
19.5%
Total Performing
339,472
684,296
6,499
25,573
39,146
6.0%
–
0.1%
0.5%
7.0%
86.3%
Non-performing
Residential Mortgages (Private Individuals)
3,336
6,149
31
97
1,270
0.4%
–
0.3%
1.0%
4.8%
93.4%
Residential Mortgages (SME)
194
302
1
6
51
0.1%
0.2%
0.7%
1.6%
7.4%
90.0%
Other Consumer Lending
1,186
5
1
12
151
92.3%
0.4%
0.2%
0.4%
0.5%
6.3%
Total Non-performing
4,716
6,456
33
115
1,472
23.5%
0.1%
0.3%
0.9%
3.8%
71.4%
Total Consumer Lending
344,188
690,752
6,533
25,688
40,618
6.3%
–
0.1%
0.5%
7.0%
86.1%
1 Consists mainly of residential mortgages to small individual business clients
Cover values including guarantees received - Consumer lending portfolio (*)
in EUR million
Cover type
Value to Loan
2020
Outstandings
Mortgages
Financial
Guarantees
Other covers
No Cover
>0% - 25%
>25%-50%
>50% - 75%
>75% - <100%
≥ 100%
Performing
Residential Mortgages (Private Individuals)
294,642
594,073
5,147
23,210
30,927
0.1%
0.7%
7.3%
92.0%
Residential Mortgages
(SME)
5,681
9,010
151
126
1,532
0.3%
0.7%
1.4%
6.1%
91.5%
Other Consumer Lending
25,780
197
861
2,619
4,336
81.5%
0.3%
0.1%
0.2%
0.3%
17.6%
Total Performing
326,103
603,281
6,160
25,955
36,795
6.4%
0.0%
0.1%
0.7%
6.7%
86.1%
Non-performing
Residential Mortgages (Private Individuals)
3,698
6,379
45
141
1,414
0.2%
0.1%
0.4%
1.2%
5.9%
92.2%
Residential Mortgages (SME)
184
301
9
54
0.1%
0.2%
0.5%
1.8%
7.7%
89.7%
Other Consumer Lending
1,303
6
4
12
175
91.8%
0.3%
0.2%
0.3%
0.6%
6.7%
Total Non-performing
5,185
6,686
49
162
1,643
23.2%
0.1%
0.3%
1.0%
4.6%
70.6%
Total Consumer Lending
331,288
609,967
6,208
26,117
38,438
6.7%
0.0%
0.1%
0.7%
6.7%
85.8%
1 Consists mainly of residential mortgages to small individual business clients
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ING Bank Annual Report 2021
79
The collateralisation levels of the consumer lending portfolio continued to improve during 2021. The
rise in collateralisation levels was due to rising housing prices observed in different mortgage markets,
specifically noticeable in the Netherlands but also in Belgium, Germany and Australia. Relative to the
overall developments in the housing markets driving a decrease of loan loss provisions relating to the
mortgages portfolio’s, note management adjustments recognised to maintain an appropriate level of
provisions. See paragraph on ‘management adjustments’ in the Loan Loss provisioning section.
ING’s residential mortgage outstanding increased mainly in Poland (18.8%), Spain (11.5%) and
Germany (8.4%). In 2020 the increases where respectively 10.3%, 7.4% and 4.9%. Mortgage
outstanding in the Netherlands decreased slightly (0.2%). For the residential mortgages portfolio, the
cover type guarantees relate to mortgages covered by governmental insurers under the Dutch
national mortgage guarantee (NHG) scheme in the Netherlands. The NHG guarantees the repayment
of a loan in case of a forced property sale.
Business lending portfolio (*)
Business lending accounts for 45.3% of ING’s total outstanding (2020: 43.8%). In line with our objective
to give stakeholders insight into the portfolio, we present the business lending portfolio per industry
breakdown in accordance with the NAICS definition and per region and main market. Business lending
presented in this section does not include pre-settlement, investment and money market exposures.
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Cover values including guarantees received - Business lending portfolio (*)
in EUR million
2021
Cover type
Value to Loan
Industry
Outstandings
Mortgages
Financial
Collateral
Guarantees
Other covers
No Cover
>0% - 25%
>25%-50%
>50% - 75%
>75% - <100%
Central Banks
81,485
18
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Real Estate
52,079
103,229
1,096
6,956
32,670
3.6%
0.7%
2.3%
0.9%
4.9%
87.7%
Natural Resources
50,451
1,221
2,470
29,319
33,451
28.9%
14.2%
13.7%
8.9%
11.1%
23.2%
Transportation & Logistics
28,184
3,602
171
8,803
44,881
16.1%
6.4%
2.1%
4.5%
12.2%
58.7%
Non-Bank Financial Institutions
25,340
1,105
13,330
3,970
52,196
39.5%
4.8%
0.4%
2.3%
6.6%
46.3%
Food, Beverages & Personal Care
20,277
8,846
440
12,658
39,597
22.9%
4.6%
5.0%
9.3%
15.9%
42.3%
Services
20,671
10,162
1,814
7,883
23,324
28.1%
5.2%
5.9%
4.9%
9.8%
46.2%
Commercial Banks
19,160
5
276
1,535
3,966
74.6%
3.6%
0.6%
1.5%
5.1%
14.5%
Utilities
21,245
172
997
4,944
11,520
50.5%
15.0%
4.9%
3.9%
3.2%
22.3%
General Industries
19,067
5,447
310
6,592
23,701
33.1%
4.8%
3.9%
7.9%
9.1%
41.1%
Chemicals, Health & Pharmaceuticals
14,384
7,442
185
5,586
11,674
30.6%
6.1%
2.9%
5.8%
12.6%
42.1%
Builders & Contractors
14,089
8,036
208
4,967
17,591
22.7%
6.4%
6.2%
7.2%
11.4%
46.1%
Others
47,237
11,427
2,138
18,881
38,418
44.2%
3.7%
5.2%
3.6%
10.6%
32.7%
Total Business Lending
413,670
160,694
23,454
112,095
332,989
44.2%
5.0%
4.0%
3.8%
7.3%
35.6%
of which Total Non-performing
7,264
2,649
162
3,810
7,090
27.5%
5.9%
6.0%
6.0%
17.2%
37.4%
1 ‘Others’ comprises industries with outstandings lower than €10 billion.
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Cover values including guarantees received - Business lending portfolio (*)
in EUR million
2020
Cover type
Value to Loan
Industry
Outstandings
Mortgages
Financial
Collateral
Guarantees
Other covers
No Cover
>0% - 25%
>25%-50%
>50% - 75%
>75% - <100%
≥ 100%
Central Banks
79,464
–
23
–
–
100.0%
–
–
–
–
–
Real Estate
52,743
99,824
1,176
6,644
28,378
3.3%
0.7%
2.1%
1.5%
7.4%
85.1%
Natural Resources
43,209
1,453
2,192
23,503
35,739
24.5%
14.4%
13.0%
7.2%
15.9%
25.0%
Transportation & Logistics
27,395
7,251
182
7,487
37,220
18.2%
5.1%
2.4%
3.9%
11.7%
58.8%
Non-Bank Financial Institutions
21,934
1,139
10,771
3,766
46,286
42.1%
3.6%
2.3%
3.6%
4.6%
43.7%
Food, Beverages & Personal Care
20,594
8,346
430
9,473
33,918
25.0%
5.1%
5.9%
9.6%
14.0%
40.3%
Services
19,632
10,623
1,855
8,394
23,917
27.9%
5.8%
7.0%
5.3%
7.2%
46.9%
Commercial Banks
18,012
313
107
1,546
3,868
75.0%
1.0%
3.4%
1.7%
8.1%
10.8%
Utilities
16,948
185
1,011
4,464
9,723
42.3%
19.1%
5.2%
4.3%
3.0%
26.0%
General Industries
16,417
5,563
241
5,736
20,781
31.5%
4.0%
5.7%
9.6%
9.9%
39.3%
Chemicals, Health & Pharmaceuticals
14,120
7,558
194
4,391
12,332
26.0%
5.7%
3.6%
7.7%
13.6%
43.5%
Builders & Contractors
13,895
7,583
309
4,490
15,711
26.3%
6.2%
6.4%
8.9%
10.4%
41.7%
Others
43,696
11,635
1,938
15,020
34,484
40.0%
5.1%
4.3%
6.1%
10.5%
34.1%
Total Business Lending
388,060
161,474
20,431
94,913
302,357
43.1%
4.9%
4.2%
4.2%
7.9%
35.7%
of which Total Non-performing
8,261
3,027
230
3,803
6,915
29.1%
5.2%
5.0%
8.5%
14.2%
38.1%
1 ‘Others’ comprises industries with outstandings lower than €10 billion.
>
Credit risk
ING Bank Annual Report 2021
82
Cover values including guarantees received - Business lending portfolio (*)
2021
Cover type
Value to Loan
Region
Outstandings
Mortgages
Collateral
Guarantees
Other covers
No Cover
>0% - 25%
>25%-50%
>50% - 75%
>75% - <100%
≥ 100%
Europe
Netherlands
107,200
62,780
3,774
12,668
58,622
53.2%
1.7%
2.3%
3.5%
7.6%
31.8%
Belgium
50,231
36,207
1,219
21,476
56,704
25.5%
1.9%
2.5%
2.9%
5.9%
61.3%
Germany
31,563
3,168
195
4,443
6,946
75.0%
4.1%
2.0%
1.6%
0.8%
16.5%
Luxembourg
23,628
9,051
1,083
3,085
33,378
59.5%
1.0%
3.7%
1.3%
4.3%
30.1%
Poland
18,245
9,349
121
4,046
30,961
30.2%
4.5%
4.2%
6.0%
10.7%
44.4%
United Kingdom
15,321
1,716
2,901
5,168
12,128
47.8%
17.7%
4.0%
6.4%
7.1%
17.1%
Switzerland
10,082
78
762
4,469
5,697
23.3%
19.3%
27.1%
13.3%
4.1%
12.9%
France
10,971
7,144
117
1,598
6,493
43.4%
2.5%
2.4%
3.3%
4.0%
44.3%
Rest of Europe
50,046
13,206
2,276
24,520
46,560
37.8%
6.9%
3.8%
3.3%
9.2%
39.1%
America
45,156
7,097
9,156
10,898
43,960
37.2%
9.4%
5.8%
3.8%
11.0%
32.8%
Asia
37,978
1,240
1,559
15,215
27,765
40.9%
6.1%
5.8%
6.0%
9.9%
31.3%
Australia
10,805
9,652
242
2,291
3,110
34.3%
6.1%
1.0%
1.4%
2.6%
54.6%
Africa
2,444
6
49
2,219
667
13.9%
9.1%
7.3%
9.7%
22.4%
37.5%
Total Business Lending
413,670
160,694
23,454
112,095
332,989
44.2%
5.0%
4.0%
3.8%
7.3%
35.6%
of which Non-performing
7,264
2,649
162
3,810
7,090
27.5%
5.9%
6.0%
6.0%
17.2%
37.4%
>
Credit risk
ING Bank Annual Report 2021
83
Cover values including guarantees received - Business lending portfolio (*)
2020
Cover type
Value to Loan
Region
Outstandings
Mortgages
Collateral
Guarantees
Other covers
No Cover
>0% - 25%
>25%-50%
>50% - 75%
>75% - <100%
≥ 100%
Europe
Netherlands
101,000
61,180
3,298
9,245
59,268
51.7%
1.6%
2.5%
3.9%
8.6%
31.8%
Belgium
50,245
36,071
1,174
22,424
53,041
24.8%
1.6%
3.0%
3.1%
6.9%
60.7%
Germany
35,069
3,233
118
2,711
4,788
80.4%
4.0%
2.1%
1.4%
1.2%
10.9%
Luxembourg
16,332
8,403
1,671
2,849
29,875
46.4%
1.5%
6.0%
1.5%
3.4%
41.1%
Poland
16,176
9,414
168
3,720
25,652
28.3%
4.5%
3.8%
7.9%
11.3%
44.2%
United Kingdom
13,864
4,659
1,971
4,028
9,906
44.6%
16.1%
7.2%
3.0%
8.3%
20.8%
Switzerland
9,544
46
684
3,540
6,980
27.2%
21.7%
16.6%
7.1%
7.2%
20.3%
France
9,513
7,543
150
2,021
4,096
39.2%
5.1%
4.1%
2.7%
2.0%
46.8%
Rest of Europe
46,302
13,817
2,460
18,446
41,326
35.4%
7.7%
4.6%
4.7%
9.1%
38.5%
America
40,508
5,967
6,872
7,442
40,815
37.9%
7.4%
6.1%
5.5%
10.2%
33.0%
Asia
37,435
978
1,728
15,174
23,607
40.6%
5.0%
5.5%
6.6%
11.9%
30.5%
Australia
10,019
10,153
83
1,650
2,273
26.4%
7.7%
2.1%
2.4%
4.7%
56.8%
Africa
2,053
10
53
1,661
730
8.0%
6.6%
3.0%
19.9%
26.8%
35.7%
Total Business Lending
388,060
161,474
20,431
94,913
302,357
43.1%
4.9%
4.2%
4.2%
7.9%
35.7%
of which Non-performing
8,261
3,027
230
3,803
6,915
29.1%
5.2%
5.0%
8.5%
14.2%
38.1%
The tables above on cover values describe the collateralisation of ING’s business lending portfolio.
Breakdowns are provided by industry as well as by geographical region or market, based on the
residence of the borrowers.
Broken down by industry, the largest increase in outstanding is attributable to Natural Resources (€7.2
billion, 16.8%) followed by Utilities (€4.3 billion, 25.4%). The largest decrease in outstanding was
observed in Real Estate (€0.7 billion), where the total cover percentage increased.
The proportion of the business lending portfolio with no cover increased, which was mainly witnessed
in the Netherlands to 53.2% (from 51.6%), caused by increased Central Bank outstanding. Most
industry types experienced an increase in total covers.
>
Credit risk
ING Bank Annual Report 2021
84
Credit quality (*)
Credit risk categories (*)
Regular
Watch List
Restructuring
Non-
performing
Possible ratings
1–19
1–19
11–20
20-22
Typical ratings
1–14
15–17
18–20
20-22
Deterioration in risk
Not significant
Significant
Significant
Significant
Significant intervention
Not required
Not required
Required
Required
Account Ownership
Front Office
Front Office
Front Office
Front Office
Credit Risk Management
Regular
Regular
Credit Restructuring
Credit Restructuring
Primary Manager
Front Office
Front Office
Credit Restructuring
Credit Restructuring
Accounting provisioning
Stage 1/2
Stage 1/2
Stage 2/3
Stage 3
1 More information on the Restructuring and Non-performing categories can be found in the Credit restructuring
section.
Credit quality outstandings (*)
1
in EUR million
2021
2020
Performing not past due
819,183
785,800
Business lending performing past due
8,121
6,252
Consumer lending performing past due
1,142
953
Non-performing
12,021
13,497
Total lending and investment
840,466
806,503
Money market
29,752
34,654
Pre-settlement
43,531
46,086
Total
913,749
887,243
1 Past due based on new definition of default, prior period outstandings updated
Past due obligations (*)
Retail Banking continuously measures its portfolio in terms of payment arrears and determines on a
monthly basis if there are any significant changes in the level of arrears. This methodology is
principally extended to loans to private individuals, such as residential mortgage loans, car loans and
other consumer loans, as well as business lending. An obligation is considered ‘past due’ if a payment
of interest or principal is more than one day late. ING aims to help its customers as soon as they are
past due by communicating to remind them of their payment obligations. In its contact with the
customers, ING aims to solve the (potential) financial difficulties by offering a range of measures (e.g.
payment arrangements, restructuring). If the issues cannot be cured, for example because the
customer is unable or unwilling to pay, the contract is sent to the recovery unit. The facility is
downgraded to risk rating 20 (non-performing) when the facility or obligor – depending on the level at
which the non-performing status is applied - is more than 90 days past due and to risk rating 21 or 22
in case of an exit scenario.
ING has aligned the regulatory concept of non-performing with that of the definition of default. Hence,
in Wholesale Banking, obligors are classified as non-performing when a default trigger occurs:
◾
ING believes the borrower is unlikely to pay; the borrower has evidenced significant financial
difficulty, to the extent that it will have a negative impact on the future cash flows of the
financial asset. The following events could be seen as indicators of financial difficulty:
◾
The borrower (or third party) has started insolvency proceedings;
◾
A group company/co-borrower has NPL status;
◾
Indication of fraud (affecting the company’s ability to service its debt);
◾
There is doubt as to the borrower’s ability to generate stable and sufficient cash flows
to service its debt;
◾
Restructuring of debt.
◾
ING has granted concessions relating to the borrower’s financial difficulty, the effect of which is
a reduction in expected future cash flows of the financial asset below current carrying amount.
◾
The obligor has failed in the payment of principal, interest or fees, the total past due amount is
above the materiality threshold and this remains the case for more than 90 consecutive days.
Further, Wholesale Banking has an individual name approach, using early warnings indicators to signal
possible future issues in debt service.
>
Credit risk
ING Bank Annual Report 2021
85
Ageing analysis (past due but performing): Consumer lending portfolio by geographic area, outstandings (*)
1,2,3
in EUR million
2021
2020
Region
Past due for 1–
30 days
Past due for
31–60 days
Past due for
61–90 days
Past due for
>90 days
Total
Past due for 1–
30 days
Past due for
31–60 days
Past due for
61–90 days
Past due for
>90 days
Total
Europe
Belgium
599
53
61
714
355
12
4
0
371
Germany
105
27
11
0
143
73
26
20
32
152
Poland
35
5
3
43
36
6
5
47
Netherlands
31
9
3
0
43
24
7
2
8
41
Luxemburg
73
3
1
1
78
41
0
0
41
Spain
13
7
5
26
14
10
8
0
33
France
2
0
0
0
2
1
0
0
0
2
United Kingdom
0
0
0
1
0
0
0
0
Rest of Europe
52
9
5
66
61
14
7
0
83
America
0
0
0
0
0
0
0
1
1
Asia
0
0
0
0
1
0
0
0
1
Australia
17
7
1
25
67
15
4
96
182
Total
927
123
91
1
1,142
674
91
50
138
953
1 Based on consumer lending. The amount of past due but performing financial assets in respect of non-lending activities was not significant.
2 The absolute and relative materiality thresholds used for determining a defaulted status do not apply for the purposes of classification as past due. Below these thresholds, arrears of more than 90 days are reported as past due.
3 Based on new definition of default, prior period has been adjusted.
The past due but performing outstanding of consumer lending increased by €189 million. The largest
increase was observed in Belgium (€343 million), in term loans (€143 million) and in Residential
Mortgage (€105 million). The largest decreases are reported by Australia, Rest of Europe and Germany.
Australia’s decrease (€157 million) is mainly visible in the >90 days past due bucket.
>
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ING Bank Annual Report 2021
86
Ageing analysis (past due but performing): Business lending portfolio by geographic area, outstandings (*)
1,2
in EUR million
2021
2020
Region
Past due for
1–30 days
Past due for
31–60 days
Past due for
61–90 days
Past due for
>90 days
Total
Past due for
1–30 days
Past due for
31–60 days
Past due for
61–90 days
Past due for
>90 days
Total
Europe
United Kingdom
1,036
108
16
0
1,159
636
485
4
0
1,124
Belgium
1,676
178
8
0
1,863
977
60
28
2
1,067
Netherlands
553
16
4
0
574
532
29
1
4
565
Luxemburg
586
270
0
1
856
468
73
5
6
553
Poland
94
5
2
1
102
66
8
4
0
78
Germany
5
0
2
0
7
45
0
–
0
45
Spain
95
0
1
0
96
44
–
–
–
44
France
36
5
0
0
41
30
1
0
0
31
Rest of Europe
571
57
1
1
629
492
8
2
3
504
America
2,076
71
0
0
2,146
1,595
131
–
–
1,726
Asia
276
–
25
0
302
37
108
–
0
146
Australia
327
17
0
1
345
61
306
1
1
369
Total
7,331
727
60
3
8,121
4,983
1,209
44
16
6,252
1 The absolute and relative materiality thresholds used for determining a defaulted status do not apply for the purposes of classification as past due. Below these thresholds, arrears of more than 90 days are reported as past due.
2 Based on new definition of default, prior period has been adjusted.
Total past due but performing outstanding of business lending increased by €1.87 billion. These
increases are mainly contributed by increased outstanding in the 1-30 days past due bucket (€2.35
billion), partly offset by decreased outstanding in 31-60 days past due bucket (€482 million). The top 3
areas of increase in the 1-30 days bucket are Belgium (€699 million), America (€481 million) and
United Kingdom (€400 million). In 2020, ING recognised management adjustment to cover the
elevated risk of clients using payment holiday facilities.
Credit restructuring (*)
Global Credit Restructuring (GCR) is the dedicated and independent department that deals with non-
performing loans and loans that hold a reasonable probability that ING will end up with a loss, if no
specific action is taken. GCR handles accounts or portfolios requiring an active approach, which may
include renegotiation of terms and conditions and business or financial restructuring. The loans are
managed by GCR or by units in the various regions and business units.
ING uses three distinct statuses to categorise the management of clients with (perceived) deteriorating
credit risk profiles, i.e. there is increasing doubt as to the performance and the collectability of the
client’s contractual obligations:
◾
Watch List
: Usually, a client is first classified as Watch List when there are concerns of any
potential or material deterioration in credit risk profile that may affect the ability of the client
to adhere to its debt service obligations or to refinance its existing loans. Watch List status
requires more than usual attention, increased monitoring and quarterly reviews. Some clients
with a Watch List status may develop into a Restructuring status or even a Recovery status.
◾
Restructuring
: A client is classified in Restructuring when there are concerns about the client’s
financial stability, credit worthiness, and/or ability to repay, but where the situation does not
require the recall or acceleration of facilities or the liquidation of collateral. ING’s actions aim to
maintain the going concern status of the client by:
◾
Restoring the client’s financial stability;
◾
Supporting the client’s turnaround;
>
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ING Bank Annual Report 2021
87
◾
Restoring the balance between debt and equity; and
◾
Restructuring the debt to a sustainable situation.
◾
Recovery
: A client is classified as in Recovery when ING and/or the client concludes that the
client’s financial situation cannot be restored and a decision is made to end the (credit)
relationship or even to enter into bankruptcy. ING prefers an amicable exit, but will enforce and
liquidate the collateral or claim under the guarantees if deemed necessary.
Watch List, Restructuring and Recovery accounts are reviewed at least quarterly by the front office,
GCR and the relevant credit risk management executives.
Forbearance (*)
Forbearance occurs when a client is unable to meet their financial commitments due to financial
difficulties they face or are about to face and ING grants concessions towards them. Forborne assets
are assets in respect of which forbearance measures have been granted.
Forbearance may enable clients experiencing financial difficulties to continue repaying their debt.
For business customers, ING mainly applies forbearance measures to support clients with
fundamentally sound business models that are experiencing temporary difficulties with the aim of
maximising the client’s repayment ability and therewith avoiding a default situation or helping the
client to return to a performing situation.
For ING retail units, clear criteria have been established to determine whether a client is eligible for the
forbearance process. Specific approval mandates are in place to approve the measures, as well as
procedures to manage, monitor and report the forbearance activities.
ING reviews the performance of forborne exposures at least quarterly, either on a case-by-case
(business) or on a portfolio (retail) basis.
All exposures are eligible for forbearance measures, i.e. both performing (Risk Ratings 1-19) and non-
performing (Risk Ratings 20-22) exposures. ING uses specific criteria to move forborne exposures from
non-performing to performing or to remove the forbearance statuses that are consistent with the
corresponding European Banking Authority (EBA) standards. An exposure is reported as forborne for a
minimum of two years. An additional one-year probation period is observed for forborne exposures
that move from non-performing back to performing.
Since the outbreak of Covid-19, ING has supported clients affected by the pandemic among others by
providing payment holidays. Refer to ‘Payment holidays’ below for more information on payment
holidays.
Summary Forborne portfolio (*)
in EUR million
2021
2020
Business Line
Outstandings
Of which:
performin
g
Of which:
non-
performing
% of total
portfolio
Outstandings
Of which:
performin
g
Of which:
non-
performing
% of total
portfolio
Wholesale Banking
9,798
7,455
2,343
3.1%
10,176
7,849
2,327
3.2%
Retail Banking
10,018
6,339
3,679
2.1%
9,640
6,341
3,299
2.0%
Total
19,816
13,793
6,022
2.5%
19,816
14,190
5,626
2.5%
Summary Forborne portfolio by forbearance type (*)
in EUR million
2021
2020
Forbearance type
Outstandings
Of which:
performin
g
Of which:
non-
performing
% of total
portfolio
Outstandings
Of which:
performin
g
Of which:
non-
performing
% of total
portfolio
Loan modification
18,311
13,128
5,183
2.3%
17,877
12,937
4,940
2.3%
Refinancing
1,505
666
839
0.2%
1,939
1,252
686
0.2%
Total
19,816
13,793
6,022
2.5%
19,816
14,190
5,626
2.5%
As per 31 December 2021, ING’s total forborne assets remained stable at €19.8 billion compared to 31
December 2020. Wholesale Banking decreased by €0.4 billion, whereas Retail Banking increased by
€0.4 billion.
>
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ING Bank Annual Report 2021
88
Wholesale Banking (*)
As per December 2021, Wholesale Banking forborne assets amounted to €9.8 billion, which
represented 3.1% of the total Wholesale Banking portfolio (Lending and Investment credit
outstanding).
Wholesale Banking: Forborne portfolio by geographical area (*)
in EUR million
2021
2020
Region
Outstandings
Of which:
performing
Of which:
non-
Outstandings
Of which:
performing
Of which:
non-
performing
performing
Europe
Netherlands
1,012
811
201
842
700
142
Belgium
329
321
8
255
175
81
Germany
868
658
210
845
676
170
United Kingdom
1,344
913
432
1,738
1,606
132
Italy
286
261
25
353
317
36
Norway
79
29
50
78
32
47
Poland
181
160
21
199
101
98
Rest of Europe
2,381
2,181
200
2,404
2,149
255
America
1,900
1,326
574
2,338
1,541
796
Asia
685
292
393
555
194
362
Australia
568
416
152
365
251
113
Africa
164
88
76
202
109
94
Total
9,798
7,455
2,343
10,176
7,849
2,327
Wholesale Banking: Forborne portfolio by economic sector (*)
in EUR million
2021
2020
Industry
Outstandings
Of which:
performing
Of which:
non-
Outstandings
Of which:
performing
Of which:
non-
performing
performing
Natural Resources
2,047
1,177
870
2,370
1,397
973
Transportation & Logistics
1,336
1,061
274
1,453
1,253
201
General Industries
366
321
45
661
605
55
Food, Beverages & Personal Care
1,202
749
452
1,475
1,216
260
Real Estate
1,665
1,570
95
529
365
165
Chemicals, Health & Pharmaceuticals
347
324
22
394
364
30
Builders & Contractors
177
135
41
449
370
78
Utilities
407
271
136
290
141
149
Services
793
687
106
750
643
106
Retail
361
304
57
346
296
49
Automotive
581
535
46
768
714
54
Other
516
318
197
691
485
206
Total
9,798
7,455
2,343
10,176
7,849
2,327
The main concentration of forborne assets in a single country was in the United Kingdom with 14%
(2020: 17%) of the total Wholesale Banking forborne assets and 18% (2020: 6%) of the total non-
performing forborne assets.
Wholesale Banking forborne assets decreased by €378 million compared to 2020, of which the
performing forborne assets decreased by €394 million. The decrease of the performing forborne assets
was visible across most industries, offset by an increase for Real Estate. On a regional basis, the
decrease was mainly visible in the United Kingdom and America.
>
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ING Bank Annual Report 2021
89
Wholesale Banking forborne assets were mainly concentrated in Natural Resources, Real Estate,
Transportation & Logistics and Food Beverages & Personal Care. Together they accounted for 64% of
the total Wholesale Banking forborne assets and 72% of the total Wholesale Banking non-performing
forborne assets. Back in 2020, the main concentration was witnessed Natural Resources, Food
Beverages & Personal Care- and Transportation & Logistics with 52% of the total WB forborne. In 2021,
a significant increase in forborne assets was visible in Real Estate (+€1.1 billion), offset by a decrease in
Natural Resources (-€0.3 billion), General Industries (-€0.3 billion), Food, Beverages & Personal Care (-
€0.3 billion) and Builders & Contractors (-€0.3 billion). Relative to the views towards sectors, also note
the sector based approach as explained in the Management adjustments paragraph in the Loan Loss
Provisioning section.
Retail Banking (*)
As per end of December 2021, Retail Banking forborne assets amounted to a total of €10.0 billion,
which represented 2.1% of the total Retail Banking portfolio (Lending and Investment credit
outstanding).
Retail Banking: Forborne portfolio by geographical area (*)
in EUR million
2021
2020
Region
Outstandings
Of which:
performin
g
Of which:
non-
Outstandings
Of which:
performin
g
Of which:
non-
performing
performing
Europe
Netherlands
4,171
3,224
947
4,415
3,447
968
Belgium
3,319
2,035
1,284
2,672
1,621
1,051
Germany
497
306
191
578
410
168
Turkey
146
97
49
307
218
89
Poland
450
152
298
349
112
237
Romania
115
49
66
114
59
55
Italy
129
47
82
49
13
37
Spain
35
11
23
22
10
12
Rest of Europe
99
68
30
80
42
37
America
9
7
2
10
9
1
Asia
3
1
1
3
1
2
Australia
1,045
340
705
1,041
399
643
Africa
1
0
0
0
0
0
Total
10,018
6,339
3,679
9,640
6,341
3,299
The main concentration of forborne assets in a single country was in the Netherlands with 42% (2020:
46%) of the total Retail Banking forborne assets and 26% (2020: 29%) of the non-performing forborne
assets. Then Belgium followed with 33% (2020: 28%) of the total Retail Banking forborne assets. Out of
the total of €10.0 billion, an amount of €4.6 billion is related to mortgages (2020: €4.6 billion).
Payment holidays
Globally, 2021 has been still dominated by the Covid-19 pandemic and the distressing human and
economic cost thereof. Despite increasing vaccination rates and a further reopening of economies
during the year, the end of 2021 was marked again by increasing infection rates due to the spread of
new virus variants. In many countries, governments have adopted economic support programs (such
as tax advantages, unemployment regulations or guarantees) to address the adverse systemic
economic impact of the coronavirus. In addition, various initiatives have been taken by ING to support
our clients to manage these extraordinary times by way of granting temporary payment holidays,
(guaranteed) new money facilities etc.
>
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ING Bank Annual Report 2021
90
Governments in almost all Retail Banking countries have adopted measures providing for payment
holidays. During 2020 and 2021, in line with the EBA moratoria guidelines, approximately 137,000
customers had been granted payment holidays under schemes that were eligible under the EBA
moratoria guidelines. The total exposure of loans for which a payment holiday was granted amounts
to €15.3 billion, of which over 57% were for customers located in the Netherlands and Belgium. At the
end of 2021, 99.8% of granted payment holidays had expired.
The payment holiday schemes offered in the various countries differ in terms of scope, benefit duration and
key conditions and are mainly applied to business lending, mortgages and consumer loans.
The various measures taken by ING to alleviate the impact of Covid-19 also impacted the loan
classification in terms of forbearance and consequently IFRS 9 staging. In light of this, the EBA has
provided guidelines that expired on 30 September 2020, which defined eligibility criteria for a payment
holiday arrangement offered to a large group of customers to be classified as a “general payment
moratorium”. Based on the guidelines, the granting of these payment holidays did not lead to
forbearance classifications. A small number of payment holidays were granted outside this scheme
and were flagged as forborne. ING followed the EBA guidelines and when a payment holiday was
provided to a customer as part of a “general payment moratorium”, ING did not consider this measure
to classifiable as forbearance. EBA further extended these guidelines in the first week of December
2020, valid until 31 March 2021, with certain extra conditions. ING decided not to make use of the
extension of these guidelines and took the decision to treat exposures subject to a payment holiday
under new or extended schemes (after September 2020) as IFRS 9 stage 2 or stage 3 exposures.
Limited exceptions, due to local regulatory requirements, were specifically approved by the highest
credit policy approval body (GCTP). To address the elevated risk for clients with payment holidays a
management adjustment was considered necessary. Please refer to the paragraph on ‘Management
adjustments’ in the Loan Loss Provisioning section.
Non-performing loans (*)
ING’s loan portfolio is under constant review. Loans to obligors that are considered more than 90 days
past due on material exposure are reclassified as non-performing. For business lending portfolios, there
generally are reasons for declaring a loan non-performing prior to the obligor being 90 days past due.
These reasons include, but are not limited to, ING’s assessment of the customer’s perceived inability to
meet its financial obligations, or the customer filing for bankruptcy or bankruptcy protection.
The table below represents the breakdown by industry of credit risk outstandings for lending and
investment positions that have been classified as non-performing.
Non-performing Loans: outstandings by economic sector and business lines (*)
1
in EUR million
Wholesale
Banking
Retail Benelux
Retail Challengers
& Growth Markets
Corporate Line
Total
Industry
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Private Individuals
2,424
2,879
2,445
2,480
4,869
5,359
Natural Resources
1,325
1,434
46
63
27
36
1,398
1,533
Food, Beverages & Personal
681
668
428
420
130
138
1,239
1,226
Transportation & Logistics
575
786
180
201
52
44
807
1,031
Services
224
313
499
474
63
58
786
844
Builders & Contractors
93
148
224
398
112
133
429
680
Real Estate
132
217
495
416
59
21
686
655
General Industries
66
138
272
232
123
133
461
502
Non-Bank Financial
56
18
24
26
4
3
85
47
Retail
140
85
103
170
47
54
290
309
Other
541
579
340
335
90
103
295
971
1,312
Total
3,833
4,386
5,035
5,614
3,153
3,203
295
12,021
13,497
1 Based on Lending and Investment outstandings.
2 Economic sectors not specified in above overview are grouped in Other.
>
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ING Bank Annual Report 2021
91
Non-performing Loans: outstandings by economic sectors and geographical area (*)
in EUR million
Region
Total
Industry
Netherlands
Belgium
Germany
Poland
Spain
United
Kingdom
France
Luxemburg
Rest of Europe
America
Asia
Australia
Africa
2021
Private Individuals
776
1,578
721
206
232
8
16
35
497
3
4
791
1
4,869
Natural Resources
67
44
20
27
116
577
421
90
37
1,398
Food, Beverages &
Personal Care
299
176
25
111
226
7
2
37
228
128
1
1,239
Transportation & Logistics
385
55
1
35
47
20
3
165
29
49
17
807
Services
199
385
45
5
66
4
22
52
6
1
786
Builders & Contractors
43
188
4
83
2
58
50
429
Real Estate
167
303
61
88
21
21
9
16
686
General Industries
110
173
18
91
4
3
34
27
461
Non-Bank Financial
Institutions
7
8
4
9
14
8
34
1
85
Retail
40
70
34
30
56
1
21
21
14
2
290
Other
119
275
201
81
12
14
6
83
64
48
67
971
Total
2,212
3,255
1,005
768
284
447
119
87
1,056
1,060
656
966
105
12,021
1 Economic sectors not specified in above overview are grouped in Other.
>
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ING Bank Annual Report 2021
92
Non-performing Loans: outstandings by economic sectors and geographical area (*)
in EUR million
Region
Total
Industry
Netherlands
Belgium
Germany
Poland
Spain
United
Kingdom
France
Luxemburg
Rest of Europe
America
Asia
Australia
Africa
2020
Private Individuals
1,040
1,760
712
214
239
7
18
38
555
5
4
766
1
5,359
Natural Resources
75
48
0
20
25
0
0
171
659
394
93
49
1,533
Food, Beverages &
Personal Care
324
165
80
114
15
11
68
1
76
240
132
1
0
1,226
Transportation & Logistics
346
54
1
42
47
18
0
3
110
40
352
18
0
1,031
Services
190
495
0
42
5
0
1
4
28
73
6
0
844
Builders & Contractors
66
361
1
93
0
0
4
107
47
0
0
680
Real Estate
144
255
86
15
80
15
17
26
16
655
General Industries
111
161
7
91
0
5
0
93
32
1
1
0
502
Non-Bank Financial
Institutions
9
13
3
0
0
4
13
4
1
47
Retail
66
140
0
41
3
6
1
36
13
3
0
309
Other
427
259
138
116
0
12
14
8
143
120
23
7
45
1,312
Total
2,799
3,710
939
862
320
156
126
81
1,359
1,220
925
905
95
13,497
1 Economic sectors not specified in above overview are grouped in Other.
The non-performing portfolio decreased in 2021, mainly due to decreased outstandings in Private
Individuals, in Builders & Contractors and in the Transportation & Logistics industry. The decrease is
visible in all businesses and also in almost all sectors. In the Netherlands, the Non Performing in Private
Individuals decreased mainly because of cures (ending their default probation).
>
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93
Loan loss provisioning (*)
ING recognises loss allowances based on the expected credit loss (ECL) model of IFRS 9, which is
designed to be forward-looking. The IFRS 9 impairment requirements are applicable to on-balance
sheet financial assets measured at amortised cost or fair value through other comprehensive income
(FVOCI), such as loans, debt securities and lease receivables, as well as off-balance sheet items such as
undrawn loan commitments, certain financial guarantees issued, and undrawn committed revolving
credit facilities.
ING distinguishes between two types of calculation methods for credit loss allowances:
◾
Individual Lifetime ECL for credit-impaired (Stage 3) financial instruments with exposures above €1
million;
◾
Collective 12-month ECL (Stage 1) and Lifetime ECL (Stage 2) for portfolios of financial instruments,
as well as Lifetime ECL for credit impaired exposures (Stage 3) below €1 million.
IFRS 9 models (*)
The IFRS 9 models leverage on the internal rating-based (IRB) models (PD, LGD, EAD), which include
certain required conservatism. To include IFRS 9 requirements, such regulatory conservatism is
removed from the ECL parameters (PD, LGD and EAD). The IFRS 9 models apply two types of
adjustments to the ECL parameters: (1) to economic outlook and (2) for Stage 2 and Stage 3 assets
only, to the lifetime horizon. The IFRS 9 model parameters are estimated based on statistical
techniques and supported by expert judgement.
ING has aligned the definition of default for regulatory purposes with the definition of ‘credit-impaired’
financial assets under IFRS 9 (Stage 3). To comply with the new regulatory technical standards (RTS)
and EBA guidelines, ING updated its definition of default in the first quarter of 2020. Consequently, ING
updated this definition also for IFRS 9 purposes, which accordingly is taken into account in updates of
IFRS9 models.
More information can be found in section 1.6 of the Consolidated Financial Statements.
Climate and environmental risks in IFRS 9 models (*)
ING is evolving in its credit risk management framework to develop a better understanding of emerging
climate and environmental risks. Banks, including ING, are in the process of collecting and analysing
empirical historical data and moving towards embedding these emerging risks into their credit risk
management processes and eventually into their IFRS 9 ECL models.
At this point in time it is not yet possible to incorporate climate risk separately into IFRS 9 ECL models given
the lack of sufficient empirical historical data. The impact of climate risk is however currently implicitly
embedded in ING’s ECL models through the macroeconomic forecasts used for both the baseline and two
alternative scenarios (downside and upside). In particular, where climate and environmental factors have
impacted the economy in the recent past or present, these impacts are reflected in projected macro-
economic indicators (e.g. GDP growth and unemployment rates).
We note that ING’s ECL models are primarily sensitive to the short-term economic outlook (we use a 3 year
time horizon for macroeconomic outlook after which a mean reversion approach is applied), and therefore
the longer-term environmental/climate risk is not yet incorporated.
With regard to our evaluation of climate-related matters, where such events have already occurred (e.g.
floods), the impact of such events are individually assessed in the calculation of stage 3 Individual provisions
and factored into ING’s normal credit monitoring and identification processes. For example, we consider
whether the affected assets have suffered a significant increase in credit risk (or are credit impaired) and
whether the ECL is appropriate.
>
Credit risk
ING Bank Annual Report 2021
94
Reconciliation gross carrying amount (IFRS 9 eligible) and statement of financial position
in EUR million
2021
2020
Carrying
Amount
Allowances
for credit
losses
on-demand
bank
positions
Repurchase
transactions
collateral
of
financial
Carrying
Amount
Allowances
for credit
losses
on-demand
bank
positions
Repurchase
transaction
s
collateral
of
financial
Amounts held at Central Banks
104,875
-6
1,650
1
106,520
109,242
-3
1,851
-2
111,087
Loans and Advances to Banks
15,213
-22
1,674
3,403
3,287
36
23,591
16,660
-23
2,161
4,869
3,639
-1,942
25,364
Financial Instruments FVOCI Loans
837
-1
3
838
1,053
-2
4
1,056
Financial Instruments FVOCI Debt securities
27,201
-12
150
27,340
32,781
-12
208
32,977
Securities at Amortised Cost
47,358
-19
980
48,319
49,223
-17
1,381
50,587
Loans and Advances to customers
622,100
-5,274
1,487
3,178
6,059
627,550
589,355
-5,779
1,551
4,679
8,501
598,306
Total on-balance (IFRS 9 eligible)
817,585
-5,334
3,324
4,890
6,466
7,229
834,158
798,314
-5,836
4,011
6,420
8,319
8,150
819,378
Guarantees and irrevocable facilities (IFRS 9 eligible)
134,122
-34
118,418
-17
Total Gross Carrying Amount (IFRS 9 eligible)
951,707
-5,368
916,732
-5,854
This table presents the reconciliation between the Statement of Financial Position and the gross
carrying amounts used for calculating the expected credit losses. No expected credit loss is calculated
for cash, on-demand bank positions, reverse repurchase transactions, cash collateral received in
respect of derivatives and other. Therefore these amounts are not included in the total gross carrying
amount (IFRS 9 eligible). Other includes value adjustments on hedged items, deferred acquisition cost
on residential mortgages and a receivable which is offset against a liquidity facility.
>
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ING Bank Annual Report 2021
95
Portfolio quality (*)
The table below describes the portfolio composition over the different IFRS 9 stages and rating classes.
The Stage 1 portfolio represents 93.5% (2020: 92.1%) of the total gross carrying amounts, mainly
composed of investment grade, while Stage 2 makes up 5.2% (2020: 6.5%) and Stage 3 makes up 1.3%
(2020: 1.5%) total gross carrying amounts, respectively.
Gross carrying amount per IFRS 9 stage and rating class (*)
1,2,3
in EUR million
12-month ECL (Stage 1)
Lifetime ECL not credit
impaired (Stage 2)
Lifetime ECL credit
impaired (Stage 3)
Total
2021
Rating class
Gross
Carrying
Amount
Provisions
Gross
Carrying
Amount
Provisions
Gross
Carrying
Amount
Provisions
Gross
Carrying
Amount
Provisions
Investment grade
1 (AAA)
107,788
3
0
0
107,788
3
2-4 (AA)
106,673
5
197
0
106,870
5
5-7 (A)
152,255
17
1,001
1
153,256
17
8-10 (BBB)
328,301
73
7,232
14
335,533
87
Non-Investment grade
11-13 (BB)
162,912
208
14,679
86
177,592
294
14-16 (B)
26,852
185
17,931
404
44,783
589
17 (CCC)
5,377
10
4,354
198
9,730
207
Substandard grade
18 (CC)
2,314
173
2,314
173
19 (C)
1,769
142
1,769
142
Non-performing loans
20-22 (D)
12,072
3,851
12,072
3,851
Total
890,158
501
49,476
1,016
12,072
3,851
951,707
5,368
1 Compared to the credit risk portfolio, the differences are mainly undrawn committed amounts (€133.3 billion) not included in Credit outstandings and non-IFRS 9 eligible assets (€95.1 billion, mainly guarantees, letters of credit and pre-settlement exposures)
included in Credit outstandings.
2 For a reference to the Notes in the consolidated financial statements, we refer to the table ‘Reconciliation between credit risk categories and financial position’.
3 IAS 37 provisions are established for non-credit replacement guarantees not in the scope of IFRS 9. Total IAS 37 provisions (€114.4 million) are excluded.
>
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ING Bank Annual Report 2021
96
Gross carrying amount per IFRS 9 stage and rating class (*)
1,2,3
in EUR million
12-month ECL (Stage 1)
4
Lifetime ECL not credit
impaired (Stage 2)
4
Lifetime ECL credit
impaired (Stage 3)
Total
2020
Rating class
Gross
Carrying
Amount
Provisions
Gross
Carrying
Amount
Provisions
Gross
Carrying
Amount
Provisions
Gross
Carrying
Amount
Provisions
Investment grade
1 (AAA)
109,734
3
46
0
0
0
109,780
3
2-4 (AA)
108,776
6
646
0
0
0
109,422
6
5-7 (A)
137,991
27
707
1
0
0
138,698
28
8-10 (BBB)
297,292
88
4,839
12
0
0
302,131
100
Non-Investment grade
11-13 (BB)
159,076
239
18,513
133
0
0
177,588
372
14-16 (B)
28,335
208
23,742
570
0
0
52,077
777
17 (CCC)
2,817
9
5,113
259
0
0
7,930
269
Substandard grade
18 (CC)
0
0
3,384
248
0
0
3,384
248
19 (C)
0
0
2,323
254
0
0
2,323
254
Non-performing loans
20-22 (D)
0
0
0
0
13,398
3,797
13,398
3,797
Total
844,021
581
59,313
1,476
13,398
3,797
916,732
5,854
1 Compared to the credit risk portfolio, the differences are mainly undrawn committed amounts (€118.4 billion) not included in Credit outstandings and non-IFRS 9 eligible assets (€89.1 billion, mainly guarantees, letters of credit and pre-settlement exposures)
included in Credit outstandings.
2 For a reference to the Notes in the consolidated financial statements, we refer to the table ‘Reconciliation between credit risk categories and financial position’.
3 IAS 37 provisions are established for non-credit replacement guarantees not in the scope of IFRS 9. Total IAS 37 provisions (€74.8 million) are excluded.
4 Prior year numbers adjusted reflecting model adjustment in residential mortgages Netherlands.
Changes in gross carrying amounts and loan loss provisions (*)
The table below provides a reconciliation by stage of the gross carrying amount and allowances for
loans and advances to banks and customers, including loan commitments and financial guarantees.
The transfers of financial instruments represent the impact of stage transfers upon the gross
carrying/nominal amount and associated allowance for ECL. This includes the net-remeasurement of
ECL arising from stage transfers, for example, moving from a 12-month (Stage 1) to a lifetime (Stage 2)
ECL measurement basis.
The net-remeasurement line represents the changes in provisions for facilities that remain in the same
stage.
Please note the following comments with respect to the movements observed in the table below:
◾
Stage 3 gross carrying amount decreased by €1.3 billion from €13.4 billion as per 31 December
2020 mainly as a result of generally low inflow into NPL in 2021, primarily due to Government
support measures;
◾
Stage 2 gross carrying amount decreased by €9.8 billion from €59.3 billion as per 31 December
2020. This is mainly caused by the Significant Lifetime PD trigger (-/-€7.9 billion) driven by
favourable macro-economic forecasts and the Watch List trigger (-/-€6.6 billion), offset by
increases in other triggers which are mainly more than 30 Days Past Due (€2.4 billion) and
Forbearance (€1.6 billion). For the latter, a 2-year probation period is required before a client
can move back to Stage 1;
>
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ING Bank Annual Report 2021
97
◾
Transportation & Logistics (including Aviation), Real Estate, Services and Food, Beverages &
Personal Care (latter two including Hospitality & Leisure) were the sectors particularly impacted
by the Covid-19 pandemic. In 2021 these sectors showed material releases in Stage 2 amounts
compared to 31 December 2020 of €1.0 billion, €1.7 billion, €2.2 billion and €1.3 billion
respectively, as the impact of the pandemic turned out to be less harsh than expected last year
and several files were being taken off the watchlist. These sectors however still are the largest
Stage 2 contributors representing 10%, 9%, 8% and 8% of the total Stage 2 gross carrying
amounts respectively;
◾
Changes in models/Risk parameters is mainly related to the most important redeveloped
models in 2021, being Netherlands mortgages, Germany mortgages and the models in
Belgium.
Additional information on macroeconomic scenarios is included in the section ‘Macro-economic
scenarios and sensitivity analysis of key sources of estimation uncertainty’.
>
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ING Bank Annual Report 2021
98
Changes in gross carrying amounts and loan loss provisions (*)
1, 2
in EUR million
12-month ECL (Stage 1)
Lifetime ECL not credit
impaired (Stage 2)
Lifetime ECL credit
impaired (Stage 3)
Total
2021
Gross
carrying
amount
Provisions
Gross
carrying
amount
Provisions
Gross
carrying
amount
Provisions
Gross
carrying
amount
Provisions
Opening balance
844,020
581
59,313
1,476
13,398
3,797
916,732
5,854
Transfer into 12-month ECL (Stage 1)
15,157
20
-14,322
-279
-835
-54
-0
-313
Transfer into lifetime ECL not credit impaired (Stage 2)
-19,737
-32
20,537
206
-800
-74
-0
100
Transfer into lifetime ECL credit impaired (Stage 3)
-2,166
-13
-1,589
-96
3,755
820
-0
712
Net remeasurement of loan loss provisions
-130
-228
404
46
New financial assets originated or purchased
208,501
149
208,501
149
Financial assets that have been derecognised
-125,819
-73
-11,935
-104
-1,898
-237
-139,652
-414
Net drawdowns and repayments
-29,799
-2,526
-694
-33,019
Changes in models/risk parameters
12
41
130
184
Increase in loan loss provisions
-67
-460
989
462
Write-offs
-0
0
-854
-854
-854
-854
Recoveries of amounts previously written off
45
45
Foreign exchange and other movements
-13
1
-125
-138
Closing balance
890,158
501
49,476
1,016
12,072
3,851
951,707
5,368
1 Stage 3 Lifetime credit impaired provision includes €4 million on Purchased or Originated Credit Impaired.
2 The addition to the loan provision (in the consolidated statement of profit or loss) amounts to € 516 million of which € 462 million related to IFRS-9 eligible financial assets, € 43 million related to non-credit replacement guarantees and € 11 million to
modification gains and losses on restructured financial assets.
>
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99
Changes in gross carrying amounts and loan loss provisions (*)
3
in EUR million
12-month ECL (Stage 1)
2
Lifetime ECL not credit
impaired (Stage 2)
2
Lifetime ECL credit
impaired (Stage 3)
1
Total
2020
Gross
carrying
amount
Provisions
Gross
carrying
amount
Provisions
Gross
carrying
amount
Provisions
Gross
carrying
amount
Provisions
Opening balance
819,491
490
38,519
881
10,955
3,275
868,965
4,646
Transfer into 12-month ECL (Stage 1)
9,139
24
-8,899
-200
-240
-18
0
-194
Transfer into lifetime ECL not credit impaired (Stage 2)
-39,093
-76
39,601
651
-509
-57
0
518
Transfer into lifetime ECL credit impaired (Stage 3)
-3,592
-30
-1,879
-163
5,471
1,518
0
1,325
Net remeasurement of loan loss provisions
0
109
0
450
0
700
0
1,259
New financial assets originated or purchased
161,333
178
0
0
161,333
178
Financial assets that have been derecognised
-116,035
-85
-6,987
-107
-897
-236
-123,919
-428
Net drawdowns and repayments
12,778
-1,043
-181
11,444
Changes in models/risk parameters
7
7
Increase in loan loss provisions
119
638
1,908
2,666
Write-offs
-1,200
-1,200
-1,200
-1,200
Recoveries of amounts previously written off
39
39
Foreign exchange and other movements
-28
-42
-226
-297
Closing balance
844,020
581
59,313
1,476
13,398
3,797
916,732
5,854
1 Stage 3 Lifetime credit impaired provision includes €4 million on Purchased or Originated Credit Impaired.
2 Prior year numbers adjusted reflecting model adjustment in residential mortgages Netherlands.
3 The addition to the loan provision (in the consolidated statement of profit or loss) amounts to € 2.675 million of which € 2.666 million related to IFRS-9 eligible financial assets, € -4 million related to non-credit replacement guarantees and € 13 million to
modification gains and losses on restructured financial assets.
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Exposure per stage, coverage ratio and stage ratio’s
2
in EUR million
2021
2020
Balance sheet
Gross Carrying
Amount
Allowances for
credit losses
Coverage ratio
Stage Ratio
Gross Carrying
Amount
Allowances for
credit losses
Coverage ratio
Stage Ratio
Loans and advances to Banks (including Central Banks)
120,089
28
0.0%
125,902
26
0.0%
Stage 1
119,896
24
0.0%
100%
125,643
21
0.0%
100%
Stage 2
193
4
2.0%
0%
259
5
2.0%
0%
Loans and advances to Customers
622,100
5,274
0.8%
589,355
5,779
1.0%
of which: Residential mortgages
310,068
513
0.2%
297,145
513
0.2%
Stage 1
297,915
37
0.0%
96%
283,361
36
0.0%
95%
Stage 2
8,777
128
1.5%
3%
10,065
141
1.4%
3%
Stage 3
3,376
348
10.3%
1%
3,719
336
9.0%
1%
Of which: Consumer Lending (excl. Residential mortgages)
32,423
1,409
4.3%
32,154
1,337
4.2%
Stage 1
28,554
217
0.8%
88%
27,854
187
0.7%
87%
Stage 2
2,654
367
13.8%
8%
2,866
347
12.1%
9%
Stage 3
1,215
825
67.9%
4%
1,435
802
55.9%
4%
Of which: Loans to public authorities
14,333
12
0.1%
14,335
8
0.1%
Stage 1
13,906
2
0.0%
97%
14,076
3
0.0%
98%
Stage 2
344
5
1.5%
2%
189
2
1.0%
1%
Stage 3
84
4
5.1%
1%
70
4
5.1%
0%
Of which: Corporate Lending
265,276
3,340
1.3%
245,721
3,921
1.6%
Stage 1
229,906
185
0.1%
87%
201,087
300
0.1%
82%
Stage 2
28,568
505
1.8%
11%
36,936
977
2.6%
15%
Stage 3
6,801
2,649
39.0%
3%
7,698
2,644
34.4%
3%
Other IFRS 9 Eligible Financial Instruments
1
209,518
66
0.0%
201,475
48
0.0%
Stage 1
199,982
35
0.0%
95%
192,000
35
0.0%
95%
Stage 2
8,941
6
0.1%
4%
8,999
3
0.0%
4%
Stage 3
596
24
4.1%
0%
476
10
2.2%
0%
Total Gross Carrying Amount (IFRS 9 eligible)
951,707
5,368
0.6%
916,732
5,854
0.6%
1 Includes Off balance sheet IFRS 9 eligible guarantees and irrevocable facilities
2 The exposure classification to residential mortgages, consumer lending and corporate lending is aligned to the regulatory definition
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Modification of financial assets
The table below provides the following information:
- Financial assets that were modified during the year (i.e. qualified as forborne) while they had a loss
allowance measured at an amount equal to lifetime ECL.
- Financial assets that were reclassified to stage 1 during the period.
Financial assets modified (*)
in EUR million
2021
2020
Financial assets modified during the period
Amortised cost before modification
2,595
2,840
Net modification results
-47
-144
Financial assets modified since initial recognition
Gross carrying amount at 31 December of financial assets for which loss allowance has changed
to 12-month measurement during the period
448
312
Modifications that have been provided in 2020 and 2021 under general payment moratoria (payment
holidays) are not included in this analysis. Refer to ‘Payment holidays’, above, for details.
Macroeconomic scenarios and sensitivity analysis of key sources of estimation
uncertainty (*)
Methodology (*)
Our methodology in relation to the adoption and generation of macroeconomic scenarios is described
in this section. We continue to follow this methodology in generating our probability-weighted ECL,
with consideration of alternative scenarios and management adjustments supplementing this ECL
where, in management's opinion, the consensus forecast does not fully capture the extent of recent
credit or economic events. The macroeconomic scenarios are applicable to the whole ING portfolio in
the scope of IFRS 9 ECLs.
The IFRS 9 standard, with its inherent complexities and potential impact on the carrying amounts of
our assets and liabilities, represents a key source of estimation uncertainty. In particular, ING’s
reportable ECL numbers are most sensitive to the forward-looking macroeconomic forecasts used as
model inputs, the probability-weights applied to each of the three scenarios, and the criteria for
identifying a significant increase in credit risk. As such, these crucial components require consultation
and management judgement, and are subject to extensive governance.
Baseline scenario (*)
As a baseline for IFRS 9, ING has adopted a market-neutral view combining consensus forecasts for
economic variables (GDP, unemployment) with market forwards (for interest rates, exchange rates and
oil prices). The Oxford Economics’ Global Economic Model (OEGEM) is used to complement the
consensus with consistent projections for variables for which there are no consensus estimates
available (most notably house prices and – for some countries - unemployment), to generate
alternative scenarios, to convert annual consensus information to a quarterly frequency and to ensure
general consistency of the scenarios. As the baseline scenario is consistent with the consensus view it
can be considered as free from any bias.
The relevance and selection of macroeconomic variables is defined by the ECL models under credit risk
model governance. The scenarios are reviewed and challenged by two panels. The first panel consists
of economic experts from Global Markets Research and risk and modelling specialists, while the second
panel consists of relevant senior managers.
Alternative scenarios and probability weights (*)
Two alternative scenarios are taken into account; an upside and a downside scenario. The alternative
scenarios have technical characteristics as they are based on the forecast errors of the OEGEM.
To understand the baseline level of uncertainty around any forecast, Oxford Economics keeps track of
all its forecast errors of the past 20 years. The distribution of forecast errors for GDP, unemployment,
house prices and share prices is applied to the baseline forecast creating a broad range of alternative
outcomes. In addition, to understand the balance of risks facing the economy in an unbiased way,
Oxford Economics runs a survey with respondents from around the world and across a broad range of
industries. In this survey the respondents put forward their views of key risks. Following the survey
results, the distribution of forecast errors (that is being used for determining the scenarios) may be
skewed.
For the downside scenario, ING has chosen for the 90th percentile of that distribution because this
corresponds with the way risk management earnings-at-risk is defined within the Group. The upside
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scenario is represented by the 10th percentile of the distribution. The applicable percentiles of the
distribution imply a 20% probability for each alternative scenario. Consequently, the baseline scenario
has a 60% probability weighting. Please note that, given their technical nature, the downside and
upside scenarios are not based on an explicit specific narrative.
Macroeconomic scenarios applied (*)
The loan loss provisions are based on the December 2021 consensus forecasts.
Baseline assumptions (*)
The general picture that the consensus conveys is that supply chain disruption, elevated energy prices
as well as covid related mobility restrictions will fade in the course of 2022. While slowing, the
economic recovery continues in the period 2022-2024 and inflation peaks in 2021-2022. The monetary
policy stance in the US and the eurozone is expected to become gradually less loose. However, with
global monetary conditions remaining loose, housing markets remain overall well supported but the
rate of increase of house prices is expected to decrease in most markets over the forecast period.
The December 2021 consensus expects global output (ING definition), after a strong rebound in 2021 of
5.7%, to continue to recover. For 2022, a growth rate of 4.1% is being anticipated which is expected to
level off to an at or below 3% growth rate for the years thereafter.
Eurozone GDP has reached again its pre-pandemic level in Q4 2021. As for the US, economic
momentum in the eurozone is seen gradually normalising after the strong rebound in 2021.
Inflationary pressures, supply-side disruptions and a challenging health situation weigh on the outlook.
Elsewhere in Europe, the consensus sees economic growth for Poland in 2022 at 4.9%, below the rate
of economic growth in 2021 (5.2%). For the years thereafter some slowing down to 4.2 % (2023) and
3.5% (2024) is expected. For Turkey, after strong economic performance in 2021 (9.3%), economic
growth is expected to decrease to at or around 3.5% in 2022-2024.
While already running above pre-pandemic levels again, demand in the US economy remains resilient.
Consumers may spend down excess savings generated during the episodes of pandemic-related
uncertainty. This, together with robust income growth driven by a resilient jobs market should provide
support to domestic demand. Elevated job openings, hirings, and quits point to sturdy labour market
fundamentals and the consensus expects the labour market to tighten further in 2022 and 2023.
However, reduced supply of inputs caused by disruption to global supply chains and increased inflation
are weighing on economic activity. As a result, the consensus expects the growth rate of the US
economy to level off from 5.6% in 2021 to 4.0 % in 2022 and 2.5 % or below in 2023-2024.
The consensus expects GDP growth for China to be in a 5 - 5.5 % range in 2022-2024, down from a
strong rebound of 8.0 % in 2021. The slowdown reflects the government’s relatively tight regulatory
and credit stance regarding real estate developers and measures to rein in house price increases and
mortgage approvals slowing down real estate investment.
In Australia, economic growth is expected to strengthen in the course of 2022. The consensus sees
economic growth slowing to at or below 3% in 2023 and 2024 after expanding by 3.8% in 2022.
When compared to the December 2020 consensus forecast, used for the 2020 Annual Report, the
December 2021 forecast assumes a stronger economic recovery. Global GDP is expected to increase
by 5.7% in 2021 (compared to 5.0 % assumed before) and 4.1% in 2022 (3.8% assumed before). This
upward adjustment follows on from a more effective than expected roll-out of vaccination programs,
higher than assumed fiscal stimulus and generally better than expected realizations.
Alternative scenarios and risks (*)
Although vaccination against Covid-19 has progressed swiftly in many countries, uncertainty
surrounding the forecasts remains larger than usual. This reflects continued uncertainty around the
development and impact of the pandemic. The pandemic could worsen (again) as, given globally still
low rates of vaccination, the emergence of new, possibly more virulent, variants cannot be excluded.
To reflect the general increase of uncertainty surrounding the forecasts, the dispersion of the
alternative scenarios was widened in 2020. Specifically, the forecast bandwidths projected for the end
of the forecast horizon has been applied to the near-term as well. As the forecast-error distributions
widen over time, this means that the distributions became wider in the near-term and thus allow for a
wider range of possible outcomes. Meanwhile, at the end of the scenario horizon they remained
unchanged and are hence comparable to scenarios generated prior to the pandemic.
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In the scenarios applied at year end 2021 the above-mentioned near-term dispersion has been halved,
following Oxford Economics’ research showing that the harm from lockdowns has halved from what it
was in the first half of 2020. The downward skew following on from the outcomes of Oxford Economics’
Global Risk Survey has been maintained. As a result of this, the near-term dispersion of the forward-
looking distributions (from which the alternative scenarios are derived) remains larger than in normal
times, but it now also reflects the adaptability of economies to the pandemic.
The upside scenario – though technical in nature – implies, for most countries, a quick return of output
to its pre-coronavirus baseline forecast and more positive medium-term prospects than envisaged in
the baseline scenario. In this scenario unemployment rates quickly fall back from their peaks and reach
new lows in the mid-2020s.
The downside scenario, while being equally technical in nature, results in a renewed global downturn in
the near-term. The downside scenario reflects the risk of the coronavirus pandemic remaining a drag
on the global economy, if new highly transmissible and more virulent variants (than Omicron) result in
renewed restrictions. The subsequent recovery would be more sluggish, as the combination of
persistent restrictions, increased risk aversion and long-term scarring weigh heavily on the global
economy. The downside scenario also captures the risks of supply chain disruptions and higher
inflation hampering economic growth.
Management adjustments applied this year (*)
In times of volatility and uncertainty where portfolio quality and the economic environment are
changing rapidly, models alone may not be able to accurately predict losses. In these cases,
management adjustments can be applied to appropriately reflect ECL. Management adjustments can
also be applied where the impact of the updated macroeconomic scenarios is over- or under-
estimated by the IFRS 9 models.
ING has internal governance frameworks and controls in place to assess the appropriateness of all
management adjustments.
Management adjustments to ECL models (*)
in EUR million
2021
2020
Model time lag overlay
0
394
Economic sector based adjustments
341
0
Payment holiday adjustments
32
244
Reserve Based Lending adjustment
0
25
Mortgage portfolio adjustment
124
0
Other Post Model Adjustments
135
17
Total management adjustments
632
680
An economic sector-based management adjustment of €341 million was taken in December 2021
because of delays in defaults occurring in the Covid-19 related crisis, mainly as a result of government
support programmes, while GDP growth forecasts as well as unemployment rates and house prices
improved over 2021 and which triggered releases of the model based provisions. As it is expected that
additional defaults as a result of the Covid-19 crisis will still come in, especially in certain sectors where
a significant change to the business models is observed, a sector-based management adjustment was
calculated. In determining the sector-based management adjustment, a heatmap approach was used
to adjust the probability of default for sectors where businesses are significantly impacted by the
pandemic. Refer also to the section ‘Covid-19 sensitive sectors’. The Acquisition Finance portfolio is also
in scope of the sector based management adjustment, given the highly leveraged nature of the
product.
The economic sector-based management adjustment replaced the time lag overlay of €394 million
that was recognised as at 31 December 2020 and which was calculated using a scenario with a time
lag between GDP growth forecasts deteriorating and defaults occurring, but did not differentiate
between sectors. Also the management adjustment that was recognised in 2020 for the Reserved
Based Lending book was released in 2021, mainly as result of increased oil prices.
As mentioned earlier, per the guidance from EBA that expired on 30 September 2020, Covid-19 related
payment holidays granted have not automatically been classified as forbearance, and hence, have not
automatically triggered recognition of lifetime ECL in Stage 2. Payment holidays have also been
granted in certain countries in 2021, though to a much lesser extent than in 2020. Looking forward, it is
expected that the phasing out of all the support measures in 2022 could lead to more insolvencies and
unemployment. This could lead to more clients getting into financial difficulties and to higher levels of
defaults. To the extent ING believes that this elevated risk is not yet covered in the IFRS 9 models, a
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management adjustment has been recognised. As at 31 December 2021 this management
adjustment is reported in Retail Banking in Belgium, Italy and Australia. As many payment holiday
programs have already expired, this management adjustment has decreased to €32 million as at 31
December 2021 coming from €244 million a year ago.
ECL of mortgage portfolios determined by the models continued to decrease rapidly during 2021,
driven by significant increase of house prices in various countries. Management adjustments of €124
million in total, mainly in stage 2 and 3, have been recognised in ING Netherlands, Belgium, Germany
and Australia to maintain an appropriate level of ECL and reflecting a potential impact of higher
inflation and rates on clients’ ability to pay and a potential impact of market uncertainty on the
recovery value of residential real estate. The management adjustment for the Netherlands mortgage
portfolio was determined by developing three alternative macroeconomic forecast scenarios, in
addition to the consensus base, up- and down-scenarios, that reflect a correction in the house prices in
the next 3 years bringing it back in line with the historical growth rate. For other countries,
management adjustments were determined by calculating the impact of lower house prices on LTVs
and LGDs.
Other Post Model Adjustments mainly relate to the impact of model redevelopment or recalibration
and periodic model assessment procedures that have not been incorporated in the ECL models yet.
These result from both regular model maintenance and ING’s multiyear program to update ECL models
for the new definition of default. These adjustments will be removed once updates to the models have
been implemented.
Analysis on sensitivity (*)
The table below presents the analysis on the sensitivity of key forward-looking macroeconomic inputs
used in the ECL collective-assessment modelling process and the probability-weights applied to each of
the three scenarios. The countries included in the analysis are the most significant geographic regions,
in terms of both gross contribution to reportable ECL, and sensitivity of ECL to forward-looking
macroeconomics. Accordingly, ING considers these portfolios to present the most significant risk of
resulting in a material adjustment to the carrying amount of financial assets within the next financial
year. ING also observes that, in general, the Wholesale Banking business is more sensitive to the
impact of forward-looking macroeconomic scenarios.
The purpose of the sensitivity analysis is to enable the reader to understand the extent of the impact
from the upside and downside scenario on model-based reportable ECL. The table does not include
any management adjustments, except for the overlay for time lag in defaults of €394 million as at 31
December 2020. The current sector based management adjustment as per 31 December 2021 is not
included in the table, which mainly explains the decreases in reportable amounts.
In the table below the Real GDP is presented in percentage year-on-year change, the unemployment
in percentage of total labour force and the house price index (HPI) in percentage year-on year change.
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Sensitivity analysis as at December 2021 (*)
2022
2023
2024
Un-weighted
ECL (Eur mln)
Probability-
weighting
Reportable
ECL (Eur mln)
1
Netherlands
Upside scenario
Real GDP
5.1
2.9
2.7
259
20%
307
Unemployment
3.2
2.9
2.9
HPI
23.3
10.9
0.9
Baseline Scenario
Real GDP
3.4
2.0
1.7
289
60%
Unemployment
3.7
4.1
4.3
HPI
13.1
2.8
0.8
Downside scenario
Real GDP
-1.5
1.2
0.7
411
20%
Unemployment
5.6
6.8
7.8
HPI
0.3
-7.7
0.6
Germany
Upside scenario
Real GDP
6.2
3.1
1.6
457
20%
483
Unemployment
2.9
2.2
1.9
HPI
12.9
7.9
5.3
Baseline Scenario
Real GDP
4.0
2.3
1.4
475
60%
Unemployment
3.4
3.1
3.1
HPI
10.4
4.6
1.9
Downside scenario
Real GDP
-0.6
0.9
0.8
535
20%
Unemployment
5.0
5.4
5.7
HPI
5.3
0.4
-2.1
Belgium
Upside scenario
Real GDP
4.6
2.5
2.0
364
20%
393
Unemployment
5.6
5.6
5.9
HPI
3.9
2.7
2.9
Baseline Scenario
Real GDP
3.1
2.0
1.8
383
60%
Unemployment
6.1
6.3
6.3
HPI
3.0
2.3
2.3
Downside scenario
Real GDP
-0.4
1.4
1.4
451
20%
Unemployment
7.6
8.6
9.0
HPI
0.4
1.0
1.0
United States
Upside scenario
Real GDP
6.7
2.4
3.1
28
20%
75
Unemployment
3.5
2.5
2.4
HPI
10.4
8.1
8.7
Baseline Scenario
Real GDP
4.0
2.5
2.1
55
60%
Unemployment
4.0
3.7
3.7
HPI
9.1
3.0
3.3
Downside scenario
Real GDP
-0.7
1.1
0.3
183
20%
Unemployment
6.5
7.4
8.0
HPI
5.3
-3.2
-3.0
1 Excluding management adjustments.
Sensitivity analysis as at December 2020 (*)
2021
2022
2023
Un-weighted
ECL (Eur mln)
Probability-
weighting
Reportable
ECL (Eur mln)
1
Netherlands
Upside scenario
Real GDP
5.3
3.3
2.8
383
20%
468
Unemployment
5.1
3.9
3.0
HPI
8.1
6.3
4.7
Baseline Scenario
Real GDP
2.8
2.9
1.9
441
60%
Unemployment
5.8
5.2
4.7
HPI
-1.9
-1.6
4.5
Downside scenario
Real GDP
-4.9
4.8
1.4
636
20%
Unemployment
7.7
7.8
7.9
HPI
-12.3
-11.0
4.3
Germany
Upside scenario
Real GDP
7.6
3.3
1.5
504
20%
558
Unemployment
3.0
2.2
1.8
HPI
3.5
8.3
6.6
Baseline Scenario
Real GDP
3.9
3.4
1.6
541
60%
Unemployment
4.1
3.5
3.5
HPI
0.4
4.8
3.1
Downside scenario
Real GDP
-2.4
3.5
1.3
662
20%
Unemployment
5.6
5.3
5.6
HPI
-3.5
0.8
-0.9
Belgium
Upside scenario
Real GDP
6.9
3.3
2.4
494
20%
559
Unemployment
7.3
6.2
5.8
HPI
-0.2
4.2
4.8
Baseline Scenario
Real GDP
4.5
3.3
2.3
540
60%
Unemployment
7.5
6.3
6.3
HPI
-1.7
3.5
3.8
Downside scenario
Real GDP
-0.4
4.0
2.2
681
20%
Unemployment
9.4
9.1
8.8
HPI
-3.6
2.5
2.9
United States
Upside scenario
Real GDP
5.6
4.1
3.8
93
20%
189
Unemployment
5.0
3.0
1.9
HPI
6.2
9.4
9.3
Baseline Scenario
Real GDP
4.0
3.2
2.5
134
60%
Unemployment
6.0
4.7
4.1
HPI
4.3
4.1
4.0
Downside scenario
Real GDP
-6.3
6.8
1.9
448
20%
Unemployment
8.5
7.9
7.6
HPI
1.2
-1.9
-2.3
1 Sensitivity does only include the effect of time lag overlay, other management adjustments are excluded.
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When compared to the sensitivity analysis of 2020 the macroeconomic inputs for 2021 and 2022 are
more favourable, as at that time expectations around the possible consequences of the spread of the
coronavirus were more pessimistic, especially with regard to house prices and the unemployment
rates. The macroeconomic inputs used in the 2021 sensitivity analysis reflect that, after declining
sharply in 2020, a strong bounce back in macro-economic forecast has been realised in 2021 and is to
a lesser extent also expected for 2022. Furthermore the widened dispersion around upside and
downside scenarios in 2021 is half of the size of that in 2020, reflecting continuing but decreased short
term uncertainty related to the impact of Covid-19 compared to a year ago.
The decrease in reportable ECL compared to 2020 is mainly caused the €394m Model Time lag Overlay
that was included in the model ECL amounts as per December 2020, while current comparable
Economic Sector based management adjustment is not included in the December 2021 model ECL
amounts. This due to the improvement of the methodology applied to determine the adjustment,
which is now recognised in addition to the model ECL, and better reflects that the uncertainty is more
prominent in specific sectors.
While the table above does give a high-level indication of the sensitivity of the outputs to the different
scenarios, it does not provide insight into the interdependencies and correlations between different
macroeconomic variable inputs. On total ING level, the unweighted ECL for all collective provisioned
clients in the upside scenario was €2,126 million, in the baseline scenario €2,294 million and in the
downside scenario €2,964 million compared to €2,394 million reportable collective provisions as per 31
December 2021 (excluding all management adjustments). This reconciles as follows to the reported
ECL’s:
Reconciliation of model (reportable) ECL to total ECL (*)
in EUR million
2021
2020
Total model ECL*
2,394
3,245
ECL from individually assessed impairments
2,342
2,323
ECL from management adjustments**
632
286
Total ECL
5,368
5,854
* The prior period has been updated to improve consistency and comparability
** The overlay of €394m as per 2020 is included in Total model ECL.
Criteria for identifying a significant increase in credit risk (SICR) (*)
All assets and off-balance sheet items that are in scope of IFRS 9 impairment and which are subject to
collective ECL assessment are allocated a 12-month ECL if deemed to belong in Stage 1, or a lifetime
ECL if deemed to belong in Stages 2 and 3. An asset belongs in Stage 2 if it is considered to have
experienced a significant increase in credit risk since initial origination or purchase. ING considers the
credit risk of an asset to have significantly increased when either a threshold for absolute change in
lifetime probability of default (PD) or a relative change in lifetime PD is hit.
It should be noted that the lifetime PD thresholds are not the only drivers of stage allocation. An asset
can also change stages as a result of other triggers, such as having over 30 days arrears, being on a
Watch List or being forborne. Refer to section 1.6.8 of Note 1 ‘Basis of preparation and significant
accounting policies’ for an exhaustive list. Furthermore, this analysis is rudimentary in a sense that
other parameters would change when an asset changes stages.
Absolute lifetime PD threshold
The absolute threshold is a fixed value calibrated per portfolio/segment and provides a fixed threshold
that, if exceeded by the difference between lifetime PD at reporting date and lifetime PD at origination,
triggers Stage 2 classification. The thresholds for the absolute change in lifetime PD vary between
75bps for Retail portfolios, 100bps for Wholesale and 250bps for SMEs, based on the characteristics of
the specific portfolio. ING is in the process of refining the thresholds on a portfolio level, which has been
implemented for a few Turkish, Polish and German models and resulting in deviating absolute lifetime
PD thresholds.
Relative Lifetime PD threshold
The relative threshold defines a relative increase of the lifetime PD beyond which a given facility is
classified in Stage 2 because of significant increase in credit risk. The relative threshold is dependent on
the individual PD assigned to each facility at the moment of origination and a scaling factor calibrated
in the model development phase that is optimised depending on the observed default rates and overall
average riskiness of the portfolio. While the scaling factor is associated with a whole portfolio/segment,
the PD at origination is facility-specific and, in this sense, the relative threshold may differ facility by
facility.
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Ultimately the relative threshold provides a criterion to assess whether the ratio (i.e. increase) between
lifetime PD at reporting date and lifetime PD at origination date is deemed a significant increase in
credit risk. If the threshold is breached, SICR is identified and Stage 2 is assigned to the given facility.
The threshold for the relative change in lifetime PD is inversely correlated with the PD at origination;
the higher the PD at origination, the lower the threshold. The logic behind this is to allow facilities
originated in very favourable ratings to downgrade for longer without the need of a Stage 2
classification. In fact, it is likely that said facilities will still be in favourable ratings even after a
downgrade of a few notches. On the contrary, facilities originated in already unfavourable ratings
grades are riskier and even a single-notch downgrade might represent a significant increase in credit
risk and thus a tighter threshold will be in place. Still, the relative threshold is relatively sensitive for
investment grade assets while the absolute threshold primarily affects non-investment grade assets.
In the table below the average increase in PD at origination needed to be classified in Stage 2 is
reported, taking into account the PD at origination of the facilities included in each combination of
asset class and rating quality. In terms of rating quality, assets are divided into “Investment grade” and
“Non-investment grade” facilities. Rating 18 and 19 are not included in the table since facilities are not
originated in these ratings and they constitute a staging trigger of their own (i.e. if a facility is ever to
reach rating 18 or 19 at reporting date, it is classified in Stage 2). In the table values are weighted by
IFRS 9 exposure and shown for both year-end 2020 and year end 2021.
In order to represent the thresholds as a ratio (i.e. how much should the PD at origination increase in
relative terms to trigger Stage 2 classification) the absolute threshold is recalculated as a relative
threshold for disclosure purposes. Since breaching only relative or absolute threshold triggers Stage 2
classification, the minimum between the relative and recalculated absolute threshold is taken as value
of reference for each facility.
Quantitative SICR thresholds (*)
2021
2020
Average threshold ratio
Investment
grade (rating
grade 1-10)
Non-
investment
grade (rating
grade 11-17)
Investment
grade (rating
grade 1-10)
Non-
investment
grade (rating
grade 11-17)
Asset class category
Mortgages
2.7
2.2
2.7
2.1
Consumer Lending
2.8
1.7
2.8
1.7
Business Lending
4.0
2.2
4.0
2.1
Governments and Fin. Institutions
7.9
2.2
7.7
2.0
Other Wholesale Banking
4.5
2.0
3.9
1.8
As it is apparent from the disclosures above, as per ING’s methodology, the threshold is tighter the
higher the riskiness at origination of the assets, illustrated by the noticeable difference between the
average threshold applied to investment grade facilities and non-investment grade facilities. In
addition to the above, asset classes having usually more favourable ratings at origination (i.e. Central
Governments and Financial Institutions) show an average threshold higher than the rest in investment
grade assets. Changes in the threshold averages between the two reporting years can be caused by
model updates (the staging parameters have been recalibrated) and/ or by changes in portfolio
composition.
Sensitivity of ECL to PD lifetime PD thresholds
The setting of PD threshold bandings requires management judgement and is a key source of
estimation uncertainty. On Group level, the total ECL collective-assessment for performing assets is
€1,003 million (2020: €1,678 million) (without taking management adjustments into account).To
demonstrate the sensitivity of the ECL to these PD thresholds bandings, analysis was run on all
collectively-assessed assets, which assumed all assets (Stage 1 and 2) were below the threshold and
apportioned a 12-month ECL. On the same asset base, analysis was run which assumed all performing
assets were above the threshold and apportioned a lifetime ECL. This gave rise to hypothetical
collective-assessment ECLs of €634 million (2020: €1,242 million) and €2,232 million (2020: €3,552
million) respectively. Please note that in this analysis all other ECL risk parameters (except for the
stage) were kept equal.
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Market risk
Introduction (*)
Market risk is the risk that movements in market variables, such as interest rates, equity prices, foreign
exchange rates, credit spreads and real estate prices negatively impact the bank’s earnings, capital,
market value or liquidity position. Market risk either arises through positions in banking books or
trading books. The banking book positions are intended to be held for the long term (or until maturity)
or for the purpose of hedging other banking book positions. The trading book positions are typically
held with the intention of short-term trading or to hedge other positions in the trading book. This
means that financial instruments in the trading books should be free of trade restrictions. Policies and
processes are in place to monitor the inclusion of positions in either the trading or banking book as well
as to monitor the transfer of risk between the trading and banking books.
ING recognises the importance of sound market risk management and bases its market risk
management framework on the need to identify, assess, control and manage market risks. The
approach consists of a cycle of five recurring activities: risk identification, risk assessment, risk control,
risk monitoring and risk reporting.
(*)
◾
Risk identification is a joint effort of the first and second lines of defence. The goal of risk
identification is to detect potential new risks and any changes in known risks. See ‘Risk
Governance’ for more on our three lines of defence governance model;
◾
Identified risks are assessed and measured by means of various risk metrics to determine the
importance of the risk to ING and subsequently to identify the control measures needed;
◾
Risk control measures used by ING include policies, procedures, minimum standards, limit
frameworks, buffers and stress tests;
◾
Risk monitoring occurs to check if the implemented risk controls are executed, complied with
across the organisation, and are effective; and
◾
Market risk management results and findings are reported to the necessary governing
departments and approval bodies.
Governance (*)
A governance framework has been established defining specific roles and responsibilities of business
management units, market risk management units, and internal approval bodies per activity.
Supervision of market risk falls under the responsibility of the EB/MBB and is delegated to the ALCO
function, where ALCO Bank is the highest approval authority and sets the market risk appetite. ALCO
Bank monitors ING’s adherence to the risk appetite for market risk and sets additional limits where
appropriate. These limits are cascaded through the organisation through lower level ALCOs. This ALCO
structure facilitates top-down risk management, limit setting, and the monitoring and control of
market risk.
The monitoring and control of market risk is the responsibility of the Financial Risk (FR) department and
Financial Institutions – Financial Markets (FI-FM) Risk. FR and FI-FM Risk are the designated departments
of the second line of defence that report to the CRO function and are responsible for the design and
execution of the bank’s market risk and counterparty credit risk management functions in support of
the ALCO function. FR focuses on the market risks in the banking books, whereas FI-FM Risk is
responsible for counterparty credit risk and market risks resulting from the Financial Markets trading
books. FR and FI-FM Risk are responsible for determining adequate policies and procedures for actively
managing market risk in the banking and trading books and for monitoring ING’s compliance with
these guidelines.
FR and FI-FM Risk also maintain a limit framework in line with ING’s Risk Appetite Framework. The
businesses are responsible for adhering to the limits that are ultimately approved by the ALCO Bank.
Limit excesses are reported to senior management on a timely basis and the business is required to
take appropriate actions based on management decisions. To adhere to the established limit
framework, ING implements hedging and risk mitigation strategies that range from the use of
traditional market instruments, such as interest rate swaps, to more sophisticated hedging strategies
to address a combination of risk factors arising at the portfolio level.
The organisational structure facilitates top-down risk management by recognising that risk taking and
risk management to a large extent occur at the regional/local level. Bottom-up reporting from
regional/local units to head office units allows each management level to fully assess the market risks
relevant at the respective levels.
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Several committees govern communication between the parties involved in market risk management,
such as MRMC (reporting to ALCO Bank) and CTRC (reporting to GCTP). The Market Risk Model
Committee (MRMC) is the dedicated authority within ING for the approval of all trading risk,
counterparty credit risk and banking risk models, methodologies and related parameters. The Trading
Pricing Model Committee (TPMC) approves pricing models for trading and banking books. Financial Risk
and FI-FM Risk departments provide systematic risk reporting to the EB and MBB, the ALCO Bank and
the senior executive management of related business functions.
The Trading and Banking Book Boundary Policy governs the boundary between trading books and
banking books. It defines the activities ING considers to be trading according to a regulatory definition
and for own funds requirement purposes. Trading activity is systematically reviewed and positions are
assessed against the mandates jointly by the first and second lines of defence. As specified in the
framework, the transfer of risk or the transfer of positions between banking and trading books is in
principle not allowed. In exceptional cases when a re-designation is deemed necessary, the re-
designation should be approved by ALCO. The boundary requirements for banking book and trading
book instruments and risk transfer are detailed in the Trading and Banking Book Boundary Policy.
The following sections elaborate on the various elements of the risk management framework for:
◾
Market risk economic capital (trading and banking books);
◾
Market risks in banking books; and
◾
Market risks in trading books.
Market risk economic capital (trading and banking books)
Economic capital for market risk is the economic capital necessary to withstand unexpected value
movements due to changes in market variables and model risk.
Economic capital for market risk is calculated for exposures both in trading portfolios and banking
portfolios and includes interest rate risk, credit spread risk, equity price risk, foreign exchange rate risk,
customer behaviour risk, real estate risk, model risks and pension risk. Economic capital for market risk
is calculated using internally developed methodologies with a 99.9% confidence level and a horizon of
one year.
For the trading books and the linear interest rate risk and equity investments in the banking books, the
Value at Risk (VaR) is taken as a starting point for the economic capital calculations for market risk. The
VaR is measured at a 99% confidence level with a one-day holding period.
To arrive at the economic capital for market risk, a simulation-based model is used which includes
scaling to the required confidence level and holding period. In determining this scaling factor, other
factors are also taken into account like the occurrence of large market movements (events).
Embedded options, e.g. the prepayment option and offered rate option in mortgages in the banking
books, result in non-linear interest rate risk in the banking books. Embedded options are economically
hedged using a delta-hedging methodology, leaving the mortgage portfolio exposed to convexity risk,
volatility risk and model risk. For the calculation of economic capital for this non-linear interest rate
risk, ING performs a Monte Carlo simulation.
While aggregating the different economic capital market risk figures for the different portfolios,
diversification benefits (based on stressed correlations) are taken into account as it is not expected
that all extreme market movements will appear at the same moment.
Market risk in banking books (*)
ING makes a distinction between the trading and banking (non-trading) books. Positions in banking
books originate from the market risks inherent in commercial products that are sold to clients, Group
Treasury exposures, and from the investment of our own funds (core capital). Both the commercial
products and the products used to hedge market risk exposures in these products are intended to be
held until maturity, or at least for the long term.
Risk transfer (*)
An important element of the management of market risks in the banking book is the risk transfer
process. In this process the interest rate, FX, funding and liquidity risks are transferred from the
commercial books through matched funding to Group Treasury, where it is centrally managed. The
scheme below presents the transfer and management process of market risks in the banking books:
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Risk measurement (*)
The main concepts and metrics used for measuring market risk in the banking book are described
below per risk type.
Interest rate risk in banking book (*)
Interest rate risk in the banking book is defined as the exposure of a bank’s earnings, capital, and
market value to adverse movements in interest rates originated from positions in the banking book.
Governance (*)
The management of interest rate risk follows the Interest Rate Risk in the Banking Book (IRRBB)
framework as approved by ALCO Bank. This framework describes roles, responsibilities, risk metrics,
and the policies and procedures related to interest rate risk management. Furthermore ALCO Bank sets
the risk appetite for interest rate risk, which is then translated into limits for the interest rate risk
metrics.
As a result of this framework, ING centralises interest rate risk management from commercial books
(that capture the products sold to clients) to globally managed interest rate risk books. This enables a
clear demarcation between commercial business results and results based on unhedged interest rate
positions.
ING distinguishes between three types of activities that generate interest rate risk in the banking book:
◾
Investment of own funds;
◾
Commercial business; and
◾
Group Treasury exposures including strategic interest rate positions.
Group Treasury is responsible for managing the investment of own funds (core capital). Capital is
invested for longer periods to keep earnings stable. The main objective is to maximise the economic
value of the book and to generate adequate and stable annual earnings within the risk appetite
boundaries set by ALCO Bank.
Commercial activities can result in linear interest rate risk, for example, when re-pricing causes the
tenors of assets to differ from those of liabilities. Also, interest rate risk can arise from customer
behaviour and/or convexity risk, depending on the nature of the underlying product characteristics.
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Customer behaviour risk is defined as the potential future value loss due to deviations in the actual
behaviour of clients versus the modelled behaviour towards the embedded options in commercial
products. General sources of customer behaviour risk, amongst others, include the state of the
economy, competition, changes in regulation, legislation and tax regime, and developments in the
housing market. Since these risk factors cannot be (fully) mitigated, ING holds capital to be able to
absorb possible losses as a result of unforeseen customer behaviour.
From an interest rate risk perspective, commercial activities can typically be divided into three main
product types: savings and demand deposits, mortgages, and loans.
◾
Savings and demand deposits are generally invested to hedge their value and minimise the
sensitivity of the margin to market interest rates. Interest rate risk can arise when there is a lag
between savings rate adjustments and the adjustments experienced through market rates or
when market rate changes cannot be passed on to clients. Interest rate risk is modelled based
on the stability of the deposit and the pass-through rate. This takes account of different
elements, such as pricing strategies, volume developments and the level and shape of the yield
curve. Savings volumes are typically assumed to be relatively stable and not sensitive to rate
changes;
◾
Interest rate risk for mortgages arises through prepayment behaviour. In modelling this risk,
both interest rate dependent pre-payments and constant prepayments are considered. Next to
the dependence on interest rates, modelled prepayments may include other effects such as
loan-to-value, seasonality and the reset date of the loan. In addition, the interest sensitivity of
embedded offered rate options is considered; and
◾
Wholesale Banking loans typically do not experience interest rate dependent prepayment
behaviour; these portfolios are match-funded taking the constant prepayment model into
account. They typically do not contain significant convexity risk. Wholesale banking loans can
have an all-in rate floor or a floor on a reference rate.
Customer behaviour in relation to mortgages, loans, savings and demand deposits is modelled, based
on extensive research. Per business unit and product type, exposures are typically segmented into
different portfolios based on expected client behaviour. For each of the segments, model parameters
for example for the pass-through rate and customer behaviour are determined based on historical
data and expert opinion. Models are backtested and updated when deemed necessary in an annual
procedure. Model parameters and the resulting risk measures are approved by (local) ALCO.
Linear risk transfers take place from commercial business books to the treasury book (Group Treasury),
if necessary, by using estimations of customer behaviour. The originating commercial business is
ultimately responsible for estimating customer behaviour, leaving convexity risk and (unexpected)
customer behaviour risk with the commercial business. Risk measurement and the risk transfer process
take place monthly. However, if deemed necessary, additional risk transfers can take place, for
instance due to volatile markets.
The commercial business manages the convexity risk that is the result of products that contain
embedded options, like mortgages. Here the convexity risk is defined as the optionality effects in the
value due to interest rate changes, excluding the first-order effects. In some cases, convexity risk is
transferred from the commercial books to treasury books using cap/floor contracts.
In the following sections, the interest rate risk exposures in the banking books are presented. ING uses
risk measures based on both an earnings and a value perspective. Net interest income (NII)-at-risk is
used to provide the earnings perspective and the net present value (NPV)-at-risk figures provide the
value perspective. Please note that the expected interest rate risk coming forward from the business is
assumed to be linearly hedged but no additional corrective management actions are taken into
account in the NPV-at-Risk measure. In the NII-at-Risk measure a more dynamic hedging process is
taken into account.
During 2021, the following activities related to the risk measurement for IRRBB were performed:
◾
Annual review of the risk appetite for IRRBB includes further enhancement;
◾
More in-depth assessment of sub-risk types such as tenor basis risk, vega optionality risk and a
client behaviour risk earnings and value metrics;
◾
Annual review of the interest rates scenarios used for calculating NII-at-Risk and NPV-at-Risk;
◾
Savings/ current account model updates and prepayment model updates for market
developments;
◾
Specific Covid-19 related stress test; and
◾
IRRBB related impact as part of firm-wide inflation risk stress test.
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Net interest income (NII) at Risk (*)
The NII-at-Risk measures the impact of changing interest rates on the forecasted net interest income
(before tax) of the banking book, excluding the impacts of credit spread sensitivity and fees. Future
projected balance sheet developments are included in this risk metric.
In its risk management ING monitors the NII-at-Risk under a three-year timeframe. Interest rates are
stressed during the first year versus the prevailing curve, taking gradual changes over the first year.
The rate changes considered comprise both upward and downward scenarios, as well as parallel (equal
movements across the yield curve) and non-parallel scenarios.
The impact of changing interest rates on ING’s NII is predominantly caused by the following factors:
◾
Change in returns of (re-)investments of client deposits;
◾
Change in deposits client rates (mainly savings), (partially) tracking changes in market interest
rates;
◾
Change in funding profile of mortgages, due to less or more expected prepayments;
◾
Higher/Lower returns of (re-)investments of capital investments;
◾
Open interest rate positions, leading to changes in return because of different market rates.
For projecting the change in client deposits rates ING uses a client rate model that describes the
relation to market interest rates and client deposits rates. The model is calibrated under a range of
interest rate scenarios. Per scenario the actual change in client deposits rate may deviate from this
calibrated model.
For projecting the change in the funding profile of mortgages ING uses prepayment models for the
various mortgage portfolios.
The NII-at-Risk figures in the tables below reflect a parallel, gradual interest rate movement (“ramped”)
under the assumption of balance sheet developments in line with the dynamic plan with a time
horizon of one year.
NII-at-Risk banking books per business - year one (*)
in EUR million
2021
2020
Ramped, unfloored
Ramped, unfloored
parallel
▼
parallel
▲
parallel
▼
parallel
▲
By business
Wholesale Banking
46
-33
135
-83
Retail Banking Benelux
-122
132
-114
105
Retail Challengers & Growth Markets
-93
75
-52
-14
Corporate Line Banking
-58
58
-52
52
Total
-226
232
-83
60
EUR ramped is at +/- 100bps in 1 year
USD ramped is at +/- 120bps in 1 year
The NII-at-Risk is primarily driven by the difference in sensitivity of client liabilities, mainly savings,
versus the sensitivity of client assets and investments to rate changes. The investment of own funds
only impacts the earnings sensitivity marginally, as only a relatively small part has to be (re)invested
within the one-year horizon.
NII-at-Risk banking book per currency - year one (*)
in EUR million
2021
2020
Ramped, unfloored
Ramped, unfloored
parallel
▼
parallel
▲
parallel
▼
parallel
▲
By currency
Euro
-181
179
-146
120
US Dollar
-23
23
41
-36
Other
-23
30
23
-25
Total
-226
232
-83
60
EUR ramped is at +/- 100bps in 1 year
USD ramped is at +/- 120bps in 1 year
Per year-end 2021, the NII is projected to be higher when interest rate rise. In this scenario the one-
year (re-) investment returns are higher than the modelled increase in client deposits rates and
modelled extra funding costs due to higher funding costs for mortgages.
The projected change in NII numbers in the tables above include projected changes in client deposits
rates. Without increasing client deposits rates the NII-at-Risk for the parallel ramped up scenario would
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ING Bank Annual Report 2021
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be significantly higher, meaning that the actual client deposits rate tracking of market interest rates in
such scenario is a key driver in the NII development of the bank.
The change in NII under a declining or upward interest rate scenario are not equal. This is primarily
caused by different expected reactions in prepayment behaviour of mortgages and different pricing
developments of commercial loans and deposits products (mainly savings). This is caused by
embedded options, explicit or implicit pricing floors and other (assumed) pricing factors.
Year-on-year variance analysis (*)
In 2021, interest rates remained at very low levels and for short tenors at even negative levels. Interest
rates in the longer tenors increased towards the end of year. The change in NII sensitivity is driven by
balance sheet developments, specifically in relation to mortgages and savings. The production of
mortgages in the longer tenors in the Eurozone was significant. The increase in funds entrusted
volume, the impact of explicit and implicit floors on savings rates in the Eurozone and savings model
updates also had an impact on NII sensitivity. Models are reviewed and recalibrated annually to reflect
actual client behavior accurately. The pre-existing hedges as executed by Group Treasury were also
adjusted during the year. As Group Treasury is included in the Wholesale Banking risk numbers, this
adjustment changed the Wholesale Banking NII-at-Risk. The total NII-at-Risk remains relatively limited
in comparison with ING’s total interest income.
Net Present Value (NPV) at Risk (*)
NPV-at-Risk measures the impact of changing interest rates on the value of the positions in the
Banking Book. This does not include the positive earnings in our commercial books. The NPV-at-Risk is
defined as the outcome of an instantaneous increase or decrease in interest rates from applying
currency-specific scenarios. The NPV-at-Risk asymmetry between the downward and upward shock is
mainly caused by convexity risk in the mortgage and savings portfolio.
The full value impact cannot be directly linked to the financial position or profit or loss account, as fair
value movements in banking books are not necessarily reported through the profit or loss account or
through other comprehensive income (OCI). The changes in value are expected to materialize over
time in the profit and loss account if interest rates develop according to forward rates throughout the
remaining maturity of the portfolio.
NPV-at-Risk banking books per business (*)
in EUR million
2021
2020
unfloored
unfloored
parallel
▼
parallel
▲
parallel
▼
parallel
▲
By business
Wholesale Banking
-1,477
1,444
-68
171
Retail Banking Benelux
-953
-202
-1,425
541
Retail Challengers & Growth Markets
832
-1,111
-506
-17
Corporate Line Banking
1,820
-1,712
1,946
-1,820
Total
223
-1,580
-54
-1,125
The prior period has been updated to improve consistency and comparability.
EUR +/- 100bp shock scenario
USD +/- 120bp shock scenario
Year-on-year variance analysis
The change in NPV-at-Risk in segments Retail Benelux and Retail Challengers & Growth Markets was
more or less off-set by an opposite NII-at-Risk change for Wholesale Banking. The NPV change for the
Retail Business line was driven by increased production in fixed rate mortgages and the development
of the savings and current account volumes combined with savings model updates. The resulting
impact on retail sensitivity was hedged by Group Treasury in line with the internal ALM practices. The
Group Treasury exposure is reported under business line Wholesale Banking. An important part of the
overall NII sensitivity can be attributed to the Corporate Line, in which core capital is invested
strategically.
IBOR transition (*)
Interbank offered rates have been widely used as benchmarks to set interest rates across a broad
range of financial products and contracts. In line with the recommendations from the Financial
Stability Board, a fundamental review of these important interest rates benchmarks has been
undertaken. While some interest benchmarks have been reformed, such as EURIBOR, others such as
EONIA and LIBOR have or will be replaced by risk-free rates (RFR) and discontinued.
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The reform of EURIBOR was completed in 2019 and allows for the continued use in both existing and
new contracts. In 2021, the Working Group on Euro Risk-Free Rates completed its work on developing
recommended fallbacks for EURIBOR contracts based on €STR. These recommendations will be used to
improve fallback language in EURIBOR contracts.
EONIA ceased to be published on 3 January 2022, and is succeeded by €STR. EONIA and €STR are both
overnight rates and the spread between them was established and fixed in 2019. ING transitioned
nearly all EONIA dependent products in the course of 2021, with only a limited number utilising the
statutory fallback mechanism put in place by the EU.
GBP, CHF, JPY, and EUR LIBOR rates ceased on 31 December 2021, whereas the most used USD LIBOR
tenors will continue to be published until the end of June 2023 to support legacy products. The USD
LIBOR extension was seen as a welcome step given the range and volume of USD LIBOR contracts and
has bought time for the market to develop and assess the alternatives to USD LIBOR. The use of USD
LIBOR for new contracts is (subject to very limited exceptions) no longer permitted.
During 2021, ING focused on the transition of EONIA and non-USD LIBOR contracts and conducting new
business using the recommended alternatives. This was supported by our investment in and ability to
offer a wide range of products to our clients using alternative rates. In 2022, we will shift our focus to
USD LIBOR, and expect to be able to leverage the experience gained transitioning the other LIBOR rates.
To enable these changes, the financial sector has issued several guidance papers and other initiatives
to help phase in key components of this transition. For example ISDA issued an IBOR fallback
supplement to help ensure clear and agreed fallback rates apply on the discontinuation of key IBORs.
For loans, various recommendations have been made to help drive the inclusion of consistent robust
fallback provisions.
Public authorities have also recognised that certain contracts do not contain provisions for any
alternatives, contain inappropriate alternatives, or cannot be renegotiated or amended prior to the
expected cessation dates of the relevant benchmark rates (‘tough legacy’ contracts). In response, the
European Commission has implemented legislation that gives the Commission the power to replace
critical benchmarks if their termination would significantly disrupt or otherwise affect the functioning
of the financial markets in the EU. In addition, the UK government has granted additional powers to
the Financial Conduct Authority (FCA) to enable the temporary publication of a ‘’synthetic’’ LIBOR using
a different methodology and inputs. The FCA has used these powers to ensure 1-, 3- and 6-months
GBP and JPY LIBOR settings continue to be available using a “synthetic” methodology for a limited time
to support legacy contracts. The FCA has not yet decided whether it will require the LIBOR benchmark
administrator to publish synthetic USD LIBOR rates after June 2023.
At the beginning of 2021, ING Bank had significant exposures to IBORs that either were discontinued at
the end of 2021 or will cease in the future. Due to the discontinuation of these interest rate
benchmarks, ING Bank, its customers, and the financial services industry more widely has faced (and is
still facing until the IBOR transition is completed) a number of risks. These risks include legal risks,
financial risks, operational risks, and conduct risk. Legal risks are related to any required changes to
documentation for new and existing transactions. Financial risks (predominantly limited to interest
rate risk) as a consequence of changes in the valuation of financial instruments linked to such
benchmarks and declining liquidity may impact a contract directly or the ability to hedge the risks in
that contract. Changes in valuation, interest calculation methodology or documentation may also
result in complaints or litigation. Operational risks due to the requirement to adapt IT systems, trade
reporting infrastructure and operational processes to the new benchmark rates. Conduct risk also plays
a particular role in each benchmark transition. For example, the renegotiation of loan contracts
requires active engagement from both parties or multiple parties in the case of syndicated loans,
which is one of the key challenges and may lead to negotiations and the required contractual updates
occurring later than planned and concentrated in a period close to actual cessation, which has been
the case for GBP LIBOR. ING will continue to reach out to impacted clients in order to best support the
relevant timelines and regulatory guidelines.
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The ING IBOR programme has a robust governance in place, with progress being tracked by business
line steering committees reporting into a central IBOR steering committee. The programme assesses
and coordinates the actions necessary to manage the required changes to internal processes and
systems, including pricing, risk management, legal documentation, hedge arrangements, as well as
the impact on our customers. ING continues to monitor market developments, with a focus on USD
market, to anticipate the impact on the program, our customers and any related risks.
During 2021, ING transitioned significant part of its non-derivative financial instruments linked to
benchmarks ceasing in 2021 to their designated replacement rates. The total of non-derivative
financial assets linked to non-USD LIBOR are reduced from EUR 8,004 million to EUR 765 million (32
contracts remaining) and the non-derivative financial liabilities linked to non-USD LIBOR reduced from
EUR 1,078 million to EUR 23 million (34 contracts remaining). The major part of the remaining non-
derivative financial instruments (98%) is linked to USD LIBOR that will cease at the end of June 2023. In
addition, ING reduced its committed undrawn credit facilities linked to non-USD LIBOR from EUR 6,735
million to EUR 534 million (includes 15 contracts that are fully undrawn) during 2021. The remaining
non-derivative financial instruments linked to non-USD LIBORs will either transition before the next
interest rate reset date with only a limited number making use of synthetic LIBORs. Therefore the
remaining exposure to non-USD LIBORs is expected to reduce further during the first quarter of 2022.
The tables below summarize ING’s approximate exposures by significant benchmark rate, excluding
contracts that will expire before transition is required. For all benchmarks except USD LIBOR the
transition deadline has been taken as 31 December 2021. For USD LIBOR the transition date is 30 June
2023 as USD LIBOR will be available to support existing contracts until that date. The 31 December
2021 table excludes exposures whose contractual terms were amended during 2021, including those
where transition will occur in 2022 and prior to the next interest rate reset date, as well as contracts
that mature in early 2022 to which no amendment is required.
Non derivative Financial instruments to transition to alternative benchmarks (*)
in EUR million at 31 December 2021
Financial Assets non-
derivative
Financial Liabilities
non-derivative
Off balance sheet
commitments
Carrying value
Carrying value
Nominal value
By benchmark rate
GBP LIBOR
764
350
USD LIBOR
41,805
1,542
16,435
CHF LIBOR
1
JPY LIBOR
EUR LIBOR
EONIA
23
184
Total
42,570
1,565
16,969
Non derivative Financial instruments to transition to alternative benchmarks (*)
in EUR million at 31 December 2020
Financial Assets non-
derivative
Financial Liabilities
non-derivative
Off balance sheet
commitments
Carrying value
Carrying value
Nominal value
By benchmark rate
GBP LIBOR
6,912
259
3,732
USD LIBOR
31,057
4,096
9,376
CHF LIBOR
345
42
321
JPY LIBOR
225
41
79
EUR LIBOR
422
8
2,564
EONIA
100
728
39
Total
39,061
5,173
16,111
Comparatives for non-derivative financial assets and liabilities have been updated to improve
consistency and comparability with the current period disclosure.
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ING Bank Annual Report 2021
116
ING has also completed the transition of a significant part of its derivative financial instruments linked
to benchmarks ceasing in 2021 to their designated replacement rates. In total, the derivative financial
instruments linked to non-USD LIBOR were reduced from EUR 153,391 million to EUR 822 million (19
contracts). The majority of derivatives linked to non-USD LIBOR rates were transacted with clearing
houses and transitioned through a standardized exercise to the designated replacement rates in
December 2021. For non-centrally cleared derivatives the main transition occurred using the ISDA IBOR
fallback arrangements. The remaining derivative financial instruments linked to non-USD LIBOR will
either be transitioned before the next interest rate reset date or will make use of synthetic LIBORs.
Therefore a rapid drop of the remaining exposures to non-USD LIBORs is expected at the beginning of
the first quarter of 2022.
Derivative Financial instruments to transition to alternative benchmarks (*)
31 December 2021
31 December 2020
in EUR million
Nominal value
Nominal value
By benchmark rate
1
GBP LIBOR
822
27,031
USD LIBOR
441,094
357,805
CHF LIBOR
9,710
JPY LIBOR
87,057
EONIA
29,593
Total
441,916
511,196
1 For cross currency swaps all legs of the swap are included that are linked to a main IBOR that is significant to ING Bank.
Comparatives have been updated to improve consistency and comparability with the current period
disclosure.
ING Bank also has exposure to interest rate benchmark reform in respect of its cash collateral balances
across some of its Credit Support Annex agreements. This exposure is not included within the table
above. However, during 2021 ING transitioned those portions of Credit Support Annex agreements
linked to benchmarks ceasing in 2021 to their designated replacement rates.
Given that IBOR reform may have various accounting implications, the International Accounting
Standards Board (IASB) has undertaken a two-phase project:
●
Phase 1 addresses those issues that affect financial reporting before the replacement of an existing
benchmark. Phase 1 amendments to IFRS were issued by the IASB in 2019 and were early adopted
by ING Bank in the same year. This allows ING to apply a set of temporary exceptions to continue
hedge accounting even when there is uncertainty about contractual cash flows arising from the
reform. Under these temporary exceptions, interbank offered rates are assumed to continue
unaltered for the purposes of hedge accounting until such time as the uncertainty is resolved.
●
Phase 2 focuses on issues that may affect financial reporting when the existing benchmark rate is
reformed or replaced. Phase 2 amendments to IFRS were issued by the IASB in 2020 and became
effective in 2021. Phase 2 amendments to IFRS relate mainly to accounting for changes in the basis
for determining the contractual cash flows of financial assets and liabilities due to the IBOR reform
and impact on hedge accounting when an existing benchmark rate is reformed or replaced with an
alternative risk-free rate. Refer to section 1.4.1 of Note 1 ‘Basis of preparation and significant
accounting policies’ of the financial statements.
As explained above, Phase 1 and Phase 2 IBOR amendments to IFRS, amongst other changes, provide
specific hedge accounting reliefs that allow hedge accounting relationships to continue when IBOR
Reform is ongoing. Phase 1 reliefs cease to apply when uncertainty arising from IBOR Reform is no
longer present with respect to the timing and amount of the IBOR-based cash flows of the relevant
instruments. It is ING Bank’s policy to cease to apply Phase 1 reliefs when the applicable contract
(either hedging instrument or hedged item) is actually modified. During 2021, ING transitioned
significant part of its financial instruments (designated in hedge accounting relationships) linked to
benchmarks ceasing in 2021. As a result, for these hedge accounting relationships the applicable Phase
1 reliefs ceased to apply and Phase 2 became applicable. For USD LIBOR, and although the
administrator of LIBOR confirmed on 5 March 2021 its plans for the cessation of USD LIBOR rates at the
end of June 2023, there is still uncertainty with respect to the timing of the transition as well as the
transition strategy for individual hedged items and/or hedging instruments linked to USD LIBOR.
Therefore, for USD LIBOR financial instruments designated in hedge accounting the applicable Phase 1
reliefs will continue to apply until the relevant contract is modified. At that point in time, Phase 2 reliefs
will become applicable.
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117
Foreign exchange (FX) risk in banking books (*)
FX exposures in banking books result from core banking business activities (business units doing
business in currencies other than their base currency), foreign currency investments in subsidiaries
(including realised net profit and loss), and strategic equity stakes in foreign currencies. The policy
regarding these exposures is briefly explained below.
Governance – Core banking business (*)
Every business unit hedges the FX risk resulting from core banking business activities into its base
currency. Consequently, assets and liabilities are matched in terms of currency.
Governance – FX translation result (*)
ING’s strategy is to protect the CET1 ratio against adverse impact from FX rate fluctuations, whilst
limiting the volatility in the profit and loss account due to this CET1 hedging. Therefore, hedge
accounting is applied to the largest extent possible. Taking this into account, the CET1 ratio hedge can
be achieved by deliberately taking foreign currency positions equal to certain target positions, such
that the CET1 capital and risk-weighted assets are equally sensitive in relative terms to changing FX
rates. For a selection of emerging market currencies ING decided not to enter into foreign currency
hedges as allowed under the policy.
Risk profile – FX translation result (*)
The following table presents the currency exposures in the banking books for the most important
currencies for the FX translation result. Positive figures indicate long positions in the respective
currency. As a result of the strategy to hedge the CET1 ratio an open structural FX exposure exists.
In order to measure the sensitivity of the CET1 ratio against FX rate fluctuations, an Historical Value at
Risk approach is used. It measures the drop in the CET1 ratio based on historical FX rates. The impact is
taken into account under the Solvency RAS.
EBA Structural FX Guidelines
The EBA guidelines on structural FX positions become effective in 2022. These guidelines aim to
harmonize the implementation and treatment of structural FX positions, which may be excluded from
the calculation of net open currency positions under CRR article 352(2) subject to permission by the
competent authorities. The implementation of these guidelines is expected to have limited impact on
the existing management of structural FX positions of ING Bank and its CET1 Ratio.
Foreign currency exposures banking books (*)
in EUR million
Foreign Investments
Hedges
Net exposures
2021
2020
2021
2020
2021
2020
US Dollar
1
8,218
7,126
-99
-10
8,119
7,117
Pound Sterling
1,593
1,285
1,592
1,285
Polish Zloty
2,761
2,631
-142
-369
2,620
2,262
Australian Dollar
3,774
3,544
-2,511
-2,269
1,263
1,275
Turkish Lira
729
1,078
729
1,078
Chinese Yuan
1,976
1,912
-107
1,869
1,912
Russian Rouble
256
344
-174
-126
82
218
Other currency
5,860
5,992
-3,453
-3,456
2,407
2,536
Total
25,167
23,913
-6,486
-6,231
18,681
17,683
1 US Dollar net exposure move is mainly driven by EURUSD FX rate.
Equity price risk in banking books (*)
Governance (*)
ING maintains a strategic portfolio with substantial equity exposure in its banking books. Local offices
are responsible for the management of the equity investment positions. Financial Risk is responsible for
monitoring the regulatory capital for equity investments on a monthly basis and acts independently
from ING / local management when monitoring these positions.
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Market risk
ING Bank Annual Report 2021
118
Risk Profile
Equity price risk arises from the possibility that an equity security’s price will fluctuate, affecting the
values of the equity security itself as well as other instruments whose value react similarly to the
particular security, a defined basket of securities, or a securities index. ING’s equity exposure mainly
consists of the investments in associates and joint ventures of EUR 1,587 million (2020: EUR 1,475
million) and equity securities held at fair value through other comprehensive income (FVOCI) of EUR
2,457 million (2020: EUR 1,862 million). The value of equity securities held at FVOCI is directly linked to
equity security prices with increases/decreases being recognised in the revaluation reserve.
Investments in associates and joint ventures are measured in accordance with the equity method of
accounting and the balance sheet value is therefore not directly linked to equity security prices.
Year-on-year variance analysis (*)
In 2021, the revaluation reserve equity securities increased by EUR 101 million from EUR 1,181 million
to EUR 1,282 million. In 2021, the equity securities at fair value through OCI increased by EUR 595
million mainly due to new investments in HQLA eligible equity instruments.
Revaluation reserve equity securities at fair value through other comprehensive income (*)
in EUR million
2021
2020
Positive re-measurement
1,291
1,201
Negative re-measurement
-9
-20
Total
1,282
1,181
Market risk in trading books (*)
Within the trading portfolios, the positions are maintained in the financial markets. These positions are
often a result of transactions with clients and may benefit from short-term price movements. In 2021,
ING continued its strategy of undertaking trading activities to develop its client-driven franchise and
deliver a differentiating experience by offering multiple market and trading products.
Governance (*)
The Financial Markets Risk Committee (FMRC) is the market risk committee that, within the risk appetite
set by the ALCO Bank, sets market risk limits both on an aggregated level and on a desk level, and
approves new products. FI-FM Risk advises both FMRC and ALCO Bank on the market risk appetite of
trading activities.
With respect to the trading portfolios, FI-FM Risk focuses on the management of market risks of
Wholesale Banking (mainly Financial Markets) as this is the only business line within ING where trading
activities take place. Trading activities include facilitation of client business and market making. FI-FM
Risk is responsible for the development and implementation of trading risk policies and risk
measurement methodologies, and for reporting and monitoring risk exposures against approved
trading limits. FI-FM Risk also reviews trading mandates and global limits, and performs the gatekeeper
role in the product review process. The management of market risk in trading portfolios is performed at
various organisational levels. The FI-FM Risk Management Framework defines policies and procedures
for the overall management of trading books. Trading activity is systematically reviewed and positions
against the mandates are assessed jointly by the first and second lines of defence.
Risk measurement (*)
ING uses a comprehensive set of methodologies and techniques to measure market risk in trading
books: Value at Risk (VaR) and Stressed Value at Risk (SVaR), Incremental Risk Charge (IRC), and Event
Risk (stress testing). Systematic validation processes are in place to validate the accuracy and internal
consistency of data and parameters used for the internal models and modelling processes.
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Market risk
ING Bank Annual Report 2021
119
Value at Risk (*)
FI-FM Risk uses the historical simulation VaR methodology (HVaR) as its primary risk measure. The
HVaR for market risk quantifies, with a one-sided confidence level of 99%, the maximum overnight loss
that could occur in the trading portfolio of ING due to changes in risk factors (e.g. interest rates, equity
prices, foreign exchange rates, credit spreads, implied volatilities) if positions remain unchanged for a
time period of one day. Next to general market movements in these risk factors, HVaR also takes into
account market data movements for specific moves in e.g. the underlying issuer of securities. A single
model that diversifies general and specific risk is used. In general, a full revaluation approach is applied,
and for a limited number of linear trading positions and risk factors in commodity and equity risk
classes a sensitivity-based approach is applied. The potential impact of historical market movements
on today’s portfolio is estimated, based on equally weighted observed market movements of the
previous year (260 days). When simulating potential movements in risk factors, depending on the risk
factor type, either an absolute or a relative shift is used. The data used in the computations is updated
daily. ING uses HVaR with a one-day horizon for internal risk measurement, management control, and
backtesting, and HVaR with a ten-day horizon for determining regulatory capital. To compute HVaR
with a ten-day horizon the one-day risk factor shifts are scaled by the square root of ten and then
used as an input for the revaluation. The same model is used for all legal entities within ING with
market risk exposure in the trading portfolio.
Limitations (*)
HVaR has some limitations: HVaR uses historical data to forecast future price behaviour, but future
price behaviour could differ substantially from past behaviour. Moreover, the use of a one-day holding
period (or ten days for regulatory capital calculations) assumes that all positions in the portfolio can be
liquidated or hedged in one day. In periods of illiquidity or market events, this assumption may not
hold. Also, the use of a 99% confidence level means that HVaR does not take into account any losses
that occur beyond this confidence level.
Backtesting (*)
Backtesting is a technique for the ongoing monitoring of the plausibility of the HVaR model in use.
Although HVaR models estimate potential future trading results, estimates are based on historical
market data. In a backtest, the actual daily trading result (excluding fees and commissions) is
compared with the one-day HVaR. In addition to using actual results for backtesting, ING also uses
hypothetical results, which exclude the effects of intraday trading, fees, and commissions. When an
actual or a hypothetical loss exceeds the HVaR, an ‘outlier’ occurs. Based on ING’s one-sided
confidence level of 99%, an outlier is expected once in every 100 business days. On an overall level in
2021, there were five outliers for hypothetical P&L and 0 outliers for actual P&L. The outliers occurred
by the market movements for that, ING Bank is in the Yellow zone and as a result the regulatory capital
multiplier has changed from 3.75 to 4.15. In general, ING reports backtesting results on a quarterly
basis to the ECB.
Stressed HVaR (*)
The Stressed HVaR (SVaR) is intended to replicate the HVaR calculation that would be generated on the
bank’s current portfolio with inputs calibrated to the historical data from a continuous 12-month
period of significant financial stress relevant to the bank’s portfolio. To calculate SVaR, ING uses the
same model that is used for 1DHVaR, with a ten-day horizon. The data for the historical stress period
used currently includes the height of the credit crisis around the fall of Lehman Brothers, and this
choice is reviewed regularly. The historical data period is chosen so that it gives the worst scenario loss
estimates for the current portfolio. The same SVaR model is used for management purposes and for
regulatory purposes. The same SVaR model is used for all legal entities within ING with market risk
exposure in the trading portfolio.
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Market risk
ING Bank Annual Report 2021
120
Incremental risk charge (*)
The Incremental risk charge (IRC) for ING is an estimate of the default and migration risks for credit
products (excluding securitisations) in the trading book, over a one-year capital horizon, with a 99.9%
confidence level. The same IRC model is used for all legal entities within ING with market risk exposure
in the trading portfolio. Trading positions (excluding securitisations) of ING, which are subject to specific
interest rate risk included in the internal model approach for market risk regulatory capital, are in
scope of the IRC model. By model choice, equity is excluded from the model. For the calculation of IRC,
ING performs a Monte-Carlo simulation based on a Gaussian copula model. The asset correlations used
in the Gaussian copula model are determined using the IRB correlation formula. The rating change is
simulated for all issuers over the different liquidity horizons (i.e. time required to liquidate the position
or hedge all significant risks) within one year. Movements across different rating categories and
probabilities of default are governed by a credit-rating transition matrix. An external transition matrix
is obtained from Standard & Poor’s (S&P). The financial impact is then determined for the simulated
migration to default, or for the simulated migration to a different rating category, based on LGD or
credit spread changes, respectively.
The liquidity horizon has been set to the regulatory minimum of three months for all positions in scope.
ING reviews the liquidity horizons on a yearly basis based on a structured assessment of the time it
takes to liquidate the positions in the trading portfolio.
ING periodically assesses the compliance of the IRC model with regulatory requirements by performing
gap analyses, substantiating the modelling choices, and quantifying the impact of alternative
approaches.
Stress testing and event risk (*)
Stress testing and event risk are valuable risk management tools. In addition to the bank-wide stress
test framework as described in the stress-testing section, FI-FM Risk performs additional assessments,
specific to the Trading Book, with various frequencies: sensitivity analyses (single-risk factor and multi-
risk factor), ad-hoc stress tests (e.g. Covid-19 scenarios) and structured stressed scenario tests under
the event risk framework - to monitor market risks under extreme market conditions. Event risk is
calculated because HVaR in general does not produce an estimate of the potential losses that can
occur as a result of extreme market movements, i.e. beyond the confidence level. Event risk evaluates
the bank’s financial stability under severe but plausible stress scenarios and assists in decision-making
aimed at maintaining a financially healthy going-concern institution after a severe event occurs. Event
risk is based on historical as well as hypothetical extreme scenarios. The result is an estimate of the
profit and loss caused by a potential event and its worldwide impact for ING. As with HVaR, the risk
appetite for event risk is limited to ALCO Bank.
ING’s event risk policy is based on a large set of possible stress scenarios per risk type. In stress
scenarios, shocks are applied to prices (credit spreads, interest rates, equity, commodities, and FX
rates) and volatilities. Depending on the type of the stress test, additional scenario assumptions can be
made, for example on correlations, dividends, or recovery rates. For equity products, for example, both
a crisis scenario (prices decrease) as well as a bull scenario (prices increase) are assumed. Scenarios are
calculated based on events happening independently, jointly by region, or in all countries
simultaneously. This way, for each risk type, a large set of scenarios is calculated. The worst scenarios
per market are combined across markets by assessing both independent events per market, and the
worst events happening in all markets at the same time.
Other trading controls
HVaR and event risk limits are the most important limits to control the trading portfolios. Additionally,
limits have been set on SVaR and IRC. Furthermore, ING uses a variety of other controls to supplement
these limits. Position and sensitivity limits are used to prevent large concentrations in specific issuers,
sectors, or countries. Moreover, other risk limits are set with respect to the activities in complex
derivatives trading. The market risk of these products is controlled by product-specific limits and
constraints.
>
Market risk
ING Bank Annual Report 2021
121
Risk profile
The following chart shows the development of the overnight HVaR under a 99% confidence level and a
one-day horizon versus actual and hypothetical daily trading profits and losses. In calculation of the
hypothetical daily profit and loss, the trading position is kept constant and only the market movement
is taken into account. The overnight HVaR is presented for the ING trading portfolio from 2016 to 2021.
1 CVA risk is not included in VaR.
The risk figures in the backtesting graph above and in the table below relate to all trading books for
which the internal model approach is applied, i.e. all trading books, including Credit Exposure
Management books.
1d VaR for Internal Model Approach trading portfolios
in EUR million
Minimum
Maximum
Average
Year end
2021
2020
2021
2020
2021
2020
2021
2020
Interest rate
1
4
12
20
42
8
26
5
15
Equity and commodity
1
1
4
14
2
3
2
3
Foreign exchange
1
3
7
1
3
1
2
Credit spread
2
4
11
32
4
15
2
7
Diversification
-5
-17
-4
-4
Total VaR
2
4
12
26
52
10
29
6
22
1 For calculation of HVaR per risk class the full valuation is performed according to HVaR methodology using a set of
scenario changes for the risk factors for the particular risk class, while risk factors for all other risk classes are kept
unchanged.
2 The total HVaR for the columns Minimum and Maximum cannot be calculated by taking the sum of the individual
components since the minimum/maximum observations for both the individual markets as well as for total HVaR may
occur on different dates. Therefore, diversification is not calculated for the minimum and maximum categories.
3 CVA risk is not included in VaR.
Average 1D/10D HVaR, 10D SVaR over 2021 has decreased compared to 2020, due to the increase in
market volatility, while IRC remained in line with 2020. The average for all the risk classes has
decreased compared to 2020, mainly driven by market movements. The VaR at the period end of 2021
decreased from EUR 22 million to EUR 6 million at period end of 2021, due to the market recovery from
the COVID crisis.
ING doesn’t calculate Comprehensive Risk capital charge and therefore it appears N/A in the table
below.
EU MR4: Consolidated trading HVaR
1
>
Market risk
ING Bank Annual Report 2021
122
EU MR3: Internal Model Approach values for trading portfolios
in EUR million
2021
2020
VaR (10 day 99%)
1 Maximum value
78
161
2 Average value
27
83
3 Minimum value
12
31
4 Period end
18
60
Stressed VaR (10 day 99%)
5 Maximum value
105
304
6 Average value
80
116
7 Minimum value
64
72
8 Period end
74
83
Incremental Risk Charge (99.9%)
9 Maximum value
195
134
10 Average value
71
74
11 Minimum value
37
38
12 Period end
65
89
Comprehensive Risk capital charge (99.9%)
13 Maximum value
n/a
n/a
14 Average value
n/a
n/a
15 Minimum value
n/a
n/a
16 Period end
n/a
n/a
Regulatory capital
According to the Capital Requirements Regulation (CRR/CRD IV), regulatory capital (own funds
requirements) for market risk can be calculated using the standardised approach or an internal model
approach. ING received regulatory approval to use an internal model to determine the regulatory
capital for the market risk in all trading books of ING. Market risk capital of trading books is calculated
according to the CRR, using internal HVaR, SVaR, and IRC models, where diversification is taken into
account. Capital for foreign exchange risk from the banking books and for collective investment
undertakings (CIUs) exposures in trading books are calculated using the standardised approach with
fixed risk weights. ING does not have a correlation trading portfolio or any other securitisations in the
trading book.
Standardised approach
EU MR1: Market risk under Standardised Approach
in EUR million
2021
2020
RWA
RWA
Outright products
1 Interest rate risk (general and specific)
6
2
2 Equity risk (general and specific)
3 Foreign exchange risk
4 Commodity risk
Options
5 Simplified approach
6 Delta-plus method
7 Scenario approach
8 Securitization (specific risk)
9
6
2
The MRWA under standardised approach slightly increased in 2021 as compared to end of 2020. The
FX exposure continued to be lower than the 2% own funds threshold. According to Art. 351 CRR, in such
a case, the calculation of Market Risk regulatory capital is not required. As of the third quarter of 2021,
collective investment undertakings are capitalised in market risk under standardised approach under
interest rate risk and foreign exchange risk.
Internal model approach
Market risk regulatory capital increased slightly during 2021 compared to 2020. The increase is driven
by an increase in HVaR and SVaR due to increased market volatility as a result of the Covid-19
pandemic, while IRC slightly decreased.
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Market risk
ING Bank Annual Report 2021
123
EU MR2-A: Market risk under Internal Model Approach
in EUR million
2021
2020
RWA
Capital
requirements
RWA
Capital
requirements
1
VaR
1,179
94
3,214
257
(a)
Previous day’s VaR (VaRt-1)
21
60
(b)
Multiplication factor (mc) x average of previous 60 working days
(VaRavg)
94
257
2
SVaR
(higher of values a and b)
6,336
507
4,419
354
(a)
Latest available SVaR (SVaRt-1))
112
83
(b)
Multiplication factor (ms) x average of previous 60 working days
(sVaRavg)
507
354
3
IRC
1,314
105
1,113
89
(a)
Most recent IRC measure
94
89
(b)
12 weeks average IRC measure
105
77
4
Comprehensive risk measure
(higher of values a, b and c)
(a)
Most recent risk measure of comprehensive risk measure
(b)
12 weeks average of comprehensive risk measure
(c)
Comprehensive risk measure - Floor
5
Other
200
16
180
14
6
Total
9,029
722
8,925
714
Sensitivities (*)
As part of the risk monitoring framework, FI-FM Risk actively monitors the daily changes of sensitivities
of the trading portfolios. Sensitivities measure the impact of movements in individual market risk
factors (foreign exchange rates, interest rates, credit spreads, equity, and commodity prices) on profit
and loss results of the trading positions and portfolios.
The following tables show the five largest trading positions in terms of sensitivities to foreign exchange,
interest rate and credit spread risk factor movements. These largest exposures also reflect
concentrations of risk in FX risk per currency, interest rate risk per currency, and credit spread risk per
country, rating and sector. Due to the nature of the trading portfolios, positions in the portfolios can
change significantly from day to day, and sensitivities of the portfolios can change daily accordingly.
Most important foreign exchange year-end trading positions (*)
in EUR million
2021
2020
Foreign exchange
Foreign exchange
US Dollar
-160
US Dollar
203
Taiwan Dollar
42
Chinese Yuan Renminbi
-63
Romanian Leu
32
Japanese Yen
-44
Japanese Yen
27
Great-Britain Pound
-37
South Korean Won
-24
Romanian Leu
-16
Most important interest rate and credit spread sensitivities at year-end (*)
in EUR thousand
2021
2020
Interest Rate (BPV)
Interest Rate (BPV)
Euro
-501
Euro
-787
US Dollar
185
US Dollar
-319
British Pound
-75
Great-Britain Pound
-120
Taiwan Dollar
73
Russian Ruble
-86
Japanese Yen
-57
Australian Dollar
-64
Credit Spread (CSO1)
Credit Spread (CSO1)
Netherlands
535
Germany
134
Germany
408
Republic of Korea
-129
United States
171
United States
118
France
112
Belgium
115
China
110
Netherlands
50
1 Basis Point Value (BPV) measures the impact on value of a 1 basis point increase in interest rates. The figures
include commodity risk in banking books.
2 Credit Spread Sensitivity (CS01) measures the impact on value of a 1 basis point increase in credit spreads.
Exposures to supranational institutions are not assigned to a specific country.
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ING Bank Annual Report 2021
124
Credit spread sensitivities per risk class and sector at year-end (*)
2021
2020
in EUR thousand
Corporate
Financial
Institution
s
Corporate
Financial
Institution
s
Credit Spread (CSO1)
Risk classes
1 (AAA)
-5
4
-4
2–4 (AA)
-7
18
2
-120
5–7 (A)
141
578
80
-14
8–10 (BBB)
204
12
301
-14
11–13 (BB)
40
-1
55
14–16 (B)
52
-6
18
-6
17–22 (CCC and NPL)
-6
-12
2
Not rated
1
Total
424
584
462
-158
1 Credit Spread Sensitivity (CS01) measures the impact on value of a 1 basis point increase in credit spreads.
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Funding and liquidity risk
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Funding and liquidity risk (*)
Introduction (*)
Funding and liquidity (F&L) risk is the risk that ING or one of its subsidiaries cannot meet its financial
liabilities when they are due at reasonable cost and in a timely manner. ING incorporates funding and
liquidity management in its business strategy and has established a funding and liquidity risk
framework to manage risks within pre-defined boundaries.
A high-level overview of the F&L framework is provided in the next figure.
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Governance (*)
Funding and liquidity risk management within ING falls under the supervision of the ALCO Bank
function that approves the funding and liquidity risk appetite and subsequently cascades it throughout
the organisation. ALCO Bank has delegated the responsibilities concerning the Internal Capital and
Liquidity Adequacy Assessment Process (ICLAAP) and documents, as per the ICLAAP framework of ING,
to the ICLAAP Committee. The ICLAAP Committee therefore focuses on technical liquidity documents
and oversees business processes and deliverables concerning ILAAP. The EB, MBB, staff departments
from the CRO and CFO domain as well as Group Treasury have oversight of and are responsible for
managing funding and liquidity risks.
ING’s funding and liquidity risk governance is based on the three lines of defence structure to ensure a
clear division of responsibilities as well as an independent risk control challenging process.
Group Treasury and the business lines have the first line of defence functions. Group Treasury’s main
responsibility is to manage ING’s (regulatory) liquidity and funding position by executing ING’s funding
plan, maintaining access to both the short- and the long-term professional funding markets and
managing the liquidity buffer. Business lines are responsible for managing the funding and liquidity
positions from the originated business, a large part of which is replicated with Group Treasury.
At the second line of defence, Financial Risk is responsible for developing and maintaining ING’s
policies, standards and guidelines on F&L risk management as well as for setting the F&L risk appetite.
Furthermore, the Financial Risk function measures funding and liquidity risks, executes stress testing,
provides management information and controls the liquidity and funding requirements on commercial
products. The Finance function is responsible for management information and regulatory reporting
related to funding and liquidity risk management.
For the third line of defence Corporate Audit Services is responsible for independently assessing the
design, effectiveness and implementation of the funding and liquidity framework.
Funding and liquidity management strategy and objectives (*)
The main objective of ING’s funding and liquidity risk management is to maintain sufficient liquidity to
fund the commercial activities of ING both under normal and stressed market circumstances across
various territories, currencies and tenors. This requires a diversified funding structure considering
relevant opportunities and constraints.
ING’s funding consists mainly of retail and corporate deposits contributing around 50 percent and 20
percent of total funding respectively. These funding sources provide a relatively stable funding base.
The remainder of the required funding is attracted primarily through a combination of long-term and
short-term professional funding. Group Treasury manages the professional funding in line with the F&L
risk appetite to ensure a sufficiently diversified and stable funding base.
Funding mix
1
2021
2020
Funding type
Customer deposits (retail)
51%
52%
Customer deposits (corporate)
25%
24%
Interbank
9%
6%
Lending/repurchase agreements
5%
9%
CD/CP
3%
2%
Long-term senior debt
4%
5%
Subordinated debt
2%
2%
Total
100%
100%
1 Liabilities excluding trading securities and IFRS equity
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Funding and liquidity adequacy and risk appetite (*)
ING distinguishes between several key drivers of future liquidity and funding needs:
◾
Refinancing needs resulting from maturing debt and asset growth;
◾
Current and future regulatory requirements;
◾
Risk appetite statements set by ING’s funding and liquidity risk function;
◾
The outcomes of various stress tests;
◾
Ability to distribute and transfer liquidity across the Group.
Taking into consideration the abovementioned factors, ING regularly assesses its current and future
liquidity adequacy and, if deemed necessary, takes steps to further improve ING’s liquidity position and
to ensure sufficient counterbalancing capacity. A Liquidity Adequacy Statement is formulated at least
quarterly to substantiate and reflect the management’s view on the current funding and liquidity
position as well as the potential future challenges. The quarterly adequacy statement is an important
part of ING’s ILAAP process.
ING assesses its F&L adequacy through three lenses – stress, sustainable and regulatory:
◾
ING evaluates its ability to withstand a period of prolonged F&L stress (idiosyncratic, market-wide
and combined – idiosyncratic plus market-wide) which is characterised by customer deposit
outflows, deterioration of funding markets access and lower liquidity value of the
counterbalancing capacity;
◾
ING assesses the extent to which its customers, professional counterparties and investors are
comfortable with extending funding in tenors, currencies and instruments necessary to
sustainably fund ING under a going-concern situation;
◾
ING manages its position to meet current and future regulatory requirements.
For each lens, ING has established a related set of risk appetite statements which define ING’s risk
appetite commensurate with the principles of liquidity adequacy. These risk appetite statements are
summarised in the next graph.
The F&L risk appetite statements are translated into a number of metrics with appropriate boundaries
and instruments which are used to measure and manage ING’s funding and liquidity risk.
The risk appetite with respect to the stress lens is set to ensure there is sufficient counterbalancing
capacity under various internally defined stress scenarios. Regarding the sustainability perspective, an
internally defined stable funding to loans (SFtL) ratio (supplemented by other metrics) is used to
ensure a diversified funding base and to prevent overreliance on professional funding. Finally, the
liquidity coverage ratio (LCR) and the NSFR regulatory metrics are monitored in terms of both ING’s risk
appetite and regulatory requirements.
The LCR compares the volume of available high-quality liquid assets (HQLA) to net outflows (outflows
minus inflows) over a 30-day stress scenario defined by the regulator. ING’s liquidity buffer forms a
part of the counterbalancing capacity which serves as a liquidity cushion under normal and stressed
conditions.
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The liquidity buffer consists mainly of high grade Level 1 assets, such as government and central bank
assets. Only assets that are freely available (not pledged under existing contracts) for liquidity
purposes are included in the buffer. The size and composition of the liquidity buffer are driven by ING’s
internal risk appetite limits as well as by regulatory requirements.
The macroeconomic and market environment are also important considerations in ING’s funding and
liquidity framework.
The macroeconomic environment comprises various exogenous factors over which ING has no control,
but which may have a material impact on ING’s F&L position. The main macroeconomic factors
analysed on a regular basis include:
◾
Global and local economic performance: e.g. shifts in GDP, inflation rate, unemployment rates
and public deficit/surplus;
◾
Changing geopolitical trends;
◾
Monetary policy with a focus on the unconventional monetary measures employed by central
banks in recent years including the measures taken since the start of the Covid-19 crisis; and
◾
Regulatory requirements: e.g. understanding the changing regulatory landscape as well as the
impact of ING’s actions on existing regulatory boundaries.
The strategic ambitions of ING, together with the design and execution of the funding plan, are
assessed under both current and projected market conditions. Key emphasis is placed on
understanding overall market trends and developments, credit rating changes and peer comparison.
Liquidity stress testing (*)
Funding and liquidity stress testing forms part of the overall F&L framework. It allows ING to examine
the effects of severe but plausible future events on ING’s liquidity position and provides insight into
which entities, business lines or portfolios are vulnerable to which types of risk or scenarios.
The stress testing framework encompasses the funding and liquidity risks of the consolidated balance
sheet of ING Bank including all entities, business lines as well as on- and off-balance sheet positions.
The net liquidity position is the main stress testing measure, capturing the liquidity position after
stressed net outflows, and is measured at different time buckets. The net liquidity position is impacted
differently under specific F&L stress scenarios and parameterisation.
The stress testing framework considers idiosyncratic, market-wide and combined (idiosyncratic and
market-wide) stress scenarios. Moreover, it differentiates between stress events that develop in a
gradual and in a fast manner, allowing ING to assess the net liquidity position at different time
horizons. The design of the framework is based on empirical evidence supplemented by expert
judgment. The framework can be extended to additional ad hoc scenarios. For example, it can be used
as input for firm-wide stress testing and reverse stress testing.
The outcomes of the stress testing are taken into account in all the key aspects of ING’s F&L risk
framework and F&L risk management:
◾
Risk Appetite Framework (through risk appetite statements);
◾
Risk identification and assessment;
◾
Monitoring of the liquidity and funding position;
◾
Business actions (if needed);
◾
Contingency funding plan; and
◾
Early warning indicators.
The funding and liquidity stress testing framework is also subject to regular internal validation by
model validation.
In line with supervisory expectations, ING’s liquidity position is stress tested at least monthly using
scenarios that are part of the F&L risk appetite statement. In addition, the results of all internal stress
scenarios are monitored and assessed on a regular basis. They also serve as input in the decision on
additional contingency measures.
Contingent F&L risks are addressed in the Contingency Funding Plan with a focus on early warning
indicators as well as organisation and planning of liquidity management in times of stress. The
contingency funding measures are developed in conjunction with the ING Recovery Plan and are tested
on a regular basis.
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Environmental, social and governance risk
Introduction
Environmental, social and governance risk is the risk that environmental and social issues stemming
from the bank’s clients result in reputational damages and/or financial losses for ING. Climate risk is the
risk that a financial loss will be incurred due to climate change, either through physical risk (e.g.
flooding) or transition risk (e.g. solar energy instead of gas).
Environmental and Social Risk
Governance
ESR is a risk function part of the second line of defence of ING. The ESR Team is responsible for
developing policy and procedures. The department takes the lead in communicating them internally
and in training internal stakeholders. The ESR Team also performs an advisory role to support the deal
principals, senior credit officers and approval authorities on individual transactions. The degree of the
ESR Team engagement in transactions is dependent upon (i) the risk profile of the project and (ii) ING’s
exposure. In some locations an ESR delegated advisor may be appointed if mutually agreed by the
head of ESR and regional head. Such a role would support the Senior Credit Officer (SCO) who would be
responsible for ESR issues in the region.
Committees involved in managing environmental and social risks include the Global Credit & Trading
Risk Committee (GCTP ) and the Global Credit Committee GCC(TA ). The GCTP approves the policies,
methodologies, and procedures related to ESR. The GCC(TA) approves transactions that entail taking
higher environmental and social risk.
The ESR function encompasses the following activities:
●
Create and maintain policies for sensitive industry sectors.
●
Assess transactions for environmental and social risk.
●
Monitor high-risk clients to ensure compliance with sustainability criteria.
●
Spread ESR awareness throughout ING.
●
Participate in European and global advisory groups (i.e. OECD advisory group, steering
committee to the Equator Principles, Thun Group of Banks) to help bring all banks to the same
high standard.
External developments and ING’s actions
After the UN Paris Agreement and the United Nations Sustainable Development Goals (UN SDGs) were
signed by world leaders in 2015, the European Commission published the European Green Deal in
December 2019 with the overarching aim of making Europe climate-neutral by 2050 and emitting net
zero greenhouse gases from then on. Among other objectives, the Green Deal targets mobilisation of
the business community in the transition to a circular economy, as well as achieving clean energy and
a toxic-free environment. The European Climate Law, provisionally agreed between the European
Parliament and the Council in April 2021, is a core element of the European Green Deal. This outlines a
framework for the gradual, irreversible reduction of greenhouse gas emissions and legally establishes
the goal of a climate-neutral Europe by 2050.
The introduction of the United Nations Guiding Principles and the Organisation for Economic
Cooperation and Development (OECD) Guidelines for Multinational Enterprises mark a clear shift
towards a more regulated environment with impact management required on social risks. Legislation
aimed at preventing human rights violations along the supply chain is being introduced in several
countries, including a proposal at EU level for mandatory human rights due diligence.
Other key developments in the regulatory landscape include the EU Taxonomy Regulation that
requires compliance to minimum social and governance safeguards and the EBA consultation on ESG
risks, which aims to incorporate ESG risks into the governance, risk management and supervision of
credit institutions and investment firms. The effects of the recent pandemic also bring a renewed focus
on the importance of health and safety measures on the ground for the projects we finance as well as
for the workforce of our clients.
ING joined the Net-Zero Banking Alliance in August 2021 in support of achieving a world with net-zero
green-house gas emissions by 2050. The Alliance was launched by 43 Founding Members on 21 April
2021 and has since grown to represent over a third of global banking assets. The initiative is part of the
UN Race to Zero and is the banking element of the Glasgow Financial Alliance for Net-Zero. In addition,
ING published its first integrated Climate Report in September 2021, which combined our progress
report on Terra and climate risk report into one comprehensive report. Our integrated approach to
climate action is about steering our portfolio to achieve net zero by 2050, providing green financing
and advice to clients, managing climate risk and reaching net zero in our own operations by 2050
rather than 2070.
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Meanwhile, the Dutch Banking Sector Agreement on Human Rights (DBA) was successfully completed
in 2019. ING updated its human rights policy to reflect its commitment to the United Nations Guiding
Principles, and improved transparency through regular human rights reporting. We continue to work
within the framework of this agreement. We are currently in the process of testing and implementing
a tool that will help assess portfolio and client exposure to salient human rights issues, enabling
identification of issues and client engagement.
The ESR Framework
ING’s ESR policy framework helps us make transparent choices about how, where and with whom we
do business. In 2021, we updated the ESR Framework as part of the three-year mandatory
comprehensive review cycle. The new release takes account of the recent ESR requirements of the EBA
Loan Origination and Monitoring guidelines, improved controls and comments received from internal
and external stakeholders. The update further aims to improve understanding of existing process and
evaluation requirements, with special attention to supply chain due diligence. Where appropriate,
internationally acknowledged certification standards and guiding principles have been added to or
adjusted per the individual sector policies.
In 2021, we continued the implementation of the new ESR self-declaration approach for business
banking. The concept was incorporated in the updated ESR Framework. There is an alternative ESR
client assessment implementation for business banking clients where lending and pre-settlement
limits exceed €1 million and where the client is active in any of the pre-identified sectors (e.g.
employment agencies). Such clients will be required to confirm their compliance with specific
statements related to safeguarding labour rights and/or environmental regulations that are specific for
that sector. The initiative has already been rolled out in half of the countries where we are active with
business banking clients globally while other affected ING locations are expected to implement this in
the course of 2022.
Following any key ESR policy updates on restrictions, we engage with affected existing clients and
provide them with the opportunity to reduce their exposure to the new restrictions; in case a reduction
is not feasible, we implement an exit strategy.
We will continue to update and refine our ESR policy to ensure it is reflective of ING’s risk appetite and
sustainability direction.
ESR in practice in 2021
The ESR policy framework includes standards and best practice guidance for ESR-sensitive sectors. It
includes explicit restrictions on activities not in line with ING’s values and harmful to people or the
environment (for example companies involved in clearance of primary forest), which we do not
finance.
The way the ESR Framework is applied in practice differs per product type. The largest potential
environmental and social impacts come from large corporates within our Wholesale Banking (WB)
segment. WB is therefore the primary focus of our assessments and where we promote active ESR
dialogue and knowledge sharing. We have been working with wholesale clients for more than 15 years
to support them in understanding and managing their environmental and social impact. A simplified
version of the ESR policy framework, following the same rationale and principles, applies to ING’s
business banking clients. The ESR framework minimum requirements are also included in ING’s
procurement policy and apply to the screening of suppliers of ING’s global procurement activities.
The ESR policy framework is incorporated in ING’s KYC policy framework, meaning the ESR client
assessment is part of regular client on-boarding and review. The ESR policy framework also triggers a
dedicated ESR transaction assessment to corporate clients, which will indicate if such transaction is
categorised as ‘ESR high risk’, and thus require a separate in-depth advice from the ESR team.
While we have a strong ESR policy framework and made progress in enhancing the automation of the
checks and controls in the ESR assessment processes, we acknowledge that we need to further
improve our processes to ensure accuracy and completeness of the data.
Of all Wholesale Banking engagements in scope of the ESR policy framework in 2021, 82 percent were
considered ESR low-risk, 7 percent ESR medium-risk and 11 percent ESR high-risk. ESR high-risk cases
require specialised advice from the global ESR team. The team now consists of 10 dedicated ESR
advisors, 9 of whom are in Amsterdam and one in Geneva. The ESR advice assesses the specific
product offered and environmental and social impacts associated with it, the sector, operating context
and geography of the engagement and other relevant factors. Based on this in-depth research, a
binding advice is given that can only be overruled at Global Credit Committee level. Of the 379 ESR
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advices given in 2021, which are related to new requests, 60 percent were positive, 24 percent positive
subject to conditions and 16 percent negative.
Conditions can play an important role in helping clients improve their environmental and social
performance and ensuring their continued compliance with our ESR policy. The following chart shows
the concentration of ESR conditions and engagement across policy sectors.
*Other includes advices reports covering the policy area animal welfare, chemicals and manufacturing.
The ESR team mainly focuses on policy development and transaction advisory. However the team also
provides training (both in-person and via webinars) to hundreds of colleagues around the world every
year in risk, front-office, KYC and compliance teams, so that ESR knowledge is built on and spread.
Further evolving ESG within the bank
Our ESR approach helps us and our clients gradually enhance the implementation of key standards like
the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational
Enterprises. But beyond stimulating better environmental and social performance in our own portfolio,
ING actively collaborates with other institutions, peers and regulators to address the environmental,
social and human rights challenges we face:
◾
ING and the Equator Principles (EPs):
management framework adopted by 126 financial institutions worldwide. ING is active in
several EP working groups covering social risks, climate change and scope. ING also co-leads
the capacity building and training workgroup, which is focussing on updating the EP E-learning
tool with the changes included in EP4. The update of the EP e-learning tool has been
successfully completed in 2021.
◾
The Covid-19 pandemic
international travel is slowly picking up again, visiting clients and their operations is still done
remotely. On a number of projects the engaged environmental and social consultants were
able to conduct virtual site visits and with the use of drones and video footage successfully visit
our clients’ construction areas. We have seen a number of clients that were confronted with
high rates of Covid-19 infections in their operations. In some cases operations were temporarily
halted, but for most the measures, such as improvement on health and safety protocols, were
sufficient to manage further spreading of the virus.
◾
Shift Business Learning Programme:
the leading centre of expertise on the UN Guiding Principles on Business and Human Rights. The
programme focuses on the corporate responsibility to respect human rights as set out in the
UN Guiding Principles. Under the leadership of Shift a group of companies active in various
business sectors including financial institutions share challenges and practices through cross-
industry workshops and benefit from tailored strategic support. ING participates in the
programme. We are also a member of the Financial Institution Practitioners’ Circle, a group for
selected practitioners in the financial sector to discuss and share approaches to meeting their
responsibility to respect human rights, led by Shift experts.
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◾
Responsible Business Conduct Agreement:
new commitment on responsible business was formed among Dutch banks. Global
Sustainability is leading the initiative for ING and the ESR team is aligned for any policy
implications or client interactions.
◾
Thun Group:
Principles on Business and Human Rights into banking activities. The Group is now in the
process of establishing itself as a formal group promoting human rights and sharing best
practices among its participant members.
By taking part in the above-mentioned initiatives, we aim to contribute our viewpoint and those of our
clients, employees and other stakeholders to help form a consensus and develop clear guidelines that
can serve as a standard for our industry.
Climate risk management
Climate change is increasingly exposing society to a range of acute and chronic physical risks. At the
same time, the transition to a net zero economy can also create exposure to transition risks, such as
stranded assets.
Managing climate risks covers both physical risks and transition risks:
●
Physical risks: These risks can be climate-related event-driven (acute) such as increased
severity of extreme weather events (e.g. cyclones, droughts, floods and fires) or longer term
(i.e. chronic) when they arises from progressive shifts, such as increasing temperatures, sea
level rises, water stress, or biodiversity loss.
●
Transition risks: these can be climate-related or environmental risks from policy, legal,
technology and market changes occurring in the shift to a lower-carbon economy. This could
result in stranded assets and/or markets by the loss of value of assets that are no longer part of
a more sustainable world
The potential impacts that physical and transition risks could have on households, businesses and the
macro-economy ultimately require us to view climate risk as a risk that has an impact on various
financial risks.
ING endorses the recommendations of the Financial Stability Board’s (FSB) Task Force on Climate-
Related Financial Disclosures. (TCFD). To further strengthen our understanding and adoption of the
TCFD recommendations, ING is part of the UNEP FI TCFD project. We continue to develop our approach
to climate related and environmental disclosures as we build our approach to quantifying such risks.
Governance
ING’s Climate Change Committee (CCC) is established by the Management Board Banking and
mandated to oversee and set priorities for the implementation of the TCFD recommendations and
other strategic climate-related topics that impact the group. The CCC is chaired by the ING Group CRO
and co-chaired by board member responsible for Wholesale Banking. The CCC meets on a bi-monthly
basis and is supported by the Climate Expert Group with experts from across the business who lead
and advise on key climate initiatives. For details please refer to our approach to climate governance
(Sustainability governance) published on our corporate website ing.com . In 2021 the mandate of the
CCC was expanded to include oversight of our approach to biodiversity. In addition , please refer to the
2021 Climate Report (Managing climate and environmental risks) available on ing.com.
With the strategic review of the risk organisation structure, that will start as of March 2022, an ESG
department will be established to ensure that ESG regulation is assessed and implemented in
accordance with the expectations of supervisors and society. The department is responsible for the
development of the overarching ESG risk framework, the setting of Risk Appetite Statements and
reporting thereon as well as the coordination of internal and regulatory ESG risk stress testing and
scenario analysis.
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As part of our integrated strategy and as per regulatory expectations (ECB Guide on climate-related
and environmental risks), ING has established its climate risk road map as a formalised programme
under ING’s global oversight of regulatory programmes. The programme aims at embedding climate-
related and environmental risks across the organisation, from identification to business strategy and
governance to risk appetite and from data management to internal reporting and external disclosures.
Together with ING’s ESR framework and the Terra approach that was introduced to align our lending
portfolio of the most carbon emission intensive sectors with the decarbonization objectives, the
climate risk programme contributes to increase the control over exposure to climate change.
The governance of the programme has recently been strengthened. Under the ING Group CRO’s
sponsorship, the Steering Committee has been extended with broader representation of Finance, both
the first and second line of defence of the Risk domain and an observer role for the third line of
defence.
The Steering Group is responsible for the following tasks:
◾
Set strategic direction and prioritise the programme deliverables
◾
Define KPIs for climate risk integration
◾
Oversight on execution
◾
Manage impediments raised by the workstreams
Workstreams are responsible for the implementation of the specific requirements with regard to
strategy and governance, the risk management framework across all risk categories, scenario and
stress testing and reporting and disclosures. Workstreams for the Wholesale Banking and Retail
Banking are responsible for the implementation in the business lines.
The Workstreams are supported by a Core Team that is responsible for overall management of the
programme, alignment on content across the workstreams, report progress to the Steering Committee
and communication with both internal and external stakeholders to further promote awareness and
knowledge of the topic
Progress 2021
Under the governance of the climate risk programme the following progress was made in 2021:
Review of credit risk policies and procedures
Under ING’s governance for policy review, the group-wide policies and procedures for Financial Risk,
ESR, Operational Risk, Compliance and Retail Risk have been assessed for guidance on climate-related
and environmental risks. Focusing on credit risk, the global policies for sector strategy and risk appetite
setting, the credit risk appetite framework, corporate credit assessment and regular review, collateral
valuation and loan renewal, credit risk mitigation, the ESR framework, the investment policy, the
methodology for the climate & environmental risk heatmap and the Retail credit risk policy have been
updated with specific requirements for climate-related and environmental risks. The risk rating policy
was updated to explicitly include climate-related and environmental risks as a valid reason to appeal
the rating.
Risk identification
In the course of 2021, we worked on further identifying climate-related and environmental risk within
our portfolio. We have created extensive heatmaps to assess each Wholesale Banking sector and the
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Retail Banking mortgages, consumer lending and business lending portfolios, from a global perspective,
on more than 30 climate-related and environmental risk factors. These heatmaps have been
established with the input from ING’s front office and credit risk management experts. The heatmaps
have been challenged for plausibility and ratified for consistency across the individual sectors and
portfolios by responsible Senior Management of the Front Office and the second line Credit Risk
function of Wholesale Banking and Retail Banking.
The table below is an extract from the consolidated heatmap. The aggregated scores on transition risk
and physical risk for each sector are assuming a 5-year horizon, which is relatively short in climate
terms. We refer to ING’s 2021 Integrated Climate Report for more information on the methodology and
risk factors used to establish the heatmaps. Besides, we highlight the fact that these scores represent
the financial materiality of climate risk on ING’s portfolio, as opposed to a generic sector perspective.
Heatmap
Sectors
Transition risk
Physical risk
EAD 2021 (€
million)
Renewables & power
Low
Low
11,203
Upstream O&G
High
low-medium
6,266
Mid & downstream O&G
medium -high
low-medium
12,098
Utilities
low
low
12,173
Metals manufacturing
low-medium
medium
5,135
Metals mining
medium
low-medium
5,153
Fertilizers
low
low-medium
387
Automotive
low-medium
low-medium
8,842
Aviation
low-medium
low-medium
3,905
Shipping
low-medium
low-medium
10,420
Containers & logistics
low-medium
low-medium
9,106
Land transport
low-medium
low-medium
3,937
Commercial real estate
1
medium
low
57,766
Residential real estate
medium
medium
329,764
1 Commercial real estate includes Wholesale Banking and business banking (Retail Banking) exposures.
All EAD exposures are from our Wholesale Bank division, except for Commercial real estate which also
include ING’s Business Banking exposure and the residential real estate which represents ING’s Retail
Bank’s mortgages.
The heatmaps’ climate risk assessments are based on internal expert judgement and don’t yet include
individual counterparty assessment. The heatmapping exercise is however a useful tool to scan our
portfolio on climate risk and to identify the pockets of exposure which need to be further investigated
in priority. The table represents the portfolios of our balance sheet for which we consider to have the
most mature level of expertise to assess climate risk impact. Going forward, we expect to disclose the
assessment on all our portfolios. We use our heatmaps to inform the Wholesale Bank sector strategy
and risk appetite papers and as main climate risk identification tool for the pilot we are launching to
embed climate risk into the Wholesale Bank transaction approval process
Retail Banking has finalized the preparation of the risk assessment of physical risk exposure of the
mortgage portfolio in cooperation with an external party. Compared with the expert led heatmaps,
the physical risk assessment of the Retail mortgages portfolio provides information on a granular level
which allows for a more quantified impact analysis.
Risk appetite
The heatmaps have been used to introduce climate-related and environmental risk in our 2022 credit
RAS cycle. Starting with a monitoring period, the 2022 credit RAS for Wholesale Banking introduces a
mechanism that limits growth of subsectors with a higher exposure to climate-related and
environmental risks while allowing subsectors with a low exposure to these risks to grow within the
overall limit of the sector. A similar approach is planned for Retail Banking, where the outcome of the
physical risk assessment that is will be conducted in the first half of 2022 is expected to inform the
Retail Banking strategy and risk appetite
Risk measurement
We have conducted a climate change scenario analysis pilot project with Baringa Partners, a
consulting group with specific climate change capabilities. The project consisted of running the Climate
Change Scenario Model, developed by Baringa and acquired by BlackRock in June 2021, on a sample of
40 counterparties in the Energy, Transport & Logistics, and Metals & Mining sectors. The pilot provided
insight on the impact of climate change pathways on company metrics. Under a 2 degrees orderly
climate change scenario, the pilot showed limited impact on company metrics until 2035 and limited
defaults. Under a disorderly 2 degrees scenario in which the response comes at a later stage and with
more sudden actions , the steeper increase of carbon pricing results in a higher number of company
defaults after 2040. In the 4 degrees scenario (“hothouse”) in which no measures to mitigate the
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impact from climate change are taken, there is no transition risk but a higher physical risk than in the 2
degrees orderly / disorderly scenarios. The main high level insight from this exercise is that transition
risks are expected to materialize much faster than physical risks given the expected actions to
decarbonize the economy. More concrete conclusions would be expected in case such exercise would
be run on a representative part of our exposure to the various sectors of the economy. The pilot project
we did has provided an accelerated experience of what climate change scenario analysis is on a
sample of companies, under specific scenarios. At the same time the heatmap data for Wholesale
Banking sectors will also be integrated in the ING internal credit risk dashboard to allow senior
management to monitor climate risk exposure against the RAS limits. ING is also actively preparing for
the ECB climate risk stress to occur in 2022. For details please refer to our stand-alone ‘Climate Report
2021’ published on our corporate website ing.com.
Next to the structured approach to measurement of exposure to climate risks and as part of collecting
and analysing empirical data of climate and environmental risk impacts, a separate assessment was
made of the credit losses resulting from the river floodings in Germany, Belgium and The Netherlands
that took place in July 2021. The credit losses were assessed not to be material for ING.
Challenges
Access to actual and consistent data is the key challenge for risk measurement as definitions and
methodologies for the quantification of climate-related and environmental risks are developing.
Availability of company data is scattered across industries and jurisdictions and limited as not all
companies are subject to disclosure requirements w.r.t. climate-related and environmental risk factors.
In absence of comprehensive company data, the use of proxies is required for a consistent assessment
of exposures. Because of these limitations and given the prospective and (very) long term nature of
climate risk measurement, the integration of quantified inputs into risk modelling has not taken place
at this stage.
Next steps
In 2022, we aim to further progress with our efforts regarding climate-related risks and opportunities
by refining our methodologies. ING’s leadership objectives in building a sustainable future has been
translated into targets to manage our portfolio’s material ESG risks and quantify the financial impact
that are linked to the United Nations’ Sustainable Development Goals. A specific KPI has been defined
for the Management Board Banking to integrate ESG into ING’s governance. For the implementation of
“E”, next to the above mentioned next steps for the integration of climate-related and environmental
risk considerations in the credit risk domain, this includes working towards standard setting and
expanding the scope to the market and liquidity risk and the non-financial risk / compliance
framework. From 2022 onwards, climate-related and environmental risks will be integrated in the
critical policies and procedures for ING’s financial markets, treasury and liquidity risk management
function and the Operational & Compliance risk framework. The outcome of internal stress testing will
inform the risk appetite and limit setting process. Where applicable, the governance framework will be
updated with roles and responsibilities for climate-related and environmental risks assigned. With the
strengthened climate risk governance and structured programme management approach, we aim to
accelerate the embedding of climate risk within the ING organisation, moving towards quantification of
these risks in our risk management procedures. This includes the implementation of a global climate
risk data management plan, the integration of climate-related and environmental risk considerations
in risk policies and procedures at country level, the further refinement of our climate-related and
environmental risk heatmaps with longer time horizons and geographical dimension. The outcome of
the ECB climate stress test that will be conducted in the first half of 2022 will inform the approach for
standardised internal climate risk stress testing that is planned to start as from 2023. Based on an
inventory of training needs of the critical functions in front office, risk management and leadership, ING
will launch training plans to educate our staff on climate risk.
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Non-financial risk
Introduction
Non-financial risk (NFR) is defined as the risk of financial loss, legal or regulatory sanctions, or
reputational damage due to inadequate or failing internal processes, people and systems; a failure to
comply with laws, regulations and standards; or external events.
Governance
The global head of NFR is responsible for developing the framework of NFR policies and standards
within ING, and for monitoring the quality of non-financial risk management in the ING entities.
Non-Financial risk measurement
ING uses an internal model in line with the Advanced Measurement Approach (AMA) to determine the
regulatory and economic capital amounts that are necessary to cover potential losses resulting from
non-financial risks. This model predicts non-financial risk losses by combining a forward-looking and a
backward-looking view on non-financial risk events. ING reports the outcome of its AMA model
quarterly.
Risk categories
ING categorises non-financial risks in the following areas:
◾
Information (technology)
risk
damage due to breaches of confidentiality, integrity or availability of information or a lack of
information quality within business processes and/or the supporting IT systems;
◾
Continuity risk
business disruptions (loss of people, processes, systems, data, premises);
◾
Control risk
ineffective organisational structures and governance procedures (including unclear roles and
responsibilities and inadequate reporting structure);
◾
Processing risk
failed (transaction) processing (input, execution, output) or failing process management;
◾
Unauthorised activity risk
damage due to employees performing outside the normal course of their business,
intentionally giving unauthorised approvals or overstepping their authority;
◾
Personal and physical security risk
reputational damage due to criminal and environmental threats that might endanger the
security or safety of ING personnel at work, people in ING locations, ING assets or assets
entrusted to ING, people at ING event locations, or might have an impact on ING organisation's
confidentiality, integrity or availability;
◾
Employment practice risk
damage due to acts that are inconsistent with employment, health and/or safety laws,
regulations or agreements, from payment of personal injury claims, or from
diversity/discrimination events; and
◾
Fraud
ING by those who intend to deceitfully or unlawfully benefit themselves and/or others. This
definition of fraud is specified in the following two categories of fraud:
Internal fraud
: acts of fraud which involves at least one internal party performed by or in
collusion with an ING employee or agent with the consequence of financial loss, regulatory
fines, litigation loss, business disruption and/or reputational damage for ING.
External fraud
: acts of fraud or scams by individuals and/or parties excluding ING staff
(including contractors), with the consequence of financial loss, regulatory fines, litigation loss,
business disruption and/or reputational damage for ING.
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Main developments in 2021
Covid-19
From the start of the global outbreak of the Covid-19 virus in January 2020, ING’s priority has been to
protect its employees and their families and to continue servicing its customers as before, putting
extra effort into supporting them in difficult times. To ensure this ING employees have put immediate
focus on ensuring the bank’s operational resilience and continuity. ING has mobilised a global crisis
management organisation – engaging with all ING entities worldwide – to monitor and manage Covid-
19-related operational, health and safety challenges. Throughout 2021, ING continued to monitor
developments in employee well-being and local Business Continuity Management (BCM) threat levels
and aimed to identify, monitor and manage Covid-19 related risks through specific risk assessments.
During 2021 ING developed an approach for the new way of working once Covid-19 measures are
lifted. This approach (Hybrid Mode) is based on working partly at home, and partly in the office
according to local health authority guidance.
Cybercrime and fraud
Cybercrime remains a continuous threat to companies in general and to financial institutions in
particular. Both the frequency and the intensity of attacks are increasing on a global scale. The
sophistication and implications of ransomware attacks are a growing concern in the threat landscape.
The continuous enhancement of the control environment to protect from, and detect and respond to,
e-banking fraud, distributed denial-of-service (DDoS), targeted attacks and more specific ransomware
attacks is of the highest priority. Based on regular scenario analysis done in ING’s first line of defence,
additional controls continue to be embedded in the organisation as part of the overall internal control
framework and are continuously re-assessed against existing and new threats.
In addition, ING continues to strengthen its global cybercrime and fraud resilience through
collaboration with financial industry peers, law enforcement authorities, government (e.g. National
Cyber Security Centre) and Internet Service Providers (ISPs).
The further digitalisation of banking services, increasing electronic exchange of information via
different consumer channels, use of and dependency on third-party vendors for services, and the
implementation of PSD2 are likely to present ongoing cybercrime resilience, fraud management and
IT-security challenges; both in the short- and medium-term as criminal actors target financial and
sensitive (payment) data, such as customer user credentials outside the traditional banking
environment. Sensitive (payment) or personal data can be obtained by criminals via social forums such
as WhatsApp and by screen scraping user credentials when a fallback procedure within PSD2 is
allowed. In 2021, these challenges have further increased with more sophisticated phishing attempts,
improved social engineering fraud attempts, an increased risk of external fraud in the lending portfolio
and because people are working from home.
Dealing with current and emerging fraud threats, especially given the ever increasing use of digital and
online banking, effectively requires continuous improvement of fraud management capabilities such
as real-time transaction monitoring and response capabilities. In addition, better alignment and
standardisation is needed for cross-border fraud management across ING and related platforms. With
legislation such as EBA PSD2 and the continuing emphasis on duty of care, financial institutions are
potentially becoming more and more responsible for losses incurred by clients and are taking on more
of the burden of reclaiming those losses.
Data risk management
Data – whether customer, financial, risk or other business – is core to ING’s purpose. Data leads to
insights and insights empower people to stay a step ahead in life and in business. The ING Data
Strategy is creating a single vision and governance for data, empowering business users with a
harmonised foundation. This encompasses further embedding data functions and improving (bank-
wide) data operations in ING’s Way of Working, and simplifying, standardising and modernising its
technology and data platforms. Recognising that data risk is one of the top risks of the bank, ING is
creating a holistic view on how ING manages risk around data, including personal data protection, data
security, data quality and data ethics.
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Identity and access management (IAM)
IAM remains one of the focus areas of ING and an important element in our control framework to
prevent and mitigate the risk of, unauthorised access to IT systems and the data processed and stored
therein. This is done by enforcing IAM global processes and controls which are periodically reviewed
and tested. These processes and controls are supported by technologies, tooling and practices which
are managed by a dedicated IAM team, also ensuring improvements are identified to address
developments both inside and outside ING. In 2021, ING continued to improve, with attention to
tooling, standardisation and harmonisation of processes, workflows and automation of IAM controls.
Personal data protection
As per 25 May 2018, the European General Data Protection Regulation (GDPR) became effective. ING is
bound by the GDPR that affords greater protection to individuals and requires more control on data
and transparency regarding the use of data by companies. In 2021, ING continued to further enhance
the data protection of our clients and employees.
Sourcing Risk
In 2019, a renewed sourcing policy became effective, outlining the inherent critical and high risks that
can materialise during the sourcing life-cycle. In addition, a sourcing guideline was issued to support
updated requirements, issued by EBA in 2019. The controls defined in the support control framework
(SCF) sourcing have been implemented and tested. The scope of sourcing encompasses outsourcing to
external providers as well as intra-group sourcing. During 2019, 2020 and 2021 the relevant service
arrangements have been assessed based on the new Sourcing Policy definition and when applicable
updated to comply with the EBA guidelines.
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Compliance risk
Introduction
Compliance risk is defined as a threat posed to ING’s standing resulting from failure to act in line with
applicable laws and regulations, internal rules (including ING’s Orange Code and global Code of
Conduct) and/or societal expectations. A failure to adequately mitigate compliance risk may lead to
damage to ING’s reputation and/or legal/regulatory sanctions, and/or financial loss.
The mission of Compliance is to support ING in conducting its business activities in line with applicable
laws and regulations, taking into account ING’s internal code of conduct and societal expectations.
Compliance wants to drive compliance risk management by desire and design throughout the
organisation, unleashing the power of our data, risk expertise, and people to keep the bank safe and
sound, and help drive new and sustainable ways of doing business.
Within ING, compliance risks are defined as those risks that are within the scope of the ING Compliance
Risk Catalogue. The following three risk categories apply:
◾
Financial crime risk refers to the risks of the bank’s products and services being abused for illicit
purpose generating or disguising financial and/or economic crimes (FEC).
◾
Conduct risk refers to the compliance risks arising from potential or perceived misconduct by
ING or its employees towards its customers, market integrity, business partners and other
stakeholders.
◾
Organisational risk refers to the compliance risks arising from actual, potential or perceived
flaws in the way that ING is organised and structured including its regulatory and reporting
framework.
Governance
The Compliance organisation (comprised of three roles: Group Compliance, geographical compliance
and country compliance) is part of ING’s second line of defence. Group Compliance sets the
methodologies and minimum standards for the bank as a whole. Geographical compliance
(Challengers & Growth Markets / Wholesale Banking / Market Leaders) together with the functional
lines in the countries are responsible for the execution of these standards and control frameworks,
within the boundaries set. Compliance is tasked with instructing, advising, challenging and having
oversight of the first line of defence in their management of compliance risks as well as raising
awareness (via training and communication), influencing and stimulating a sound compliance risk
culture. The scope of the compliance risks is outlined in the ING Compliance Charter.
Compliance is headed by the chief compliance officer (CCO) who reports directly to the CRO. The CCO
has direct access to the Risk Committee of the Supervisory Board. The CCO and the chairman of the
Risk Committee had regular bilateral consultations in 2021.
Strengthening the compliance function
As a global bank in a fast-changing world we want to do the right thing to be safe, secure and
compliant for our customers and for society. To live up to that the OneCompliance strategy was
launched in October 2019.
The OneCompliance strategy is a multi-year, global compliance strategy and transformation
programme that is based on a framework that aims to help ING manage risks consistently across the
organisation. In 2021 the work continued on the following programme goals: a global identity and risk
view allowing people to assess risks in a uniform way; a single, risk-based monitoring methodology to
accelerate improvements in addressing risks; simplified work processes through a uniform framework,
to allow people to focus on what matters; the necessary skills and resources to deliver at the desired
quality; intuitive, actionable and insightful management information and global dashboard to take
smart decisions and steer within risk appetite and our global direction (steering) to support everyone in
Compliance. As we operate in a dynamic and challenging environment we are continuously learning
and improving while getting to a more sustainable and mature level within the compliance function.
Financial crime
Financial crime risk results from illicit activity in the form of money laundering, terrorist financing,
bribery and corruption, sanctions evasion, fraud and customer tax offences. It arises in the course of
ING’s day-to-day banking operations if our customers, employees or third parties undertake or
facilitate financial crime, or if our products and services are misused for illicit purposes to generate or
disguise financial crime.
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We have zero tolerance for deliberately or knowingly facilitating financial crime - keeping ING safe,
secure and compliant remains a top priority in order to protect our business and society at large from
financial crime and its corrosive effects upon individuals and communities.
Financial crime risk management
The Non-Financial Risk Committee, chaired by ING’s chief risk officer, is the principal risk management
forum for financial crime risk. This committee reviews and escalates, where appropriate, key financial
crime topics and risks across ING to the Executive Board and Management Board Banking.
Responsibility for the oversight of ING’s compliance with our legal and regulatory obligations in relation
to financial crime risk resides with the global head Financial Crime Compliance who reports to ING’s
chief compliance officer, with oversight by the chief risk officer. The Global KYC Committee, chaired by
the chief operating officer, is mandated by the Management Board Banking to steer, prioritise and
approve KYC-related topics undertaken across ING, and to oversee compliance with international
standards and laws and internal policies related to KYC.
We believe all of our people have a key role to play in the fight against financial crime. Having a robust
and sound risk culture embedded in our day-to-day way of working is a foundational element of our
financial crime risk control environment. We define the accountabilities and responsibilities of our staff
in accordance with the three lines of defence model, considering our business, geographical and
functional structure.
As an organisation, we’re committed to meeting our legal and regulatory requirements and the
standards we also expect from ourselves. ING remains subject to regulatory investigations and scrutiny
in certain jurisdictions, and we’re committed to executing and implementing the identified
enhancements required to our financial crime risk framework in a sustainable way for the longer-term.
Key risk management processes
ING strives to play its part in contributing to the safeguarding of the financial system against illicit
financial activity, in the context of heightened and changing regulatory expectations and as financial
crime risks continue to evolve. To fulfil our responsibility as a global financial institution in combatting
financial crime, we believe it is essential to comply with anti-money laundering and counter terrorism
financing (AML/CFT) laws and regulations, establish a reasonable and risk-based control framework to
mitigate financial crime risk, and to seek to provide useful information to relevant government
agencies. We also believe it is important to respond swiftly and proactively to new financial crime
threats and techniques (which can be increasingly sophisticated as financial criminals harness and
misuse new technological capabilities) as well as to relevant media reporting, such as on the Pandora
Papers and the Congo Hold-Up.
To mitigate financial crime risks, we apply a framework of preventative and detective systems and
controls, underpinned by policy, procedures and related control standards across our global business in
all locations where we operate. In 2021, we remained focused on continuing to strengthen this
financial crime risk management framework in order to support sustainable remediation of known
issues. At the same time, we acknowledge that the continuous maturing of the financial crime risk
management framework, as well as other developments such as regulatory and legislative changes,
will keep asking for our attention and commitment in future years. For that purpose we’ve initiated the
Financial Economic Crime Controls Maturity Programme (FCMP). See also ‘Know your customer (KYC)’.
In 2021, we refreshed and further enhanced the annual Systematic Integrity Risk Analysis (SIRA) across
our global footprint, which assesses inherent and residual integrity risks related to financial crime, and
the effectiveness of the associated processes and controls ING has in place. This provides insights into
the financial crime integrity risks that ING may be exposed to, so we can appropriately manage these
risks in accordance with our risk appetite. Our risk-based surveillance (screening and monitoring)
controls are also designed to identify activity that may require additional investigation or other risk
management actions, and where appropriate, reporting to the relevant authorities.
We monitor our compliance in relation to financial crime risk and our tolerance levels on a regular basis
against a set of quantitative and qualitative financial crime Risk Appetite metrics that were updated in
2021 and approved by the Non-Financial Risk Committee.
Bribery and Corruption
Corruption curbs economic growth and impedes the development of societies. It undermines business
confidence and corporate integrity, hinders fair business competition and harms international trade.
ING takes these risks seriously: bribery and corruption risks are part of our non-financial risk
framework, and are included in the client and third-party due diligence and monitoring measures in
our financial crime risk management framework. We will continue to further structurally strengthen
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our response to bribery and corruption risks in key areas as part of our multi-year enhancement
programme and FCMP, and in support of our zero tolerance approach for bribery and corruption.
Customer Tax Compliance
ING remains committed to its reporting obligations under the Foreign Account Tax Compliance Act
(FATCA) and Common Reporting Standards (CRS). Throughout 2021, we have worked to improve the
quality of reports provided to tax authorities and reacted to the implementation of mandatory
disclosure rules for EU jurisdictions (implemented via the amendment to Directive 2011/16 (DAC6)). We
also continue to focus on customer tax integrity, as we do not want to be involved in or facilitating tax-
related financial crime through servicing our customers.
Key developments in 2021
Covid-19 taskforce
Opportunistic criminals have been quick to exploit the disruption caused by the Covid-19 pandemic.
During 2021, the activities of the ING financial crime Covid-19 taskforce continued to focus on
protecting customers from fraud and cyber-related crimes, as well as identifying evolving criminal
money laundering methods. The taskforce worked with data analysts and business-aligned teams
globally to share guidance with regional teams on the thematic financial crime risks relating to Covid-
19, including potential risk scenarios and datapoints to assist regional and local teams identify unusual
transactions.
Evolving external landscape
Financial institutions continue to face considerable regulatory scrutiny in relation to detecting and
preventing financial crime, and increasing costs of compliance. In 2021, this saw some participants in
the Dutch banking sector streamlining their workforces or increasing their account fees for higher risk
customers. In addition, the complexity of the regulatory landscape continues to give rise to potential
tension between data privacy (GDPR), anti-money laundering/counter terrorism financing and anti-
corruption laws and regulations. This includes requirements for sharing information within ING in
relation to financial crime in order to manage our risk exposure, while also complying with relevant
data legislation (which can differ significantly depending on jurisdiction). Society’s expectations that
financial institutions are accountable for safeguarding the financial system also create an increasingly
demanding environment.
We take this gatekeeper responsibility seriously. We believe that by proactively participating in public-
private partnerships and collaborating with other banks, as well as investing in new and innovative
technological capabilities, we can be more effective in the collective fight against financial crime. We
also recognise the essential role played by certain other financial services providers in safeguarding the
financial system against illicit funds.
Payment Service Providers
The position of payment service providers (PSPs) in the financial service industry has become
prominent and permanent over the years. PSPs face continuous challenges to demonstrate
compliance with industry standards and recommendations, such as the guidance provided by the
Wolfsberg Group and Financial Action Task Force (FATF) on payment transparency. Having limited
transparency on transactions initiated through the different payment platforms increases the
challenge of monitoring whether PSPs and banks are potentially misused to facilitate tax evasion,
money laundering and terrorist financing.
ING will continue to contribute to dialogues with PSPs, regulators and industry bodies on these
challenges; ensuring we obtain the required transparency on payment information. This supports
compliance with the applicable laws and regulations and internal policies and instructions as well as
monitoring to ensure that ING stays within its financial crime risk appetite.
EU AML/CFT legislative package
In mid-2021 the European Commission adopted a package of legislative proposals aimed at
strengthening anti-money laundering (AML) and counter terrorism financing (CFT) rules. This included
amendments to existing legislation to tackle emerging challenges linked to technological innovations,
such as virtual assets, as well as the increasingly global nature of terrorist organisations. It also
included centralisation of EU AML/CFT supervision (the European Anti Money Laundering Authority)
and establishing a single EU AML/CFT rulebook, which provides financial institutions with harmonised
and directly applicable AML/CFT rules.
ING welcomes this harmonisation, which removes a degree of regulatory complexity. We have
considered amendments in the context of drafting the updated ING Financial Crime Policy framework.
We have also participated in workstreams and analyses prepared by global banking associations such
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as the Dutch Banking Association and the European Banking Federations to assist us in assessing the
potential impact of the AML legislative package on the bank.
Virtual Assets
The rise in price and use of virtual assets, accompanied by the growth of virtual assets service providers
was a key theme throughout 2020 and continued in 2021 to attract regulatory attention for potential
tax evasion, money laundering and terrorist financing concerns. Although the industry’s assessment of
financial crime risks in these areas is beginning to mature, the evolving regulatory environment and
understanding of how the virtual assets ecosystem may be potentially abused for financial crime
purposes continues to present a challenge for financial institutions.
We believe it is important to contribute to ongoing dialogue with regulators on this topic. In 2021, we
created guidance that has been shared across the bank to develop a deeper knowledge and
understanding of virtual assets and the associated financial crime risk landscape, an important step
towards our goal of ensuring that ING remains a safe and compliant bank.
Environmental crime
Environmental crime risks also came to the fore in 2021; including a wide range of activities such as
the illegal wildlife trade, the illegal extraction and trade of forestry and natural resources as well as
illegal land clearance and waste trafficking, all of which have a socio-economic impact on the
population and earth. There is a growing convergence between environment crime and other serious
crimes including corruption and trade-based fraud, among others.
In 2021, we examined the risks arising from the illegal wildlife trade and how to detect suspicious
financial flows linked to it. We joined the United for Wildlife Financial Taskforce, which brings together
private, public and third-sector partners to identify, disrupt and prevent illegal wildlife trade.
Know your customer (KYC)
Know your customer and financial crime compliance play a key role in ensuring we only engage and
do business with people and companies that meet regulatory requirements and are within our risk
appetite. Knowing who we do business with is vital to keeping ING safe, secure and compliant. As part
of our ongoing anti-money laundering efforts, we continuously assess relationships with customers
and monitor and screen transactions. Potentially unusual or suspicious transactions are reviewed and,
where applicable, reported to the relevant authorities.
We’re continuously working to strengthen the implementation of KYC and build sustainable KYC
practices. This includes enhancing customer due diligence files (documentation, data and identity
verification) and making structural improvements in five areas: policy and risk appetite statements,
digital tooling, governance, monitoring and screening, and KYC knowledge and behaviour. All of these
enhancements are being integrated into our business-as-usual practices.
To reinforce this foundation, the Financial Economic Crime Controls Maturity Programme, set up in
2020, broadens the scope of certain aspects of financial crime such as sanctions, customer tax, new
and existing FEC threats and internal quality controls. Its holistic approach aims to take into account
new developments in the complex and dynamic environment that we operate in and is jointly
managed by the Financial Crime Compliance (FCC) and KYC departments.
Our regulators keep a close eye on the measures we have in place against money laundering and
terrorism financing and to manage compliance risks, as well as improvements we’ve made to address
shortcomings that had been identified in some countries. In February 2021, the French regulator, the
Autorit
é
ô
le prudentiel et de r
é
solution (ACPR), confirmed ING had put in place the necessary
corrective measures following its reprimand in 2018 and a sanction of €3 million.
Public-private partnerships
To continue to be more effective in our efforts to counter financial economic crime, we work closely
with our peers, regulators and law enforcement.
We have elected to centrally coordinate our proactive participation in various public-private
partnerships across our footprint. This ensures a holistic, streamlined and strategically orientated
approach towards ING’s participation in external partnerships and improves our ability to meet
regulatory obligations, satisfy moral and integrity expectations and improve the operational efficiency
of managing financial and economic crime-related risks.
To this end, in 2021 we participated in several projects leveraging intelligence from public-private
partnerships in the areas of trade-based money laundering and synthetic drug production in the
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Netherlands. We also continue to support supranational initiatives, such as Europol’s project on the
financial crime risks associated with virtual assets.
Throughout 2021, ING continued to work in a consortium of Dutch banks on Transaction Monitoring
Netherlands (TMNL). The initiative, which monitors transactions within a combined database, is
operational and intersecting with thematic areas of focus for law enforcement, enabling us to better
understand potential criminal money flows, and improve our detection controls in response to these
insights. In the Netherlands, ING also works with the government’s Financial Intelligence Unit and three
other banks in the Fintell Alliance. In a pilot, the alliance investigated and analysed alerts generated by
TMNL. It detected complex financial crime networks that none of the banks could have found alone,
illustrating the benefits of multilateral information exchange.
In Germany, ING joined the public-private partnership Anti-Financial Crime Alliance (AFCA) to foster
mutual exchange of information within the financial system. The alliance consists of 30 members,
amongst them public authorities, the largest financial institutions as well as representatives from the
real estate sector. We also continue to contribute in various fora to the further development of
industry-wide standards.
KYC policy framework
The KYC policy and related control standards (the KYC policy framework) set the minimum
requirements and control objectives for all ING entities to guard against the involvement in financial
crime activity. The KYC policy framework reflects relevant national and international laws, regulations,
guidance documents and guidelines from national, European and international authorities,
(supra)national risk assessments and industry standards related to:
◾
financial crime, covering money laundering, terrorist financing, bribery and corruption, export
trade controls, proliferation financing, sanctions (economic, financial and trade), countries
designated by ING as ultra-high-risk countries (UHRC).
◾
customer tax compliance, covering customer tax integrity (CTI), FATCA, CRS, mandatory
disclosure requirements (MDR).
◾
environmental and social risk (ESR) client assessment, specifically the initial customer screening
for environmental and social risk.
The KYC policy framework is mandatory and applies to all ING entities (i.e. all branches and majority-
owned subsidiaries of ING Groep N.V., including ING Bank N.V., or where ING exercises control), their
corporate functions and their branches, including outsourcing partners to whom ING entities have
sourced KYC-related responsibilities. The KYC policy framework also reflects relevant national and
international laws, regulations and industry standards related to business partners and overarching
requirements with regards to record retention, training and awareness. ING entities have local
procedures in place, aimed at enabling them to comply with local laws and regulations and the KYC
policy framework. Where local laws and regulations are more stringent, these have to be applied.
As a result of frequent evaluation of the business from economic, strategic and risk-based
perspectives, ING, with limited exception, does not engage in business involving certain countries
including Cuba, Iran, North Korea, Sudan, Syria and the Crimea region. ING has a policy not to enter
into new relationships with clients from these countries and processes are in place to discontinue
existing relationships involving these countries.
Global approach
ING updated its KYC policy in line with external regulatory developments in anti-money laundering and
financial sanctions. In 2021, we finalised the implementation of our continuous adverse media
screening tool in all of ING’s Wholesale and Retail Banking businesses. This allows us to continuously
screen customers against news intelligence related to financial and economic crime, creating an
additional control to monitor our customers on relevant news updates on a daily basis, instead of
during the periodic CDD reviews only. As a result, the business is better able to identify customers
involved in potential criminal activity. We also enhanced our screening control environment, reducing
false positives to prevent potential transaction delays for our customers.
Substituting local tools with centralised global tools enables us to further improve the way we onboard,
monitor and screen customers using a standardised approach across the world.
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Knowledge and behaviour
We believe all our people play a role in keeping ING safe, secure and compliant and that a sound risk
culture requires us to act with integrity above all. We want to empower our employees with the skills
and knowledge they need to fight financial crime, and encourage them to speak up if they have
concerns relating to financial crime risk management.
In 2021, the Global KYC Academy further matured and rolled out new learnings to KYC employees, in
addition to the regular curriculum. These included trainings on customer tax offences, environmental
and social risks, sanctions and KYC tools. It also continued to partner with ACAMS (Association of
Certified Anti-Money Laundering Specialists) to develop and deliver tailored, certified training for our
employees. The ACAMS training portfolio focuses on learning paths that provide professional
foundational skills or advance expertise in a range of topics including customer due diligence,
screening, transaction monitoring and sanctions. Over 8,000 ACAMS trainings were enrolled in 2021.
Virtual Instructor Led Training (VILT) was also rolled out to enable innovative and flexible learning,
especially with many employees working from home due to the coronavirus pandemic. In addition we
introduced a mobile app quiz to engage employees and stimulate learning on KYC topics.
To increase understanding and share best practices on financial crime risk management, awareness
sessions were held for all employees and bi-annual bootcamps are organised for money laundering
reporting officers. Our training framework is currently being enhanced to provide more targeted and
specialist training on risks related to bribery and corruption. We are also working on further developing
dedicated centres of expertise to use our centralised expertise more effectively and harmonise
standards across ING.
In 2021, behavioural risk assessments were carried out at ING in Italy and in Wholesale Banking in the
UK and Germany. These focused on identifying behavioural patterns and driving appropriate escalation
behaviour. Feedback sessions and dialogue starters to initiate open conversations around these
assessments were also held in Italy, while behavioural interventions were held in Poland and Romania,
aimed at improving the desired behaviours around leadership and decision-making. In addition, two
KYC world cafes were held for all KYC employees to create a shared understanding, collective purpose
and uniformed approach to solving problems when dealing with common behavioural risks.
Conduct Compliance & Culture
Conduct risk is defined by anything that can result either in client detriment or impacts market
integrity. Conduct compliance includes client protection and transparency (Treating Customers Fairly),
market conduct (including market manipulation) and conflicts of interest.
A sound risk culture is paramount at ING as it determines the way in which employees identify,
understand, discuss, and act on the risks we are confronted with and the risks we take. The proper
embedding of our global Code of Conduct, Orange Code and the Whistleblower policy into our
processes is key to managing our culture and ethics risk.
Treating Customers Fairly
Building on work done in 2020 to strengthen our compliance with the Markets in Financial Services
Directive (MiFID) and to create a more effective Client Protection and Product Approval (CPAC)
framework, in 2021 we created several training sessions on investment services, issued guidelines and
closely monitored the remediation of improvements to the MiFID implementation to ensure a common
understanding of our approach to MiFID group-wide. CPAC governance was further strengthened to
ensure strong challenge and a consistent application globally of risk appetite when offering investment
services to our customers. Preparations for the implementation of the Mifid Quickfix have progressed in
line with implementation in 2022.
Alongside direct consumer protection requirements as laid down in the specific regulations (e.g. Mifid
II) ING is bound by local consumer protection laws and has adopted its own minimum standards, such
as the Customer Golden Rules. These minimum standards are regularly reviewed to stay in sync with
legal developments and expectations from society. One of the elements we take into account in the
review, is the outcome of the various discussions we have with consumer associations. Sometimes
such review and discussions also lead to an offer to compensate certain customers, as we have done
for certain customers with mortgages in Swiss franc in Poland and for certain Dutch retail customers in
connection with certain revolving consumer loans with variable interest. See for more detail Note 43
‘Legal proceedings’ to the consolidated financial statements.
Transaction reporting activities were improved considerably with the creation of a group-wide
governance framework and controls, as well as participating in the market wide upload of backlog in
close cooperation with the relevant supervisory authorities and the reporting agencies.
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To support our objectives, we expanded our focus to other key areas: In relation to insurance products,
we rolled out a global policy and controls in order to align with the EU Insurance Distribution Directive
(IDD). To safeguard client interests during the IBOR transition, best practices focused on client conduct
and shared by the relevant supervisory authorities have been implemented.
Finally, in response to the increasing importance of sustainable products for our clients and the need
for ESG considerations to form an integral part of our products and services to clients, alongside the
development and roll out of policy on SFDR. ESG is being embedded within the ING organisation across
all three lines of defence.
Market Conduct
Market conduct risk stems from undertaking activities that impact market integrity. The smooth
functioning and public confidence in markets are crucial for economic growth and wealth. As part of
our work in 2021 to strengthen our market conduct framework, an update of our market abuse policy
was completed, together with a revised set of key controls owned by the first line and rolled out to all
ING entities, alongside an updated mandatory e-learning on market abuse. To support ING entities in
the maintenance of information barriers and the communication of confidential and inside
information, new global procedures are in the process of being rolled out to ING entities.
Conflicts of Interest
ING is committed to identify conflicts of interest and act on them. The Conflicts of Interest policy sets
the obligations to identify, assess and manage conflicts of interest, when personal or organisational
interests are in conflict over the interest of our client(s), employees or other stakeholders (e.g. when
related to personal account dealing). In 2021 the Conflicts of Interest policy was revised to further align
with the standards as defined by enterprise risk management. The policy incorporates key
requirements for both personal and organisational conflicts of interest in line with the European Bank
Association Guidelines on Internal Governance. Next to the updated policy, mandatory instructions on
conflict of interest registers were developed including templates, which provide more guidance on
identifying, assessing and keeping audit trail of our conflict of interest risks.
Culture & Ethics
In 2021, ING executed the risk culture programme that was developed based on the 2020 self-
assessment. Some key results are the formalisation of ING’s risk culture principles, the development of
a risk culture dashboard, and the development and roll-out of an approach to increase awareness and
dialogue on Non-Financial Risk. The dashboard is developed to monitor and facilitate meaningful
conversations on our risk culture and it leverages different instruments for insight generation.
Instruments include amongst others a survey to capture employee perceptions, quantitative indicators
from existing data sources and systems and a structured approach to capturing the professional
judgements of Compliance officers. The risk culture programme is actively discussed by the MBB and
the SB on a quarterly basis.
In February 2021, ING launched a programme to further enhance the global Whistleblower process.
The programme aims to further strengthen risk management through more automated data
collection and reporting and to continuously enhance psychological safety and trust by strengthening
the whistleblowing confidentiality and employee protection. The quarterly whistleblowing report is
shared with the MBB and the SB.
To preserve risk awareness and risk judgement in the area of risk culture, ING continued its efforts
towards embedding the Orange Code decision making model that supports ethical and well-balanced
decision-making throughout ING further by inserting referral to using the model in several local PARP
frameworks.
Innovation, analytics and digitalisation
We continue to seek to harness new and innovative technological capabilities to keep our clients safer
and to enhance their digital journey with ING. In 2021, we consolidated disruptive client-focussed
innovation activities across the Group under a single dedicated business area, ING Neo. We also
continue to prioritise more incremental innovation, under the oversight of our KYC Innovation
Committee and RegTech Innovation Board.
In 2021, we rolled out the CoorpID platform which digitalises the know your customer process for our
corporate clients improving the KYC journey of our customers, in four countries and will aim to
continue to expanding in throughout 2022. Furthermore, we rolled out the Blacksmith solution to
improve the KYC journey for financial institutions in six countries. We also continued to develop and
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leverage an AI-supported platform to help us to respond swiftly and effectively to the changing
regulatory landscape and underlying policies in relation to financial crime.
Tax risk
Tax policies, procedures and a tax control framework have been implemented to support management
in mitigating potential tax risks in a prudent manner. Internal monitoring, control and reporting of tax-
related risks take place on a continuous basis with regular reporting to various stakeholders. For
404/SOX purposes (section 404 of the Sarbanes-Oxley Act), an ‘effectiveness of internal control
statement’ with respect to tax controls has been provided. Tax risk management is subject to
Corporate Audit testing and evaluation. In the Netherlands and also in other countries, ING’s position is
to be cooperatively tax compliant, this implies to have transparency about and disclosure of relevant
tax risks towards tax authorities. Tax risks not only refer to ING’s own tax position, but also to the risks
in relation to our customers. In this respect, we have integrated a tax integrity assessment in our
overall customer risk assessment process.
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Model risk
Introduction
Model risk is the risk that the financial or reputational position of ING is negatively impacted as a
consequence of the use of models. Model risk can arise from errors in the development,
implementation, use or interpretation of models, or from incomplete or wrong data etc., leading to
inaccurate, non-compliant or misinterpreted model outputs.
A model is defined as a quantitative method, system, or approach that applies statistical, economic,
financial, or mathematical theories, techniques, and assumptions to process input data into
quantitative estimates or whose inputs are partially or wholly qualitative or based on expert
judgement.
Governance (*)
The head of Model Risk Management (MoRM) reports to the ING chief risk officer. The Model Risk
Management Committee (MoRMC) is the dedicated authority within ING for model risk management. It
is a committee designated by the Management Board of ING bank. It is chaired by the ING chief risk
officer and co-chaired by the head of MoRM.
Model lines of defence (*)
ING’s model risk and control structure is based on the three model lines of defence (MLoD) approach.
This approach aims to provide a sound governance framework for model risk management by defining
and implementing three different management layers with distinct roles and oversight responsibilities.
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The composition and main activities within the three model lines of defence (MLoD):
◾
The 1
st
development, and is accountable for, among others, the development, implementation and
use of the models as well as monitoring models’ performance;
◾
The 2
nd
risk management framework, proposes the model risk appetite, provides challenge to model
risk identification and assessment and provides an independent validation of models used
within ING;
◾
The 3
rd
all lines of defence and provide assurance over the 1st and 2nd line model risk management
activities.
Model risk appetite (Model RAS) (*)
The model risk appetite is designed to determine the level of model risk ING is willing to accept in
pursuit of its strategic objectives. The initial iteration of Model RAS was introduced in 2020 and was
monitored throughout 2021. At the end of 2021, the data captured by the initial Model RAS was
evaluated, resulting in the implementation of thresholds and early warning limits for selected metrics.
Model risk management (*)
Model risk management is executed via processes such as: model identification, model classification,
model risk identification and assessment, and model validation. During 2021, these processes were
further enhanced by incorporating model identification in the product approval and review process and
by inclusion of model ethics principles as an element for assessing model risk. Dedicated model
validation frameworks are in place for the key model types such as Credit, Market, Liquidity,
Operational Risk, IRRBB and advanced analytics. These frameworks are continuously being enhanced
to keep up to date with latest development.
On an aggregated level model risk is monitored via analysis of data from the global model inventory.
The insights, from aggregated data analysis, are reported to the MoRMC and to the MBB for senior
management to take well-informed decisions on acceptance or further mitigation of model risk.
Model lifecycle (*)
The next figure provides a schematic overview of the model lifecycle, where orange represents the
activities of the 1
st
nd
rd
the different processes are outlined below (reference).
Initiation or change
: The initiation of the development of a new model or change of an existing model
can be triggered by different factors. These may be (i) internal, such as the introduction of a new
product that cannot be handled by the existing models, a change in ING’s organisation, financial or
commercial strategy or findings and issues by an auditor, validator or based on monitoring; or (ii)
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external, such as innovation/new technology that becomes available (for example the Fintech models),
new or upcoming supervisory regulations or ongoing technical developments.
Data collection
requirements for model development. The process includes the definition of the data needed,
assessment of data availability and quality, assumptions and limitations, as well as the gathering of
the data needed for the analyses, impact study and testing during the model development process.
Model development
is a structured process that leads to a model that is ready for validation and
subsequent use. Depending on the development approach these first stages can be separate or
integrated. An example of the latter is data science-based application development.
Pre-approval validation
ensure objectivity and effective challenge, the model validator is independent from other model
parties such as the model developer, model owner or model approver. Model validation applies equally
to in-house developed and third-party models.
The objective of the
model approval
model for formal decision to the internal approver before a model can be deployed and used. The
recommendations and validation report prepared by the model validator are key inputs for the
approval.
During the
implementation
environment.
In the
model use
The model can only be used after formal approval for use of the model.
The objective of model
performance monitoring
intended, also after possible changes in the commercial, organisational or legal environment. Model
performance monitoring begins when model use has started and continues until the model has
officially been decommissioned.
Periodic validation:
During the life-time of a model its ongoing validity must be safeguarded. This is
done by periodic independent (re)validation that assesses whether the model is still valid for its
intended use and if it is used as intended. There are two types of validation: (1) periodic, such as
annual, which is mandatory for regulatory models, or (2) ad hoc, for example triggered by changes in
the model, the business or financial instruments etc. The actual frequency of periodic validation
depends on the model risk, model type and applicable regulation.
A model that is / will no longer be used must be decommissioned.
Decommissioning
model. It can, for example, be triggered because (1) the product, organisation or risk the model is
made for has changed considerably or no longer exists, (2) the model is outdated, underperforming or
better alternatives are available, (3) the model became obsolete or (4) the external approver withdraws
its approval for the model.
Continuous model inventory and reporting
: Keeping an inventory of all models and their status during
their lifecycle is a continuous process. It supports management and control of the models in scope,
both per individual model and the overarching management of all ING’s models. Periodic model risk
reporting provides the relevant internal and external stakeholders with an overview of the models in
use and the associated model risk given the defined model risk appetite.
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Business risk
Introduction
Business risk for ING has been defined as the exposure to value loss due to fluctuations in
volumes/margins, net fee and commission income as well as expenses. It is the risk inherent to
strategy decisions, internal efficiency and the business environment. Business risk economic capital is
calculated via the variance-covariance methodology for these risks, covering the risk that
volume/margins, net fee and commission income and operating expenses will deviate from the
expected expenses over the horizon of the relevant activities.
Governance and risk management
ING applies an explicit risk appetite statement regarding business risk, focusing on earnings stability
and diversification of the business mix. Diversification reduces the risk that volumes and/or margins will
suddenly drop due to unexpected changes in the business environment for certain markets and
products. Furthermore, the underlying risk types (expense risk, volume-margin risk, and net fee and
commission income risk) are mitigated and managed differently. Expense risk is monitored and
managed via the financial performance of the bank and the local units, whereby the reported expense
numbers are compared quarterly with the projected cost/income ratio. Deviations from this ambition
are monitored as part of the financial projections that are discussed continuously within different parts
of the organisation.
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Supervisory Board report
In 2021, the Supervisory Board and its committees continued to focus
on overseeing and constructively challenging management in their
ambition to keep transforming into a data-driven digital bank in line
with ING’s strategy. How ING could help customers, employees and
communities safely through and after the Covid-19 pandemic remained
an important focus. ING’s risk culture and the priority to further
strengthen its global anti-money laundering (AML) and know your
customer (KYC) activities also were key attention areas.
The Supervisory Board is responsible for supervising (i.e. assessing, overseeing, monitoring,
constructively challenging, scrutinising and discussing) the policy (
beleid
) of the Management Board
Banking, and the general course of affairs of ING and the business connected with it. Furthermore, the
Supervisory Board provides the Management Board with advice. The Supervisory Board and
committees of the Supervisory Board are identical and fulfil the same role at the level of ING Groep N.V.
and ING Bank N.V.
In 2021, the Supervisory Board spent time on strategy as well as the initiatives and developments that
relate to ING’s strategic ambitions, with a focus on digitalisation to support a differentiating experience
for customers and stakeholders. This was done in dialogues with the Management Board Banking in
light of ING’s four focus areas. ING will continue to focus on being safe, secure and compliant and on its
role as gatekeeper in the fight against financial crime. ING will enable and increase healthy economic
growth by diversifying its income, in existing and new products and services. Clear choices will continue
to be made about where and how ING serves its customers. ING aims to become a data-driven digital
bank to bring benefits for its customers, employees, cost-to-serve and controls. In sustainability, ING
will keep working to build a sustainable future for ING and its customers, society and the environment.
The impact of the Covid-19 pandemic has been immense, affecting millions of people around the
globe. It has also impacted families, customers, governments, economies, supply chains and jobs,
turning people’s lives and their livelihoods upside down. As was the case last year, this was an
important topic for the Supervisory Board and its committees, with the Management Board Banking
providing the Supervisory Board with regular updates and an outlook. The dialogue focused on how ING
continues to help customers, employees and communities safely through and beyond the Covid-19
pandemic period, while taking into account ING’s business continuity, performance and gatekeeper
role that ensure a safe and compliant bank.
The Supervisory Board met 14 times in 2021 for its regular meetings. On average, 97% of the
Supervisory Board members participated in the meetings. See the attendance matrix for the
Supervisory Board meetings and committee meetings for more details. The continued high attendance
in 2021 demonstrates that Supervisory Board members are engaged with ING and are able to devote
sufficient time and attention to overseeing ING’s affairs. The Supervisory Board discusses and
reconfirms all of its members’ outside positions on an annual basis. It approves any intended outside
positions when they occur, among others to safeguard this level of engagement.
SB Attendance 2021
1
SB
RiCo
2
AC
NCGcom
3
RemCo
Hans Wijers (chair)
14/14
10/10
6/6
14/14
9/9
Mike Rees (vice-chair)
13/14
10/10
6/6
Jan Peter Balkenende
5
5/5
4/4
Juan Colomb
á
s
14/14
10/10
6/6
Mariana Gheorghe
11/14
8/10
13/14
8/9
Margarete Haase
14/14
10/10
6/6
Lodewijk Hijmans van den Bergh
9/9
6/6
Herman Hulst
14/14
10/10
6/6
Harold Naus
4
14/14
10/10
3/3
9/9
Herna Verhagen
4
14/14
3/3
14/14
9/9
Total attendance
6
97%
98%
100%
98%
97%
1. This SB attendance overview shows the regular SB (committee) meetings that took place during the year. In addition to the
regular meetings, there were 11 internal SB meetings in 2021 in view of nomination and remuneration matters, with a total
attendance of 99%. These are not shown separately in the overview for year-on-year, like-for-like comparison purposes.
2. Additional RiCo meetings took place in 2021, three of which were in combination with the RemCo on remuneration matters
that also required a risk view.
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3. Additional NCGcom meetings took place in 2021, three of which were in combination with the RemCo, in view of medium to
longer term board succession planning.
4. Harold Naus participated three times in a NCGcom meeting in combination with the RemCo. Herna Verhagen participated
three times in a RiCo meeting in combination with the RemCo.
5. Jan-Peter Balkenende retired from the SB as per the end of the AGM on 26 April 2021. At this AGM, Lodewijk Hijmans van den
Bergh was appointed to the SB. Their attendance is shown relative to their tenure.
6. The numbers exclude SB observers, if any. If SB members cannot join a meeting, they will – at all times – continue to receive
the meeting materials to allow them to provide feedback prior to the meetings.
Abbreviations used: SB = Supervisory Board; RiCo = Risk Committee; AC = Audit Committee; NCGcom = Nomination and
Corporate Governance Committee, RemCo = Remuneration Committee
Supervisory Board meetings
In addition to the topics mentioned in the introduction, the Supervisory Board discussed a wide range
of other topics during the year. These related to, among others:
-
the impact of Covid-19 and the negative interest rate environment on ING’s performance and its
stakeholders (e.g. how to empower customers to remain in charge of their banking and their
finances, how to equip employees for a hybrid way of working in which flexibility is central, and
how to help communities to build back better);
-
the increasing attention to environmental, social & governance (ESG) related matters in relation to
strategy, including sustainability, climate risk and energy transition;
-
the follow-up to the European Central Bank’s Supervisory Review and Evaluation Process (SREP) and
related matters such as the internal capital adequacy assessment process (ICAAP), the internal
liquidity adequacy assessment process (ILAAP) and stress testing;
-
ING’s financial, non-financial and compliance risks;
-
ING’s gatekeeper role and ensuring the security and compliance of the bank through enhancing
and maturing ING’s KYC priorities, supported by structural solutions (see ‘Risk Management’ for
further details on ING’s AML/KYC measures);
-
the continued focus on further strengthening ING’s risk culture;
-
several topical regulatory themes with a global ING scope such as data (including the strategy,
management, quality, ingestion and ethics of data), IT and cybersecurity, sourcing and the
suitability policy framework;
-
the financing of the company in accordance with ING’s capital and liquidity adequacy (in line with
the annually updated Risk Appetite Framework including principles and statements), ING’s capital
plan and ING’s dividend and distribution policy;
-
the audit plans of the internal and external auditor;
-
ongoing supervisory developments;
-
various nomination and succession planning related matters for the Management Board Banking,
including the impact on the division of responsibilities at management board level (succession chief
risk officer (CRO), succession head of Wholesale Banking, appointment head of Retail Banking and
separation of the board roles for technology and operations with an appointment of a chief
technology officer and succession of the chief operations officer (COO)/chief transformation
officer);
-
diversity (at the top);
-
various remuneration related matters, such as the annual review of the Reward and Appointment
Framework and the ING Remuneration and Regulations Framework; and
-
the functioning of the Supervisory Board and Management Board Banking, supported by the
annual collective self-evaluations.
In its deliberations on the various topics the Supervisory Board takes into account the customers’ and
other stakeholders’ interests in view of ING’s function in society.
The Management Board Banking was present at each regular Supervisory Board meeting. For some
parts of these meetings, depending on the nature of the topics discussed, only the chief executive
officer (CEO) was present. The Supervisory Board also had sessions with only its individual members,
prior to its regular meetings when this was justified by the nature of the topics on the agenda. The
purpose of these so-called pre-meetings and Supervisory Board-only meetings is to allow the
Supervisory Board to reflect independently on and consider important matters in the absence of the
Management Board Banking.
Outside of the collective meetings there was frequent interaction between the chairs of the relevant
Supervisory Board committees and the members of the Management Board Banking to ensure that –
at all times – everyone was up to date on the most recent developments. Furthermore, as a pilot, the
chairs of the Risk Committee and the Audit Committee initiated informal interaction with the chairs of
local risk and audit committees of ING’s five largest subsidiaries to enrich the Supervisory Board
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dialogue. Also, Supervisory Board members who do not chair committees were assigned specific focus
areas that make best use of their skills, knowledge and experience to further enhance well-informed
Supervisory Board decision-making and challenge. The 2021 focus areas were risk culture,
sustainability, models and stress testing and operational resilience.
Continuous dialogue with stakeholders
ING maintains continuous interaction with stakeholders, and strikes a balance between the interests of
all stakeholders, including customers, shareholders, employees, society and other stakeholders, such
as, but not limited to external supervisors and regulators. The Supervisory Board had periodic
conversations with various internal and external stakeholders. It exercised its oversight role to ensure
that, actions resulting from this, were embedded in the organisation and followed up, including actions
related to risk culture and behaviour. Some 2021 examples in this respect relate to stakeholder
interaction with regard to ESG and sustainability as well as with regard to the application of ING’s
remuneration approach. The dialogue between ING and external supervisors and regulators was a
standard agenda item for the Supervisory Board throughout the year. This included several discussions
on the results of and follow-up to the annual SREP, through which the ECB aims to promote a resilient
banking system as a prerequisite for a sustainable and sound financing of the economy. The SREP
involves, among others, a comprehensive assessment of banks’ strategies, processes and risks, and
takes a forward-looking view to determine how much capital each bank needs to cover its risks.
Strengthening ING’s global AML/KYC capabilities
Keeping ING safe, secure and compliant remains a top priority. Since 2017, ING has been working to
strengthen customer due diligence, transaction monitoring and screening in a sustainable way for the
longer term and to better contribute to the fight against financial economic crime through the global
KYC enhancement programme. Various initiatives have been implemented to further enhance
AML/KYC activity throughout the bank. Among other things, this has led to standardised KYC policies,
global KYC governance and harmonisation of processes, tooling and training. Further developments are
captured in the Financial Economic Crime (FEC) Controls Maturity Programme, which defines and
further enhances ING’s operational long-term FEC control framework to manage and mitigate financial
and economic crime risks in a sustainable, risk-based way. Progress is monitored by and discussed
between the Supervisory Board, management and the relevant supervisors.
In 2021, the Supervisory Board was updated at least quarterly on developments regarding KYC and
relevant specifics were discussed in more detail. This was facilitated through thematic sessions on
various topics such as the KYC roadmap, the FEC Controls Maturity Programme, transaction monitoring
and KYC aspects related to payment service providers. These sessions also contributed to the
Supervisory Board’s continuous learning.
The Supervisory Board and Management Board Banking also discussed ING’s global AML/KYC
governance and processes. Additional improvements were identified that are now being implemented.
The boards reconfirmed their commitment to ensure that ING (1) continues to fulfil its gatekeeper role
and play its part in contributing to the fight against financial crime, (2) complies with applicable
regulatory requirements and (3) continues to take the necessary actions to strengthen compliance risk
management and culture throughout the organisation.
Permanent education including exchange with the business
It is important for the members of the Supervisory Board, as part of their continuous learning, to
participate in the permanent education and exchange with ING’s business on a regular basis. The latter
is aimed at keeping the Supervisory Board up to date on ING-relevant knowledge, skills and expertise
and expanding these where necessary. It is meant to increase the Supervisory Board’s understanding
of and engagement with ING’s business operations and stakeholders.
Due to prevailing Covid-19 related measures, on-site visits to local ING businesses could not take place
in 2021. These were replaced by a combination of virtual gatherings and an off-site in the Netherlands:
-
on 14 and 15 January 2021, the annual Supervisory Board Knowledge Days took place. These were
combined with regular Supervisory Board meetings and focused, among others, on sustainability
(i.e. energy transition and climate change) and IT and cybersecurity;
-
In September 2021, an off-site was held in the Netherlands as an alternative to the annual business
visit. This was the first opportunity since the Covid-19 outbreak for the Supervisory Board and the
Management Board Banking to meet in person. The off-site, among others, focused on providing
the Supervisory Board with a better understanding of ING in Belgium, allowing it to (i) gain insight
into the local economic, financial and political landscape, including particularities; (ii) learn about
the current status of ING’s local business strategy and operations, including ING’s Retail, Business
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and Wholesale Banking activities; and (iii) get a more in-depth view on specific initiatives that are
either currently underway or anticipated, including on AML/KYC and other regulatory priorities.
Throughout the year, a number of other educational sessions on specific topics were organised for and
requested by the Supervisory Board. For 2021, a balance was sought between sessions focused on
compliance, FEC, sustainable risk culture and management, and those on other relevant strategic
topics. The latter included in-depth sessions on (i) ING’s Wholesale Banking business and Retail Banking
business, including Business banking, (ii) technology and IT platforms, (iii) data management, (iv)
sourcing, (v) credit decision models, and (vi) managing and developing talent. Additionally, thematic
sessions were organised to focus specifically on certain themes that needed further attention and/or
were looking forward at emerging risks and developments. In 2021, these related to data strategy,
quality and protection (including Schrems II ruling), capital and liquidity management, SOX Act
framework and controls, management adjustments and developments in the area of non-financial
risk. Furthermore, at the request of the Supervisory Board, several deep dive sessions were organised
on selected key topics, such as IT and cybersecurity, modelling and operational resilience. These
sessions had a substantial risk management relevance and contributed to a more in-depth
understanding of the matters discussed.
The various educational sessions provided opportunities for Supervisory Board members to interact
with senior management and subject-matter experts. They also interacted in speed-meet sessions.
These meetings were also held virtually. Such interaction contributes to a better mutual understanding
and alignment on what matters most to ING, its employees and the Supervisory Board. As in previous
years, the Supervisory Board will continue this practice.
Strategy based on long-term value creation
Throughout 2021, the Supervisory Board monitored and discussed the progress of the strategy and its
transformation and, as part of this, had an active and continuous dialogue with the Management
Board Banking. In recent years, ING has seen multiple trends emerging; many parts of the business
moved online due to Covid-19, customers are becoming more digital and self-directed, negative
interest rates are leading to economic uncertainty, regulation is more complex and demanding, new
players are changing the competitive landscape and ESG has moved to the core of society. In the
meantime, ING is continuing to empower people to stay a step ahead in life and business. This has led
to the following four focus areas to ensure ING seizes the opportunities flowing from today’s reality
and big trends to create long-term value.
ING will continue to be safe, secure and compliant and focus on its role as gatekeeper in the fight
against financial crime. ING will enable and increase healthy economic growth by diversifying its
income, in existing and new products and services. Clear choices will continue to be made about where
and how ING serves its customers. ING aims to become a data-driven digital bank to bring benefits for
its customers, employees, cost-to-serve and controls. In sustainability, ING will keep working to build a
sustainable future for ING and its customers, society and the environment.
These focus areas have been discussed and agreed upon during periodic meetings between the
Supervisory Board and the Management Board Banking. The Supervisory Board acknowledges the duty
of care it has towards all stakeholders of ING and makes sure to take this into account while delivery
on the focus areas is being executed.
Financial and risk reporting
The Management Board Banking prepared the financial statements and discussed these with the
Supervisory Board. The quarterly results, including the relevant press releases, were discussed and
approved in February, May, August and November 2021. The full-year 2020 financial results were
discussed and approved in March 2021.
The financial statements will be submitted for adoption at the 2022 Annual General Meeting as part of
the 2021 Annual Report. KPMG, in its role as ING’s external auditor, audited ING’s 2021 financial
statements. As part of the standard procedures, KPMG declared itself independent from ING, in
compliance with applicable rules and regulations. Read more in ‘Audit Committee meetings’
The Supervisory Board was also informed in detail throughout the year of potential financial, non-
financial and compliance risks for ING, including the continued implications of Covid-19, subsequent
political and economic developments in various countries and regions, updates on (upcoming)
regulatory changes, and discussed how these risks could best be mitigated. As part of this, ING
performed specific stress tests and the results were discussed with the Supervisory Board. In this
context, ING released its first integrated climate report in September 2021. It details ING’s progress and
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targets on climate alignment in the nine sectors in ING’s loan book most responsible for climate
change. Read more in ‘Risk Committee meetings’ below.
Internal Supervisory Board meetings
During the 2021 internal meetings of the Supervisory Board (with the CEO attending, except when
matters concerning him were discussed), among others, the following recurring topics were addressed:
-
the annual targets and periodic performance assessments of the Management Board Banking;
-
the composition of the Management Board Banking (this year including nominations for the
succession of the CRO and the head of Wholesale Banking, the appointment of the head of Retail
Banking, the separation of the board roles for operations and technology with the appointment of
a chief technology officer and the succession of the COO/chief transformation officer);
-
the composition of the Supervisory Board including its committee composition (this year including
the nomination for one new member, Mr Lodewijk Hijmans van den Bergh);
-
ING’s broader talent and succession planning in view of bench strength, including the outcome of
ING’s annual talent review;
-
remuneration related matters, including, but not limited to (1) the remuneration report, (2) the
appointment/compensation/severance proposals of high earners and senior management in
control functions and (3) the Variable Remuneration Accrual Model (VRAM) Process;
-
the annual collective self-evaluation of the Management Board Banking and the Supervisory Board;
and
-
the progress on the global implementation of ING’s suitability policy framework and the global job
architecture.
Supervisory Board annual collective self-evaluation
As in previous years, the Supervisory Board conducted its annual collective self-evaluation over the
reporting year. This was facilitated by an independent external party and with input from several
executives and senior managers who regularly interact with the Supervisory Board and attend
Supervisory Board meetings. The self-evaluation addressed the ‘what’ (roles and responsibilities) and
the ‘how’ (culture and behaviour). In addition, the 2021 self-evaluation also focused on ESG, an
important theme during the year, to identify priorities and further contribute to a future-proof ING and
a positive contribution to society.
Approach
During the November 2021 Supervisory Board meeting, the Supervisory Board discussed and approved
the annual collective self-evaluation process and design for the year 2021. In December 2021, input
was gathered from the Supervisory Board members and frequent attendees. This, together with the
outcome of the 2021 mid-year review and of the bilateral interactions between the chairman and each
individual Supervisory Board member in January 2022, formed the basis for the collective Supervisory
Board self-evaluation dialogue in February 2022. During this dialogue the Supervisory Board
determined its collective positive points to maintain and its 2022 priorities for further improvement.
This is part of the Supervisory Board’s practice to regularly deliberate on its collective performance:
towards year-end (to determine the next year’s approach and potential specific themes to address),
halfway through the year (to reflect on status and progress) and at the start of the year (to discuss the
outcome of the previous year and agree on positive points to keep and points for further
improvement).
Results
The Supervisory Board’s collective dialogue in February 2022 centred around the following questions:
(1) Positive points: are the positive points previously identified still valid? Where has the Supervisory
Board further improved, taking into account the ongoing impact of Covid-19 and increased focus on
ESG? and (2) Priorities for further improvement: Did the Supervisory Board sufficiently progress in 2021
on the improvement areas previously defined? What are the priority areas to further improve in 2022?
The Supervisory Board’s agreed priorities for 2021 included:
1.
Further guide and support the Management Board Banking in building an effective new team,
while safeguarding the continued segregation of duties between the various boards.
2.
Continue paying dedicated attention to embedding an organisation-wide change in (risk)
culture mindset and behaviours, supported by a well-diversified employee base capable of
delivering on ING’s purpose and strategy.
3.
Further re-balance focus in meetings on strategy and sustainability, business and financial
performance, risk management and regulatory requirements, taking into account the
continuously evolving demands and expectations of various stakeholders in relation to these
key topics.
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4. Continue investing in the Supervisory Board’s own lifelong learning, especially in the areas of
technology, IT and cybersecurity in light of ING’s ambition.
During 2021, the Supervisory Board addressed all of the above and, where applicable, embedded
enhancements in its standard working practice. Items 1-3 form part of the regular meetings of the
Supervisory Board and its committees, with a view to the Supervisory Board’s role and responsibilities
supported by its comprehensive annual cycle of work. Item four is, among others, part of the
Supervisory Board’s education programme.
Looking back on 2021, and compared to previous years, the Supervisory Board concluded that several
positive points continued to be valid and had also further improved during 2021:
-
Regarding the ‘what’, the following Supervisory Board strengths were recognised: (1) its
effectiveness at overseeing, supervising, challenging and advising the Management Board Banking,
(2) its understanding of the capacity of the organisation to deliver the strategy, and the
effectiveness of ING's people and talent processes, (3) its composition, and (4) the charter,
including the distribution of work between the full Supervisory Board and its Committees, its
meeting management and the support available.
-
Regarding the ‘how’, the following positives were recognised: (1) the relationships between the
Supervisory Board members and with the Management Board Banking and (2) the understanding
of the views and requirements of key stakeholders.
Looking forward, the Supervisory Board concluded that several priorities for further improvement are
still relevant and the following areas require further attention during 2022:
-
Regarding the ‘what’ it identified: (1) safeguarding balance in open, constructive dialogue with the
Management Board Banking on business/market developments, including emerging risks, and time
spent per meeting on regulatory topics and (2) continue to be provided with fit-for-purpose
supporting materials for board meetings.
-
Regarding the ‘how’ these attention points were identified: (1) Covid-19 permitting, the importance
of returning to physical meetings with the Management Board Banking and other ING
representatives, and (2) continue investing in access to and leveraging on knowledge, skills and
experiences relevant to the Supervisory Board in the context of ING.
With regard to ESG, the Supervisory Board concluded that this is to be seen and addressed as an
integral part of ING’s strategy and objectives (see ‘In conversation with our chairman’ and other ESG-
related sections in this Annual Report). As part of ING’s next steps in this area, the Supervisory Board
will continue working with the Management Board Banking to further enhance and embed ESG
principles in ING’s internal processes and business activities.
The Supervisory Board agreed to a number of specific actions for 2022 to contribute to its
performance, such as to:
1.
Ensure time is spent on ING’s progress on its strategic priorities and on reviewing the
performance of specific countries and business lines as part of the Supervisory Board’s time
spent on ING’s medium to longer-term strategy, where relevant complemented with additional
outside-in views of stakeholders.
2.
Ensure to pay continued attention to diversity and inclusion and attracting and retaining talent
to contribute to a well-diversified employee base.
3.
Enhance the Supervisory Board’s governance on ESG with a dedicated Supervisory Board
committee.
4.
Evaluate and re-assess the practice and allocation of non-chair Supervisory Board members to
specific focus areas so as to benefit from the knowledge, skills and experience they’ve gained in
other roles in those areas that are most relevant to ING; this will also further enhance the
Supervisory Board’s collective decision making and effectiveness in challenging management.
5.
Implement Hybrid Mode as the Supervisory Board’s standard new way of working and
collaboration, which combines the advantages of meeting in person and meeting virtually,
enhancing collaboration and co-creation as well as flexibility, respecting personal health and
well-being. As part of this, and Covid-19 permitting, resume in-person informal gatherings (to
provide the Supervisory Board with additional opportunity to reflect and look forward) as well as
resume off-sites/business visits.
The Supervisory Board is of the opinion that the above contributes to overseeing and constructively
challenging ING in its ambition to keep transforming into a data-driven digital bank in line with the
strategy.
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Permanent committee meetings
To manage each of the committees’ annual cycle of work and potential committee interdependencies,
each committee has drawn up an annual work plan that is being kept up to date throughout the year
for priority setting and forward-looking purposes. These plans all feed into the Supervisory Board’s
annual meeting cycle.
Risk Committee
The Risk Committee met 10 times in 2021, of which three were combined with the Remuneration
Committee to address remuneration-related risk methodology elements, such as those relating to the
VRAM that was introduced in 2018 (see also ‘Remuneration Committee meetings
’
). Since 2020, almost
all Supervisory Board members have been members of the Risk Committee. The reason for this is the
ever increasing importance of risk and how this is managed and supervised. On 31 December 2021, the
committee members were: Mike Rees (chair), Juan Colomb
á
s, Mariana Gheorghe, Margarete Haase,
Lodewijk Hijmans van den Bergh, Herman Hulst, Harold Naus and Hans Wijers.
The committee assists and advises the Supervisory Board with the performance of its duties in relation
to overseeing: (1) the setting and monitoring of ING’s risk appetite and risk strategy for all types of risk,
including but not limited to financial, non-financial and compliance risk; (2) the effectiveness of the
internal risk management and control systems; and (3) other related risk management topics. The Risk
Committee prepares the discussions within and decisions of the Supervisory Board on such matters.
ING needs to ensure that integrity continues to come first and that critical non-financial risk areas stay
top of mind, as an integral part of ING’s identity. ING needs to build strong foundations with structural
solutions that continue to earn and maintain the trust of its stakeholders, including its customers and
society at large. In light of Covid-19, additional updates on financial, non-financial and compliance risk
were provided, both separately and as an integral part of recurring reports.
At each quarterly Risk Committee meeting financial and model risks, non-financial risks and
compliance risks were discussed, with a specific focus on Covid-19. This included the status of ING’s
accompanying metrics such as for risks in the areas of solvency, liquidity and funding, credit, country,
market, IT, non-financial risk and compliance. The discussions were supported by different analyses
conducted on the potential Covid-19 impact on ING’s credit portfolio, capital and liquidity position, and
updates on credit developments in certain countries and portfolios. The non-financial and compliance
risk discussions were supported by (1) updates of the bank-wide KYC enhancement and maturity
efforts, (2) a variety of topical dashboards such as on IT (risk), cybersecurity, sourcing, data quality and
data privacy (including GDPR) and (3) the status of implementation of related regulatory programmes.
With respect to Covid-19, the committee addressed risks related to business continuity, business
resilience, the working from home control environment, HR, and IT and cybercrime.
As part of the annual recurring topics, the Risk Committee also discussed the following topics:
-
the annual review of the Risk Appetite Framework and accompanying principles and risk appetite
statements;
-
the annual update to the Recovery Plan;
-
the impact of upcoming regulations, and credit developments in certain countries and portfolios;
-
the review of the scope of ING’s key policies; and
-
the update of the Conflicts of Interest policy.
The entire Supervisory Board also participated in the dry run of the Recovery Plan.
As mentioned before, throughout the year, deep dives and thematic sessions took place on specific
topics. Deep dives are technical discussions on selected recurring key topics that have substantial risk
management relevance and that contribute to a more in-depth understanding of the matters at hand.
In 2021, there were deep dives on operational resilience, IT and cybersecurity, modelling and sourcing.
Thematic sessions focus specifically on certain themes that need further attention and/or are looking
forward at emerging risks and developments. Thematic sessions in 2021 encompassed: SOX Act
Framework and controls, capital and liquidity management with a view to capital planning, supervisory
update with the focus on SREP and Covid-19, data plan and data quality, non-financial risk
management (developments) and management adjustments. In principle, these sessions were
presented from a risk management angle and where relevant also addressed the impact of the Covid-
19 pandemic. All Supervisory Board members received a standing invitation for sessions deemed
relevant to them and participated in several of these.
All relevant items discussed by the committee were reported to the Supervisory Board, with the
Supervisory Board approving those items as required from a governance perspective.
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Audit Committee
The Audit Committee met six times in 2021. On 31 December 2021, the committee members were:
Margarete Haase (chair), Juan Colomb
á
s, Herman Hulst, Mike Rees and Hans Wijers.
The committee assists and advises the Supervisory Board with (1) the performance of its duties in
relation to the integrity and quality of ING’s financial reporting, (2) the related effectiveness of ING’s
internal risk management and control systems, and (3) the preparation of the discussions within and
the decisions of the Supervisory Board on such matters.
The Audit Committee addressed, among others, the following recurring topics:
-
the quarterly results and the financial statements;
-
judgemental accounting topics;
-
key audit matters, as included in the auditors’ reports;
-
financial reporting;
-
(the approval of) the external auditor’s audit plan/engagement letter/independence and fees;
-
the overall internal control environment, the internal controls over financial reporting, the internal
and external auditor reports;
-
the review of the internal audit function;
-
matters related to the financing of the company, including the assessment of ING’s capital and
liquidity position;
-
the press releases related to the periodic results and the Annual Report;
-
the internal audit plan, including its support and progress monitoring;
-
critical and highly overdue issues, as reported by the internal audit function;
-
the updated internal audit charter and the update of the ING External Auditor Independence Policy;
and
-
update of ING’s key policies, such as the ING Global Tax Policy.
The Audit Committee performed an assessment of the functioning of the external auditor and the
scope and materiality of the audit plan and the principal risks identified in the audit plan.
Specific attention was paid to a variety of other related topics. These included, among others, the
following recurring topics:
-
ING’s long-term CET1 ratio ambition level;
-
ING’s (interim) dividend;
-
SOX Act framework and controls; and
-
capital and liquidity management.
In addition, in 2021, the Audit Committee addressed, among others, expected credit losses including
management adjustments, IT security / access management and matters in the context of Covid-19
uncertainty.
All relevant items discussed by the committee were reported to the Supervisory Board, with the
Supervisory Board approving those items as required from a governance perspective.
Directly following the Audit Committee meetings, the members of the Audit Committee met in a
closed meeting with the internal and external auditors to seek confirmation that all relevant topics
were discussed in the Audit Committee meetings.
To properly prepare for the regular Audit Committee meetings, the chairperson of the Audit
Committee held separate sessions with the external auditor, the general manager of the internal audit
department, the chief financial officer (CFO) and the Group Controller. The chairperson also met with
various senior managers.
Nomination and Corporate Governance Committee
The Nomination and Corporate Governance Committee met 14 times in 2021, of which three were
combined with the Remuneration Committee to address topics that simultaneously covered
nomination as well as remuneration. On 31 December 2021, the committee members were: Hans
Wijers (chair), Mariana Gheorghe and Herna Verhagen.
The committee assists the Supervisory Board with the performance of its duties in relation to selection
and nomination of, among others, the members of the Supervisory Board and Management Board
Banking, talent management and the effectiveness of ING’s governance arrangements. The committee
prepares the discussions with and decisions of the Supervisory Board on such matters.
With regard to nomination related matters, it is ING’s aim to ensure that all of its boards are – at all
times – adequately composed to perform its duties. As is standard practice, the Nomination and
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Corporate Governance Committee therefore discusses (1) the performance of the individual members
of the Management Board Banking (also serving as input to the Remuneration Committee) and (2)
medium- to long-term succession planning for the Management Board Banking and the Supervisory
Board. A continuing conversation on Management Board Banking succession planning is facilitated by
the chief human resources officer as part of its regular meetings in the form of deep dives by function
and business line.
Finding suitable board succession candidates remains challenging, while taking into account the
evolving role of boards in general and with the goal of maintaining a balanced board composition.
Numerous requirements are to be met in view of board composition, including regulatory
requirements, suitability considerations, diversity, banking and other industry knowledge, outside
positions, independence, no conflicts of interest, availability, etc. Also diversity-related aspects are to
be taken into account as well as the minimum and optimal size of a board and how to arrive at an
appropriate balance in its representation of regions, age, gender, knowledge and expertise. The generic
profile of the Supervisory Board aims to capture these elements; this profile can be found on ing.com.
Read more on the boards’ composition in the ‘Composition of the Executive Board, Management Board
Banking and Supervisory Board’ section that also includes a diversity and competence matrix.
With a view to the above, in 2021 specific attention was paid to:
-
the succession of the head of Wholesale Banking, the appointment of a head of Retail Banking and
the separation of the board roles for operations and technology, resulting in the appointment of a
chief technology officer and the succession to the chief operations officer (COO)/chief
transformation officer.
-
the nomination and subsequent appointment by the General Meeting 2021 of Lodewijk Hijmans
van den Bergh as well as the reappointments of Hans Wijers and Margarete Haase to the
Supervisory Board.
The Nomination and Corporate Governance Committee also focuses on ING’s broader talent and
succession planning in view of bench strength and diversity at higher management levels, with
selected key roles receiving dedicated attention. This is done by taking into account ING’s diversity
policy (70% principle for mixed teams) and by accelerating refreshment where possible without
jeopardising business continuity. The diversity policy is published on ing.com and explained in more
detail in ‘Our People’. The committee also holds periodic conversations outside of its regular meetings
with internal talented individuals who are considered to have the potential to assume more senior and
complex roles in the organisation over time. The results of these conversations are fed into the
individuals’ coaching and development plans.
With regard to corporate governance, the committee discussed:
-
the 2021 Annual Report and the accompanying booklets on ING’s application of the Dutch
Corporate Governance Code and the Dutch Banking Code;
-
the approach and agenda for the General Meeting 2021, including the impact of the Covid-19
pandemic;
-
the suitability policy framework and its global implementation, thereby also taking into account
regulatory developments.
-
the annual updates to the corporate board charters, the governance manual and the decision
structure as well as any changes in board members’ outside positions; and
-
the review of the scope of ING’s key policies, such as ING's suitability policy framework.
All relevant items discussed by the committee were reported to the Supervisory Board, with the
Supervisory Board approving those items as required from a governance perspective.
Remuneration Committee
The Remuneration Committee met nine times in 2021. On 31 December 2021 the committee members
were: Herna Verhagen (chair), Mariana Gheorghe, Harold Naus and Hans Wijers.
The committee assists the Supervisory Board, with the performance of its duties in relation to
remuneration, the remuneration policies and the application and compliance thereof and shall prepare
the discussions within and decisions of the Supervisory Board on such matters. In doing so, the
Remuneration Committee will take into account the adequacy of information provided to shareholders
on remuneration policies and practices.
As an annual recurring topic, the Remuneration Committee reviewed the remuneration report by way
of benchmarking with the purpose of further improving the remuneration report.
In addition, the Remuneration Committee discussed the progress and performance on the annual
targets set for the Management Board Banking. With regard to variable remuneration and the
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application of ING’s accompanying VRAM (including last year’s lessons learned), the committee
received input and advice from the Risk Committee following strengthened risk management
governance. This served as input for a review of the predefined thresholds above which the pool for
variable remuneration may be unlocked for those eligible as well as the accompanying individual
variable remuneration proposals, including potential cases for holdback or clawback of deferred
compensation by way of malus. Furthermore, the Remuneration Committee discussed the mandate
for the variable remuneration cap for selected global staff outside the European Economic Area in the
Corporate Staff departments, and in the business lines of Wholesale Banking and Retail Banking from
100% to 200%, for a period of five performance years, starting with performance year 2022. The
above-mentioned was approved by the 2021 Annual General Meeting of ING Groep N.V.
This included the views and expectations of the ECB, specifically regarding the impact that such policies
may have on the maintenance of a financial institution’s sound capital base.
The Remuneration Committee also reviewed the proposed updates to ING’s Remuneration Regulations
Framework as part of its annual review. Throughout the year it assessed Identified Staff and High
Earner-related remuneration matters, based on ING’s accompanying governance framework.
In 2021, the committee paid specific attention to potential implications of the Covid-19 pandemic on
target setting and remuneration, by closely monitoring developments in this area.
All relevant items discussed by the committee were reported to the Supervisory Board, with the
Supervisory Board approving those items as required from a governance perspective.
Overview of Supervisory Board committee members
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Composition of the Management Board Banking and Supervisory
Board
ING’s aim is to ensure that the boards are – at all times – adequately composed to perform their duties.
The Supervisory Board continued with the succession planning for a new CRO resulting in Ljiljana
Č
ortan being appointed as the CRO of ING Bank and member of the Management Board Banking as of
1 January 2021.
Andrew Bester was appointed as a member of the Management Board Banking and head of Wholesale
Banking as of 6 April 2021. In addition, Aris Bogdaneris was appointed as head of Retail Banking as of 1
May 2021. This appointment formalised the role at Management Board Banking level and was an
important step forward in building a global Retail Banking business. Aris Bogdaneris continued in his
role as head of Challengers & Growth Markets alongside his role as head of Retail Banking.
To further strengthen ING’s position as a digital leader in banking, the decision was taken to separate
the Management Board Banking roles for technology and for operations. Ron van Kemenade was
appointed as a member of the Management Board Banking and chief technology officer as of 1 May
2021. Marnix van Stiphout was appointed as a member of the Management Board Banking and
COO/chief transformation officer as of 1 September 2021. He succeeded Roel Louwhoff, who stepped
down from the Management Board Banking, effective 1 August 2021. Roel Louwhoff left ING on 1
November 2021.
Lodewijk Hijmans van den Bergh was appointed as new Supervisory Board member by and at effective
as per the end of the General Meeting 2021. He also became a member of the Risk Committee.
Furthermore, the terms of appointment of Hans Wijers, Jan Peter Balkenende and Margarete Haase
expired at the end of the 2021 Annual General Meeting (of ING Groep N.V.). At his request, Jan Peter
Balkenende retired from the Supervisory Board as of the end of the above-mentioned meeting to focus
on other future activities. The Supervisory Board proposed to reappoint Hans Wijers and Margarete
Haase to the 2021 Annual General Meeting. These proposals were approved.
All the proposed appointments were approved by the ECB.
All Supervisory Board members, with the exception of not more than one person, shall qualify as
independent as defined in the best practice provision 2.1.8 of the Dutch Corporate Governance Code.
The members of the Supervisory Board are therefore requested to assess annually whether or not they
are independent as set out in the Dutch Corporate Governance Code and to confirm this in writing. On
the basis of these criteria, all members of the Supervisory Board are to be regarded as independent on
31 December 2021. On the basis of the NYSE listing standards, all members of the Supervisory Board
are also to be regarded as independent.
For the full list of board members see ‘Corporate Governance’.
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Diversity & competence matrix
*
Please note the following:
●
The purpose of this matrix is to provide ING’s stakeholders with an overview on the main aspects of diversity and competencies that ING considers to be the most relevant for its stakeholders.
●
The competencies included in this matrix represent a non-exhaustive overview of the competencies that ING's corporate board members already had before joining ING and/or developed during their position(s) at ING.
●
The content of the matrix is subject to change in the light of ING’s continually changing situation, markets and environment.
●
Furthermore, for the appointments of new corporate board members, all relevant competencies are also shared with the ING’s supervisors DNB/ECB based on their standard suitability matrix to assess the collective competence of members of the management/supervisory body.
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Appreciation for the Management Board Banking and ING
employees
The Supervisory Board would like to thank the members of the Management Board Banking for their
contribution to ING’s performance over the past year. It remained a year of uncertainty as Covid-19
continued to have an impact on our business and our customers and the devastating effects of climate
change became even more apparent. We’re grateful for their efforts in navigating these challenges
and creating long-term value for our stakeholders. In particular, we’re pleased to see progress in the
areas ING focused on this year: being safe, secure and compliant; digitalisation to improve the
customer experience; delivering healthy returns for our shareholders; and taking action to protect
planet and people for a more sustainable future. Of course, none of this would be possible without our
employees; we rely on them to deliver on ING’s purpose and strategy. The Supervisory Board
appreciates their ongoing commitment and flexibility. We recognise it’s not always been easy. Our
sincere thanks to all.
Additional information
More information can be found in
‘Corporate governance’
, which is deemed to be incorporated by
reference here.
Amsterdam, 7 March 2022
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Corporate governance
This chapter comprises ING Bank N.V.’s Corporate Governance
Statement.
Dutch Banking Code
The Dutch Banking Code is applied by ING Bank N.V. (ING Bank). The application by ING Bank is
described in the 2021 publication ‘Application of the Dutch Banking Code by ING Bank N.V.’, 10 March
2022, available on ing.com. This is to be read in conjunction with and deemed to be incorporated in the
Annual Report of ING Bank.
The Banking Code can be downloaded from the website nvb.nl/English/.
Financial reporting process
As ING Bank is a consolidated subsidiary of ING Groep N.V. (ING Group), its policies and procedures for
establishing and maintaining adequate internal control over financial reporting are the same as those
applied by ING Group for its consolidated financial statements with respect to ING Bank and the entities
included in the latter's own consolidated financial statements.
ING’s internal control over financial reporting is a process designed under the supervision of our
principal executive and principal financial officers to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of ING, provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that our receipts and expenditures are being made only in
accordance with authorisations of our management and directors, and provide reasonable assurance
regarding prevention or timely detection of unauthorised acquisition, use or disposition of our assets
that could have a material effect on our financial statements.
ING has a process in place where, under the supervision and with the participation of the CEO and CFO,
ING assesses the effectiveness of internal control over financial reporting, based on the criteria of the
Committee of Sponsoring Organisations of the Treadway Commission (‘COSO’) in Internal Reporting –
Integrated Framework (2013 Framework).
Board composition
The Management Board is composed to be adequate and balanced, with a diverse selection of persons
with knowledge, skills and executive experience, preferably gained in the banking sector, experience in
corporate governance of large stock-listed companies and experience in the political and social
environment in which such companies operate. In addition, there should be a good balance in the
experience of and affinity with the desired nature and culture of the business of ING. ING also takes
account of factors such as nationality, gender, age and education for the composition of the
Management Board.
The Supervisory Board regularly assesses the composition of the Management Board.
The Gender Diversity Act, which entered into force in the Netherlands on 1 January 2022, requires ING
to set appropriate and ambitious targets for gender diversity in its Management Board and senior
management. ING’s target for gender diversity in the Management Board is set at 30%.
Changes in the composition
Ljiljana
Č
ortan was appointed as the CRO of ING Bank and member of the Management Board as of 1
January 2021. In terms of the dimensions of diversity, Ljiljana
Č
ortan added both nationality and
gender diversity to the Management Board.
Report of Management Board
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165
Information on members of the Management Board Banking
Steven van Rijswijk (51) was appointed as chief
executive officer and chairman of the Executive
Board and the Management Board Banking with
effect from 1 July 2020. He has been a member of
the Executive Board since 8 May 2017. Before his
appointment as chief executive officer, he was ING’s
chief risk officer.
As chief executive officer and chairman he is responsible for:
●
the proper functioning of the Executive Board and Management Board Banking;
●
formulating, communicating and delivering ING’s strategy, including ESG;
●
ING’s decision-making, results, governance, (risk) culture, branding, reputation and ING’s people
agenda;
●
communication with the Supervisory Board.
Relevant positions pursuant to CRD IV
CEO and chairman of the Executive Board of ING Groep N.V. and the Management Board Banking of ING
Bank N.V.
Other relevant ancillary positions
Member of the management board of the Dutch Banking Association (Nederlandse Vereniging van
Banken), member of the board of directors of the Institute of International Finance, Inc.
Tanate Phutrakul (56) was appointed as chief
financial officer and member of the Management
Board Banking with effect from 7 February 2019,
and subsequently as a member of the Executive
Board at the AGM 2019.
As chief financial officer he is responsible for:
●
formulating and communicating ING’s financial strategy (including internal and external financial
reporting), budgeting, cost control and the financing of the company;
●
business performance reporting and analysis, among which measuring adherence to financial
targets;
●
capital and liquidity management;
●
investor relations;
●
regulatory & international affairs;
●
global economic research;
●
the communication to the Audit Committee and Supervisory Board on the aforementioned topics.
Relevant positions pursuant to CRD IV
CFO and member of the Executive Board of ING Groep N.V. and the Management Board Banking of ING
Bank N.V.
Other relevant ancillary positions
None.
Ljiljana
Č
ortan (50) was appointed as chief risk
officer and member of the Management Board
Banking with effect from 1 January 2021 and
subsequently as member of the Executive Board
member at the 2021 AGM.
As chief risk officer she is responsible for:
●
formulating ING’s risk framework and risk appetite;
●
assessing, creating and maintaining risk awareness;
●
developing financial and non-financial risk governance, policies, methodologies and guidance;
●
managing risk model landscape and developing analytics capabilities;
●
monitoring compliance, risk management, the execution of control activities and risk behaviour;
●
risk reporting.
Relevant positions pursuant to CRD IV
CRO and member of the Executive Board of ING Groep N.V. and the Management Board Banking of ING
Bank N.V.
Tanate Phutrakul
Chief financial officer
Ljiljana
Č
ortan
Chief risk officer
Steven van Rijswijk
Chief executive officer
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166
Other relevant ancillary positions
None.
Pinar Abay (44) joined the Management Board
Banking on 1 January 2020. Previously she was a
board member of ING in Turkey and a non-executive
member of the board of ING in Belgium.
As head of Market Leaders she is responsible for:
●
the execution of the strategy and priorities for ING as well as the strategies for Retail in the
Benelux and Wholesale Banking in Belgium and Luxemburg;
●
driving performance, operations and compliance, including profitability and risk management
within Market Leaders across all products and segments in the Benelux; and
●
creating a platform in which the interests of Retail, Business Banking and Wholesale Banking are
appropriately balanced.
Relevant positions pursuant to CRD IV
Member of the Management Board Banking of ING Bank N.V. and non-executive member of the board
of ING Belgium N.V./S.A.
Other relevant ancillary positions
None.
Andrew Bester (56) was appointed as member of
the Management Board Banking and head of
Wholesale Banking with effect from 6 April 2021.
As head of Wholesale Banking he is responsible for:
●
of ING;
●
driving performance, operations and compliance of wholesale banking, including profitability and
risk management across all geographies, segments and products;
●
optimising all aspects of Wholesale Banking and steering of the different regions, sectors and
products and Wholesale Banking innovation; and
●
sustainability.
Relevant positions pursuant to CRD IV
Member of the Management Board Banking of ING Bank N.V.
Other relevant ancillary positions
None.
Aris Bogdaneris (58) was appointed as member of
the Management Board Banking with effect from
1 June 2015. He is head of Retail Banking and
head of Challengers & Growth Markets.
As head of Challengers & Growth Markets he is responsible for:
●
the execution of the strategy and priorities for ING as well as the strategies for Retail and
Wholesale Banking in the Challengers countries (Australia, Austria, Czech Republic, France,
Germany, Italy, Portugal, Spain) and the Growth countries (Poland, Romania, Turkey), Asia region
and the strategic positions in Thailand and China (where applicable);
●
driving performance, operations and compliance, including profitability and risk management
within Challengers & Growth Markets across all products and segments; and
●
creating a platform in which the interests of Retail, Business Banking and Wholesale Banking are
appropriately balanced.
As head of Retail Banking he is responsible for:
●
defining the strategy and priorities for Retail and Business Banking, facilitating the global
platform strategy and overseeing the proper implementation of these in line with ING’s strategy.
Pinar Abay
Head of Market Leaders
Andrew Bester
Head of Wholesale Banking
Aris Bogdaneris
Head of Retail Banking
Head of Challengers &
Growth Markets
Report of Management Board
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167
●
setting targets for implementation of the global Retail strategy, and monitoring implementation
and effectiveness thereof;
●
creating effective Retail governance to deliver a global Retail customer experience; and
●
leveraging global competencies and bringing expertise to local units with respect to Retail
products, channels and client interactions.
Relevant positions pursuant to CRD IV
Member of the Management Board Banking of ING Bank N.V., member of Management Board of ING
Bank (Australia) Limited and member of the Supervisory Board of ING DiBa.
Other relevant ancillary positions
None.
Ron van Kemenade (56) was appointed as
member of the Management Board Banking and
chief technology officer with effect from 1 May
2021. Prior to his appointment, he was the chief
information officer of ING Bank.
As chief technology officer he is responsible for:
●
translating the defined ING and respective business line (Wholesale Banking and Retail)
strategies into an IT data and information security strategy and overseeing proper
implementation thereof;
●
the total IT landscape (including infrastructure and applications), information security and data
management;
●
advising the business on technology driven (business) opportunities.
Relevant positions pursuant to CRD IV
Member of the Management Board Banking of ING Bank N.V. and member of the management
board of ING Groenbank N.V.
Other relevant ancillary positions
None.
Marnix van Stiphout (51) was appointed as member
of the Management Board Banking, chief operations
officer and chief transformation officer with effect
from 1 September 2021.
In his role, he is responsible for translating the defined ING and respective business line (Wholesale
Banking and Retail) strategies into a strategy for the operations function and overseeing proper
implementation thereof, in particular on:
●
sourcing and shared services;
●
KYC operations;
●
process management;
●
global analytics;
●
data protection execution;
●
the execution and management of bank-wide transformation;
●
making decisions on related budget release in line with ING’s strategy.
Relevant positions pursuant to CRD IV
Member of the Management Board Banking of ING Bank N.V.
Other relevant ancillary positions
None.
Ron van Kemenade
Chief technology officer
Marnix van Stiphout
Chief operations officer
& chief transformation
officer
Report of Management Board
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168
Supervisory Board
The Supervisory Board is composed to be adequate and balanced, with a mix of persons with
knowledge, skills and executive experience, preferably gained in the banking sector, experience in
corporate governance of large stock-listed companies and experience in the political and social
environment in which such companies operate. In the selection of Supervisory Board members, ING
strives for a balance in nationality, gender, age, and educational and work background. In addition,
there should be a balance in the experience and affinity with the nature and culture of the business of
ING and its subsidiaries.
The Supervisory Board is responsible for selecting and nominating candidates for appointment or
reappointment to the Supervisory Board, among others based on the Supervisory Board profile, which
is available on ing.com. The Supervisory Board regularly assesses the composition of the Supervisory
Board.
In 2021, three out of nine members of the Supervisory Board were female. We believe the Supervisory
Board is well-balanced in terms of other relevant diversity aspects. Overall, the preferred emphasis on
members with a financial or banking background has been maintained. In terms of nationality, the
ratio between Dutch and non-Dutch nationalities in 2021 was 56 - 44%.
According to the Gender Diversity Act, which entered into force in the Netherlands on 1 January 2022,
ING is required to comply with a gender diversity quota of one third male and one third female for its
Supervisory Board. Currently the Supervisory Board is compliant.
Ancillary positions
Members of the Supervisory Board may hold other positions, including directorships, either paid
or unpaid. CRD IV restricts the total number of supervisory board positions or non-executive
directorships with commercial organisations that may be held by a Supervisory Board member to four,
or to two, if the Supervisory Board member also has an executive board position. The ECB may, under
special circumstances, permit a Supervisory Board member to fulfil an additional supervisory board
position or non-executive directorship. Positions with, inter alia, subsidiaries or qualified holdings are
not taken into account in the application of these restrictions. Such positions may not conflict with the
interests of ING Bank. It is the responsibility of the individual member of the Supervisory Board and the
Supervisory Board collectively to ensure that the directorship duties are performed properly and are
not affected by any other positions that the individual may hold outside ING Bank.
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169
Information on the members of the Supervisory Board
Relevant positions pursuant to CRD IV
Chairman of the Supervisory Board of ING Groep N.V./ING Bank N.V. and supervisory board member of HAL Holding N.V.
Other relevant ancillary positions
Member of the Temasek European Advisory Panel of Temasek Holdings Private Limited and Chairman of the Supervisory
Council of SEO Amsterdam Economics.
Relevant positions pursuant to CRD IV
Vice-chairman of the Supervisory Board of ING Groep N.V./ING Bank N.V., non-executive chairman of Athla Capital
Management Limited, non-executive chairman of Travelex Topco Limited and non-executive chairman of the board of
Satsanga Fintech Holdings.
Other relevant ancillary positions
Non-executive chairman of Mauritius Africa FinTech Hub.
Relevant positions pursuant to CRD IV
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. and non-executive member of the board of
directors and member of the audit committee, the compensation committee and the risk committee of Credit Suisse
Group AG and Credit Suisse AG.
Other relevant ancillary positions
None.
Relevant positions pursuant to CRD IV
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. and non-executive director of ContourGlobal Plc.
Other relevant ancillary position
Member of the Advisory Council of the Bucharest Academy of Economic Studies, Romania, member of the board of
Envisia – Boards of Elite and member of the board of Teach for Romania.
Report of Management Board
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170
Relevant positions pursuant to CRD IV
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V., member of the supervisory board and chairwoman
of the audit committee of Fraport AG, member of the supervisory board and member of the audit committee of AMS
AG, and member of the supervisory board of Marquard & Bahls AG.
Other relevant ancillary positions
Chairwoman of the Employers Association of Kölnmetall and member of the German Corporate Governance
Commission.
Relevant positions pursuant to CRD IV
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V., deputy chairman of the supervisory board of HAL
Holding N.V., chairman of the supervisory board of BE Semiconductor Industries N.V. and non-executive chairman of
the board of directors of Fortino Capital Partners N.V.
Other relevant ancillary positions
Chairman of the board of Utrecht University Fund (the Netherlands), chairman of the executive committee of
Vereniging Aegon and external advisor to the management committee of De Brauw Blackstone Westbroek N.V.
Relevant positions pursuant to CRD IV
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V.
Other relevant ancillary positions
None.
Relevant positions pursuant to CRD IV
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V., CEO of Cardano Risk Management B.V. and CFO of
Cardano Holding Limited.
Other relevant ancillary positions
Chairman of the Curatorium VU Amsterdam “Risk Management for Financial Institutions”.
Relevant positions pursuant to CRD IV
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. and CEO of PostNL N.V.
Other relevant ancillary positions
Member of the supervisory board, member of the audit committee of Het Concertgebouw N.V, member of the advisory
council of Goldschmeding Foundation and member of the Board of VNO-NCW (inherent to her position at Post NL N.V.).
Report of Management Board
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171
Conformity statement
The Management Board Banking is required to prepare the Financial statements and the Annual Report
of ING Bank N.V. for each financial year in accordance with applicable Dutch law and those
International Financial Reporting Standards (IFRS) that were endorsed by the European Union.
Conformity statement pursuant to section 5:25c paragraph 2(c) of the Dutch Financial Supervision
Act (Wet op het financieel toezicht).
The Management Board Banking is responsible for maintaining proper accounting records, for
safeguarding assets and for taking reasonable steps to prevent and detect fraud and other
irregularities. It is responsible for selecting suitable accounting policies and applying them on a
consistent basis, making judgements and estimates that are prudent and reasonable. It is also
responsible for establishing and maintaining internal procedures which ensure that all major financial
information is known to the Management Board Banking, so that the timeliness, completeness and
correctness of the external financial reporting are assured.
As required by section 5:25c paragraph 2(c) of the Dutch Financial Supervision Act, each of the
signatories hereby confirms that to the best of his knowledge:
◾
the ING Bank N.V. 2021 Financial statements give a true and fair view of the assets, liabilities,
financial position and profit or loss of ING Bank N.V. and the enterprises included in the
consolidation taken as a whole; and
◾
the ING Bank N.V. 2021 Annual Report gives a true and fair view of the position at the balance
sheet date, the development and performance of the business during the financial year 2021
of ING Bank N.V. and the enterprises included in the consolidation taken as a whole, together
with a description of the principal risks ING Bank N.V. is being confronted with.
Amsterdam, 7 March 2022
The Management Board Banking
S.J.A. (Steven) van Rijswijk
CEO, chairman of the Management Board Banking
T. (Tanate) Phutrakul
CFO
L. (Ljiljana)
Č
ortan
CRO
P. (Pinar) Abay
Head of Market Leaders
A.J.M. (Andrew) Bester
Head of Wholesale Banking
A. (Aris) Bogdaneris
Head of Retail Banking
Head of Challengers & Growth Markets
R.H.E. (Ron) van Kemenade
Chief technology officer
M.A. (Marnix) Stiphout
Chief operations officer / Chief transformation officer
Report of Management Board
ING Bank Annual Report 2021
172
Contents
Consolidated financial statements
Notes to the consolidated financial statements
Notes to the consolidated statement of financial position
Notes to the consolidated statement of profit or loss
Notes to the consolidated statement of cashflows
Segment reporting
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ING Bank Annual Report 2021
173
Additional notes to the consolidated financial statements
46
Parent company financial statements
Other information
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ING Bank Annual Report 2021
174
Consolidated statement of financial position
As at 31 December
in EUR million
2021
2020
2021
2020
Assets
Liabilities
Cash and balances with central banks
Deposits from banks
Loans and advances to banks
Customer deposits
Financial assets at fair value through profit or loss
Financial liabilities at fair value through profit or loss
– Trading assets
– Trading liabilities
– Non-trading derivatives
– Non-trading derivatives
– Designated as at fair value through profit or loss
– Designated as at fair value through profit or loss
– Mandatorily at fair value through profit or loss
Current tax liabilities
Financial assets at fair value through other comprehensive income
Deferred tax liabilities
Securities at amortised cost
Provisions
Loans and advances to customers
Other liabilities
Investments in associates and joint ventures
Debt securities in issue
Property and equipment
Subordinated loans
Intangible assets
Total liabilities
Current tax assets
Deferred tax assets
Equity
Other assets
Share capital and share premium
Other reserves
Retained earnings
Shareholders’ equity (parent)
Non-controlling interests
Total equity
Total assets
Total liabilities and equity
References relate to the accompanying notes. These are an integral part of the Consolidated financial
statements.
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175
Consolidated statement of profit or loss
for the years ended 31 December
in EUR million
2021
2020
2019
2021
2020
2019
Continuing operations
Interest income using effective interest rate method
Addition to loan loss provisions
Other interest income
Staff expenses
Total interest income
Other operating expenses
Total expenses
Interest expense using effective interest rate method
-5,550
-7,507
-11,305
Other interest expense
-1,966
-1,603
-3,085
Result before tax
Total interest expense
-7,516
-9,110
-14,391
Taxation
Net interest income
Net result
Fee and commission income
Net result (before non-controlling interests)
Fee and commission expense
-1,487
-1,503
-1,571
Net result attributable to Non-controlling interests
Net fee and commission income
Net result attributable to Shareholder of the parent
Valuation results and net trading income
Dividend per ordinary share
Investment income
Total amount of dividend paid (in million euros)
Share of result from associates and joint ventures
Impairment of associates and joint ventures
-3
-235
-34
Result on disposal of group companies
-29
-3
Net result on derecognition of financial assets measured at amortised cost
-0
Other income
Total income
References relate to the accompanying notes. These are an integral part of the Consolidated financial
statements.
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176
Consolidated statement of comprehensive income
for the years ended 31 December
in EUR million
2021
2020
2019
Net result (before non-controlling interests)
Other comprehensive income
Items that will not be reclassified to the statement of profit or loss:
Realised and unrealised revaluations property in own use
-2
-7
Remeasurement of the net defined benefit asset/liability
Net change in fair value of equity instruments at fair value through other
comprehensive income
-335
Change in fair value of own credit risk of financial liabilities at fair value through profit
or loss
-19
-116
Items that may subsequently be reclassified to the statement of profit or loss:
Net change in fair value of debt instruments at fair value through other
comprehensive income
-178
-32
Realised gains/losses on debt instruments at fair value through other comprehensive
income reclassified to the statement of profit or loss
-42
-34
-34
Changes in cash flow hedge reserve
-1,955
Exchange rate differences
-1,620
-5
Share of other comprehensive income of associates and joint ventures and other
income
-3
Total comprehensive income
Comprehensive income attributable to:
Non-controlling interests
-247
Shareholders of the parent
References relate to the accompanying notes. These are an integral part of the Consolidated financial
statements.
For the disclosure on the income tax effects on each component of the other comprehensive income
reference is made to Note 35 ‘Taxation’.
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177
Consolidated statement of changes in equity
in EUR million
Share capital
and share
premium
Other
reserves
Retained
earnings
Shareholders'
equity
(parent)
Non-
controlling
interests
Total
equity
Balance as at 31 December 2020
Net change in fair value of equity instruments at fair value through other comprehensive income
-6
Net change in fair value of debt instruments at fair value through other comprehensive income
-164
-164
-13
-178
Realised gains/losses on debt instruments at fair value through other comprehensive income reclassified to the statement of profit or loss
-40
-40
-1
-42
Changes in cash flow hedge reserve
-1,603
-1,603
-352
-1,955
Realised and unrealised revaluations property in own use
-13
-2
-0
-2
Remeasurement of the net defined benefit asset/liability
Exchange rate differences and other
-10
Share of other comprehensive income of associates and joint ventures and other income
-21
-3
-3
Change in fair value of own credit risk of financial liabilities at fair value through profit or loss
Total amount recognised directly in other comprehensive income net of tax
-1,456
-1,433
-375
-1,809
Net result
Total comprehensive income net of tax
-1,265
-247
Dividends
-3,125
-3,125
-40
-3,165
Employee stock option and share plans
Changes in the composition of the group and other changes
-0
-0
Balance as at 31 December 2021
References relate to the accompanying notes. These are an integral part of the Consolidated financial
statements. Changes in individual Reserve components are presented in Note 19 ‘Equity’.
Report of Management Board
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178
Consolidated statement of changes in equity - continued
in EUR million
Share
capital and
share
premium
Other
reserves
Retained
earnings
Share-
holders'
equity
(parent)
Non-
controlling
interests
Total
equity
Balance as at 31 December 2019
Net change in fair value of equity instruments at fair value through other comprehensive income
-399
-337
-335
Net change in fair value of debt instruments at fair value through other comprehensive income
Realised gains/losses on debt instruments at fair value through other comprehensive income reclassified to the statement of profit or loss
-33
-33
-1
-34
Changes in cash flow hedge reserve
Realised and unrealised revaluations property in own use
-33
-7
-0
-7
Remeasurement of the net defined benefit asset/liability
Exchange rate differences and other
-1,557
-1,557
-63
-1,620
Share of other comprehensive income of associates and joint ventures and other income
-37
Change in fair value of own credit risk of financial liabilities at fair value through profit or loss
-3
-16
-19
-19
Total amount recognised directly in other comprehensive income net of tax
-1,760
-1,644
-1,589
Net result
Total comprehensive income net of tax
-1,666
Dividends
-43
-43
-3
-46
Employee stock option and share plans
Changes in the composition of the group and other changes
-1
-1
Balance as at 31 December 2020
References relate to the accompanying notes. These are an integral part of the Consolidated financial
statements. Changes in individual Reserve components are presented in Note 19 ‘Equity’.
Report of Management Board
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179
Consolidated statement of changes in equity - continued
in EUR million
Share capital
and share
premium
Other
reserves
Retained
earnings
Shareholders'
equity
(parent)
Non-
controlling
interests
Total
equity
Balance as at 31 December 2018
Net change in fair value of equity instruments at fair value through other comprehensive income
-335
Net change in fair value of debt instruments at fair value through other comprehensive income
-33
-33
-32
Realised gains/losses on debt instruments at fair value through other comprehensive income reclassified to the statement of profit or loss
-33
-33
-1
-34
Changes in cash flow hedge reserve
Realised and unrealised revaluations property in own use
-0
Remeasurement of the net defined benefit asset/liability
Exchange rate differences and other
-11
-11
-5
Share of other comprehensive income of associates and joint ventures and other income
-137
Change in fair value of own credit risk of financial liabilities at fair value through profit or loss
-123
-116
-116
Total amount recognised directly in other comprehensive income net of tax
Net result
Total comprehensive income net of tax
Dividends
-2,819
-2,819
-29
-2,848
Employee stock option and share plans
Changes in the composition of the group and other changes
-23
-1
Balance as at 31 December 2019
References relate to the accompanying notes. These are an integral part of the Consolidated financial
statements. Changes in individual Reserve components are presented in Note 19 ‘Equity’.
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180
Consolidated statement of cash flows
for the years ended 31 December
in EUR million
2021
2020
2019
2021
2020
2019
Cash flows from operating activities
29
Disposals and redemptions:
– Associates and joint ventures
Result before tax
– Disposal of subsidiaries, net of cash disposed
-3
Adjusted for:
– Depreciation and amortisation
- Financial assets at fair value through other
comprehensive income
– Addition to loan loss provisions
- Securities at amortised cost
– Other non-cash items in Result before tax
– Property and equipment
Taxation paid
-1,871
-1,735
-2,369
– Loans sold
Changes in:
– Net change in Loans and advances to/from banks,
not available/payable on demand
-3,909
– Other investments
– Net change in Trading assets and Trading liabilities
-5,624
-2,567
Net cash flow from/(used in) investing activities
-8,487
-2,681
– Loans and advances to customers
-27,772
-16,696
– Customer deposits
Cash flows from financing activities
30
– Other
29
-8,179
-2,770
Proceeds from debt securities
Net cash flow from/(used in) operating activities
-7,869
Repayments of debt securities
-76,150
-99,212
-94,497
Proceeds from issuance of subordinated loans
Cash flows from investing activities
Repayments of subordinated loans
-2,538
-2,608
-931
Investments and advances:
- Acquisition of subsidiaries, net of cash acquired
-17
Repayments of principal portion of lease liabilities
-301
-273
-271
- Associates and joint ventures
-91
-24
-686
Dividends paid
-3,165
-46
-2,848
- Financial assets at fair value through other
comprehensive income
-13,186
-16,949
-16,270
Net cash flow from/(used in) financing activities
-1,686
-36,732
-10,465
- Securities at amortised cost
-44,945
-37,522
-12,268
– Property and equipment
-184
-287
-355
Net cash flow
-3,335
– Other investments
-179
-300
-395
Cash and cash equivalents at beginning of year
31
Effect of exchange rate changes on cash and cash equivalents
-565
-425
Cash and cash equivalents at end of year
31
Report of Management Board
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181
Consolidated statement of cash flows - continued
As at 31 December 2021, Cash and cash equivalents includes cash and balances with central banks of
EUR
In 2020 the increase was mainly driven by ING’s participation of EUR
term refinancing operations (TLTRO III) in 2020, which were mainly placed on deposit with the ECB as at
31 December 2020, and by increased customer deposits. Reference is made to Note 31 ‘Cash and cash
equivalents’.
References relate to the accompanying notes. These are an integral part of the Consolidated financial
statements.
The table below presents the Interest and dividend received and paid.
in EUR million
2021
2020
2019
Interest received
Interest paid
-8,723
-9,690
-14,594
Dividend received
1
Dividend paid
-3,165
-46
-2,848
1 Includes dividends received as recognized within Investment Income, from equity securities included in the Financial assets
at fair value through profit or loss, Financial assets at fair value through OCI, and from Investments in associates and joint
ventures. Dividend paid and received from trading positions have been included.
Dividends received from associates and joint ventures are included in investing activities, interest
received, interest paid and other dividends received are included in operating activities and dividend
paid is included in financing activities in the Consolidated statement of cash flows.
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Notes to the Consolidated financial statements
1 Basis of preparation and significant accounting policies
1.1 Reporting entity and authorisation of the Consolidated financial statements
) is a company domiciled in
.
Commercial Register of
, number 33031431. ING Bank N.V. is a wholly-owned subsidiary
of
statements, as at and for the year ended 31 December 2021, comprise ING Bank N.V. (the Parent
company) and its subsidiaries, together referred to as ING Bank.
.
The ING Bank Consolidated financial statements, as at and for the year ended 31 December 2021,
were authorised for issue in accordance with a resolution of the Management Board Banking on 7
March 2022. The General Meeting of Shareholder may decide not to adopt the financial statements,
but may not amend these.
1.2 Basis of preparation of the Consolidated financial statements
The ING Bank Consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and the
relevant articles of Part 9 of Book 2 of the Dutch Civil Code.
IFRS as adopted by the EU are IFRS Standards and IFRS Interpretations as issued by the
International Accounting Standards Board (IASB) and the IFRS Interpretations Committee (IFRIC) with
some limited modifications such as the temporary ‘carve-out’ from IAS 39 ‘Financial
Instruments: Recognition and Measurement’ (herein, referred to as IFRS).
Under the EU carve-out, ING Bank applies fair value hedge accounting to portfolio hedges of interest
rate risk (macro hedging). For further information, reference is made to paragraph 1.6.4
‘Derivatives and hedge accounting’ of this note and to note 37 ‘Derivatives and hedge accounting’.
The ING Bank Consolidated financial statements have been prepared on a going concern basis and
there are no significant doubts about the ability of ING Bank to continue as a going concern. In 2021
ING Bank’s capital and liquidity position remained strong despite the Covid-19 impact and ING Bank
has sufficient buffers to withstand certain adverse scenarios without breaching currently applicable
and likely future requirements. Strong capital position allowed ING Bank to pay a cash dividend to the
shareholder during 2021. Reference is made to Note 19 ‘Equity’.
The Consolidated financial statements are presented in euros and rounded to the nearest million,
unless stated otherwise. Amounts may not add up due to rounding.
1.2.1 Presentation of Risk management disclosures
To improve transparency, reduce duplication and present related information in one place, certain
disclosures of the nature and extent of risks related to financial instruments required by IFRS 7
‘Financial instruments: Disclosures’ are included in the ‘Risk management’ section of the Annual
Report.
These disclosures are an integral part of ING Bank Consolidated financial statements and are
indicated in the ‘Risk management’ section by the symbol (*). Chapters, paragraphs, graphs or tables
within the ‘Risk management’ section that are indicated with this symbol in the respective headings
or table header are considered to be an integral part of the Consolidated financial statements.
1.3 Impact of Covid-19
In 2021, the Covid-19 pandemic continued to have an impact on people, businesses and the
economy. While vaccination rates continued to increase and Covid-19 related restrictions were lifted
in some jurisdictions in the first part of 2021, the end of 2021 was again marked by new waves of
infections, supply chain disruptions, rising energy prices and increasing inflation impacting
companies and consumers. In many countries, governments have adopted economic support
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programs. In addition, various initiatives have been taken by ING to support our clients to manage
these extraordinary times by way of granting, amongst others, temporary payment holidays.
Governments in almost all Retail Banking countries have adopted measures providing for payment
holidays. During 2020 and 2021, in line with the EBA moratoria guidelines, approximately 137
thousand customers had been granted payment holidays under schemes that were eligible under
the EBA moratoria guidelines. The total exposure of loans for which a payment holiday was granted
amounts to EUR 15.3 billion of which over 57% were for customers located in the Netherlands and
Belgium. At the end of 2021, 99.8% of granted payment holidays had expired.
As government support measures will, or have already ended, and Covid-19 remains a threat as was
evidenced with the emergence of the omicron variant at the end of 2021, Covid-19 is still bringing
uncertainties and risks.
Certain sector were particularly impacted by the Covid-19 pandemic. An economic sector-based
adjustments of EUR 341 million was taken in December 2021 because of delays in defaults occurring
in the Covid-19 related crisis, mainly as a result of government support programmes, while GDP
growth forecasts as well as unemployment rates and house prices improved over 2021 and which
triggered releases of the model based provisions.
For further information on payments holidays and management adjustments applied, reference is
made to the ‘Credit risk’ paragraph of the ‘Risk management’ section.
As a result of the economic effects of Covid-19 estimation uncertainty and level of management
judgement remains at an elevated level in 2021 compared to before the Covid-19 pandemic,
particularly in the estimation of loan loss provisions (including the need for management
adjustments) and impairment assessment of an investment in an associate,. Reference is made to
paragraph
1.5 ‘Significant judgements and critical accounting estimates and assumptions’ for further
explanation.
1.4 Changes to accounting policies and presentation
ING Bank has consistently applied its accounting policies to all periods presented in these
Consolidated financial statements.
In 2021, in note 21 ‘Net fee and commission income’, ING Bank changed the presentation of net fee
and commission income to better align with internal management and monitoring. Comparative
figures for 2020 and 2019 have been updated accordingly.
1.4.1 Changes in IFRS effective in 2021
The following amended standards became effective in 2021:
◾
Amendments to IFRS 9 ‘Financial Instruments’, IAS 39 ‘Financial Instruments: Recognition and
Measurement’, IFRS 16 ‘Leases’, IFRS 4 ‘Insurance Contracts’ and IFRS 7 ‘Financial Instruments:
Disclosures’: ‘IBOR Reform and its Effects on Financial Reporting – Phase 2’ (issued in August
2020);
◾
Amendments to IFRS 16 ‘Leases’: ‘Covid-19-Related Rent Concessions’ (issued in May 2020).
The IBOR Reform – Phase 2 amendments relate mainly to accounting for changes in the basis for
determining the contractual cash flows of financial assets and liabilities due to the IBOR reform and
impact on hedge accounting when an existing benchmark rate is reformed or replaced with an
alternative risk free rate. Specifically, Phase 2 amendments require that the effective interest rate on
debt financial instruments is adjusted, and hedge accounting continues on transition to risk free
rates, but only to the extent that the modifications made to financial instruments are those
necessary to implement the IBOR Reform and that the new basis for calculating cash flows is
‘economically equivalent’ to the previous basis. By applying these mandatory amendments, ING
Bank avoids recognising modification gains and losses on debt instruments that would otherwise be
required in the absence of Phase 2 amendments (changes to debt instruments resulting from IBOR
Reform are treated as a reset to the instrument’s variable interest rate). In addition, ING Bank avoids
hedge accounting discontinuations when modifying both hedged items and hedging instruments
(and related hedge documentation) as a consequence of IBOR reform that would otherwise be
required in the absence of Phase 2 amendments. Refer to ‘Risk Management’ section – ‘Market Risk’
for more details.
Although ING Bank has significant exposures to IBORs, the transition to the new risk free rates did not
have a material impact in 2021 partially due to the IBOR amendments to IFRS 9 and IAS 39 as
described above.
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The amendments to IFRS 16 ‘Leases’ provide lessees with an exemption from assessing whether a
Covid-19-related rent concession is a lease modification. As ING Bank did not receive rent
concessions as a lessee, these amendments had no impact on the accounting policies of ING Bank.
ING Bank has not early adopted any standard, interpretation or amendment in 2021 which has been
issued, but is not yet effective.
1.4.2 Upcoming changes in IFRS after 2021
The following published amendments are not mandatory for 2021 and have not been early adopted
by ING Bank. ING Bank is still currently assessing the detailed impact of these amendments. However,
the implementation of these amendments is expected to have no significant impact on ING Bank’s
Consolidated financial statements.
Effective in 2022:
◾
Amendments to IFRS 3 ‘Business Combinations’: Reference to the Conceptual Framework (issued
in May 2020).
◾
Amendments to IAS 16 ‘Property, Plant and Equipment’: Proceeds before Intended Use (issued in
May 2020).
◾
Amendments to IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’: Onerous
Contracts — Cost of Fulfilling a Contract (issued in May 2020).
◾
Annual improvements to IFRS Standards 2018-2020 Cycle: Amendments to IFRS 1 ‘First-time
Adoption of International Financial Reporting Standards’, amendments to IFRS 9 ‘Financial
Instruments’ and amendments to IFRS 16 ‘Leases’ (issued in May 2020).
Effective in 2023:
◾
Amendments to IAS 1 ‘Presentation of Financial Statements’: Classification of Liabilities as
Current or Non-current (issued in January 2020).
◾
Amendments to IAS 1 ‘Presentation of Financial Statements’: Disclosure of Accounting Policies
(issued in February 2021).
◾
Amendments to IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’:
Definition of Accounting Estimates (issued in February 2021).
◾
Amendments to IAS 12 ‘Income Taxes’: Deferred Tax Related to Assets and Liabilities Arising From
a Single Transaction (issued in May 2021).
IFRS 17 ‘Insurance contracts’ – effective in 2023
In May 2017, the IASB issued IFRS 17 ‘Insurance Contracts’, a new accounting standard for insurance
contracts covering recognition and measurement, presentation and disclosure. Once effective, IFRS
17 will replace IFRS 4 ‘Insurance Contracts’, which allowed diversity in accounting practices for
insurance contracts. In June 2020, the IASB published amendments to IFRS 17 including a scope
exclusion for credit card contracts and similar contracts that provide insurance coverage, and an
optional scope exclusion for loans with death waivers. ING Bank does not have insurance business,
but mainly sells insurance products as a broker where it does not run the insurance risk. ING Bank is
currently assessing the detailed impact of adopting this Standard.
1.5 Significant judgements and critical accounting estimates and assumptions
The preparation of the Consolidated financial statements requires management to make
judgements in the process of applying its accounting policies and to use estimates and assumptions.
The estimates and assumptions affect the reported amounts of the assets and liabilities and the
amounts of the contingent assets and contingent liabilities at the balance sheet date, as well as
reported income and expenses for the year. The actual outcome may differ from these estimates.
The process of setting assumptions is subject to internal control procedures and approvals.
ING Bank has identified areas that require management to make significant judgements and use
critical accounting estimates and assumptions based on the information and financial data that may
change in future periods. These areas are:
◾
Loan loss provisions (financial assets);
◾
The determination of the fair values of financial assets and liabilities;
◾
Impairment assessment of an investment in associate;
◾
Provisions; and
◾
Accounting for Targeted Longer-Term Refinancing Operations (TLTRO).
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For further discussion of the significant judgements and critical accounting estimates and
assumptions in these areas, reference is made to the relevant parts in paragraph 1.6 ‘Financial
instruments’ (specifically 1.6.8 ‘Impairment of financial assets’, 1.6.3 for ‘Fair values of financial
assets and liabilities’, 1.10 ‘Investments in associates and joint ventures’, 1.16 ‘Provisions, contingent
liabilities and contingent assets’ and 1.6.9 ‘Accounting for Targeted Longer-Term Refinancing
Operations (TLTRO)’) of this note and the applicable notes to the Consolidated financial statements.
1.6 Financial instruments
1.6.1 Recognition and derecognition of financial instruments
Recognition of financial assets
Financial assets are recognised in the balance sheet when ING Bank becomes a party to the
contractual provisions of the instrument. For a regular way purchase or sale of a financial asset,
trade date and settlement date accounting is applied depending on the classification of the financial
asset.
Derecognition of financial assets
Financial assets are derecognised when the rights to receive cash flows from the financial assets
have expired or where ING Bank has transferred the rights to receive the cash flows from the
financial asset or assumed an obligation to pass on the cash flows and has transferred substantially
all the risks and rewards of the asset. If ING Bank neither transfers nor retains substantially all the
risks and rewards of ownership of a financial asset, it derecognises the financial asset if it no longer
has control over the asset. The difference between the carrying amount of a financial asset that has
been extinguished and the consideration received is recognised in profit or loss.
Recognition of financial liabilities
Financial liabilities are recognised on the date that the entity becomes a party to the contractual
provisions of the instrument.
Derecognition of financial liabilities
Financial liabilities are derecognised when the obligation specified in the contract is discharged,
cancelled or expired. The difference between the carrying amount of a financial liability that has
been extinguished and the consideration paid is recognised in profit or loss.
1.6.2 Classification and measurement of financial instruments
Financial assets
ING Bank classifies its financial assets in the following measurement categories:
◾
those to be measured subsequently at fair value (either through OCI, or through profit or
loss); and
◾
those to be measured at amortised cost (AC).
At initial recognition, ING Bank measures a financial asset at its fair value plus, in the case of a
financial asset not at FVPL, transaction costs that are directly attributable to the acquisition of the
financial asset. Transaction costs of financial assets carried at fair value through profit or loss (FVPL)
are expensed in the statement of profit or loss.
Financial assets - Debt instruments
The classification depends on the entity’s business model for managing the financial assets and the
contractual terms of the cash flows at initial recognition.
Business models
Business models are classified as Hold to Collect (HtC), Hold to Collect and Sell (HtC&S) or Other
depending on how a portfolio of financial instruments as a whole is managed. ING Bank’s business
models are based on the existing management structure of the bank, and refined based on an
analysis of how businesses are evaluated and reported, how their specific business risks are
managed and on historic and expected future sales. Sales are permissible in a HtC business model
when these are due to an increase in credit risk, take place close to the maturity date (where the
proceeds from the sales approximate the collection of the remaining contractual cash flows), are
insignificant in value (both individually and in aggregate) or are infrequent.
Contractual cash flows Solely Payments of Principal and Interest (SPPI)
The contractual cash flows of a financial asset are assessed to determine whether they represent
SPPI. Interest includes consideration for the time value of money, credit risk and also consideration
for liquidity risk and costs associated with holding the financial asset for a particular period of time. In
addition, interest can include a profit margin that is consistent with a basic lending arrangement.
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Financial assets with embedded derivatives are considered in their entirety when determining
whether their cash flows are SPPI.
In assessing whether the contractual cash flows are SPPI, ING Bank considers the contractual terms
of the instrument. This includes assessing whether the financial asset contains a contractual term
that could change the timing or amount of contractual cash flows such that it would not meet this
condition.
Based on the entity’s business model for managing the financial assets and the contractual terms of
the cash flows, there are three measurement categories into which ING Bank classifies its debt
instruments:
◾
Amortised Cost (AC):
Debt instruments that are held for collection of contractual cash flows under a HtC business
model where those cash flows represent SPPI are measured at AC. Interest income from these
financial assets is included in Interest income using the EIR method. Any gain or loss arising on
derecognition is recognised directly in profit or loss. Impairment losses are presented as a
separate line item in the statement of profit or loss.
◾
FVOCI:
Debt instruments that are held for collection of contractual cash flows and for selling the
financial assets under a HtC&S business model, where the assets’ cash flows represent SPPI, are
measured at FVOCI. Movements in the carrying amount are recognised in OCI, except for the
recognition of impairment gains or losses, interest revenue and foreign exchange gains and
losses which are recognised in profit or loss. When the financial asset is derecognised, the
cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss
and presented in Investment income or Other income, based on the specific characteristics of
the business model. Interest income from these financial assets is included in Interest income
using the EIR method. Impairment losses are presented as a separate line item in the statement
of profit or loss.
◾
FVPL:
Debt instruments that do not meet the criteria for AC or FVOCI are measured at FVPL. This
includes debt instruments that are held-for-trading (presented separately as Trading assets)
and all other debt instruments that do not meet the criteria for AC or FVOCI (presented
separately as Mandatorily at FVPL). ING Bank may in some cases, on initial recognition,
irrevocably designate a financial asset as classified and measured at FVPL. This is the case
where doing so eliminates or significantly reduces an accounting mismatch that would
otherwise arise on assets measured at AC or FVOCI. Fair value movements on trading securities,
trading loans and deposits (mainly reverse repo’s) are presented fully within valuation result
and net trading income, this also includes interest. The interest arising on financial assets
designated as at FVPL is recognised in profit or loss and presented within Interest income or
Interest expense in the period in which it arises. The interest arising on a debt instrument that is
part of a hedge relationship, but not subject to hedge accounting, is recognised in profit or loss
and presented within Interest income or Interest expense in the period in which it arises.
ING Bank reclassifies debt instruments if, and only if, its business model for managing those financial
assets changes. Such changes in business models are expected to be very infrequent. There have
been no reclassifications during the reporting period.
Financial assets - Equity instruments
All equity investments are measured at fair value. ING Bank applies the fair value through OCI option
to investments which are considered strategic, consisting of investments that add value to ING
Bank’s core banking activities.
There is no subsequent recycling of fair value gains and losses to profit or loss following the
derecognition of investments if elected to be classified and measured as FVOCI. However, the
cumulative gain or loss is transferred within equity to retained earnings on derecognition of such
equity instruments. Dividends from such investments continue to be recognised in profit or loss as
Investment income when ING Bank’s right to receive payments is established. Impairment
requirements are not applicable to equity investments classified and measured as FVOCI.
Other remaining equity investments are measured at FVPL. All changes in the fair value are
recognised in Valuation result and Net trading income in the Consolidated statement of profit or loss.
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Financial liabilities
Financial liabilities are classified and subsequently measured at AC, except for financial guarantee
contracts, derivatives and liabilities designated at FVPL. Financial liabilities classified and measured at
FVPL are presented as follows:
◾
the amount of change in the fair value that is attributable to changes in own credit risk of the
liability designated at FVPL is presented in OCI. Upon derecognition this Debit Valuation
Adjustment (DVA) impact does not recycle from OCI to profit or loss; and
◾
the remaining amount of change in the fair value is presented in profit or loss in ‘Valuation
results and net trading income’. Interest on financial liabilities at FVPL is also recognised in
the valuation result, except for items voluntarily designated as FVPL for which interest is
presented within ‘Other interest income (expense).
A financial guarantee contract is a contract that requires ING Bank to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due
in accordance with the original or modified terms of a debt instrument. Such a contract is initially
recognised at fair value and is subsequently measured at the higher of (a) the amount determined in
accordance with impairment provisions of IFRS 9 ‘Financial instruments’ (see section “Impairment of
financial assets”) and (b) the amount initially recognised less, when appropriate, cumulative
amortisation recognised in accordance with the revenue recognition principle of IFRS 15 ‘Revenue
from contracts with customers’.
1.6.3 Fair values of financial assets and liabilities
All financial assets and liabilities are recognised initially at fair value. The fair value of a financial
instrument on initial recognition is generally its transaction price (that is, the fair value of the
consideration given or received). However, if there is a material difference between the transaction
price and the fair value of financial instruments whose fair value is based on a valuation technique
using significant unobservable inputs, the entire day one difference (a ‘Day One profit or loss’) is
deferred. ING Bank defers the Day One profit or loss relating to financial instruments classified as
Level 3 and financial instruments with material unobservable inputs into CVA which are not
necessarily classified as Level 3. The deferred Day One profit or loss is recognised in the statement of
profit or loss over the life of the transaction until the transaction matures or until the observability
improves. In all other cases, ING Bank recognises the difference as a gain or loss at inception.
Subsequently, except for financial assets and financial liabilities measured at amortised cost, all the
other financial assets and liabilities are measured at fair value.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. It assumes that
market participants would use and take into account the characteristics of the asset or liability when
pricing the asset or liability. Fair values of financial assets and liabilities are based on unadjusted
quoted market prices where available. Such quoted market prices are primarily obtained from
exchange prices for listed financial instruments. Where an exchange price is not available, quoted
prices in an active market may be obtained from independent market vendors, brokers, or market
makers. In general, positions are valued at the bid price for a long position and at the offer price for a
short position or are valued at the price within the bid-offer spread that is most representative of fair
value in the circumstances. In some cases where positions are marked at mid-market prices, a fair
value adjustment is calculated.
For certain financial assets and liabilities, quoted market prices are not available. For such
instruments, fair value is determined using valuation techniques. These range from discounting of
cash flows to various valuation models, where relevant pricing factors including the market price of
underlying reference instruments, market parameters (volatilities, correlations and credit ratings),
and customer behaviour are taken into account. ING Bank maximises the use of market observable
inputs and minimises the use of unobservable inputs in determining the fair value. It can be
subjective dependent on the significance of the unobservable input to the overall valuation. All
valuation techniques used are subject to internal review and approval. Most data used in these
valuation techniques are validated on a daily basis when possible.
When a group of financial assets and liabilities are managed on the basis of their net risk exposures,
the fair value of a group of financial assets and liabilities are measured on a net portfolio level.
To include credit risk in fair value, ING Bank applies both Credit and Debit Valuation Adjustments
(CVA, DVA, also known as Bilateral Valuation Adjustments or BVA). Own issued debt and structured
notes that are designated at FVPL are adjusted for ING Bank’s own credit risk by means of a DVA.
Additionally, derivatives valued at fair value are adjusted for credit risk by a BVA. The BVA is of a
bilateral nature as both the credit risk on the counterparty (CVA) as well as the credit risk on ING
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Bank (DVA) are included in the adjustment. All input data that is used in the determination of the
BVA is based on market implied data. Additionally, wrong-way risk (when exposure to a counterparty
is increasing and the credit quality of that counterparty deteriorates) and right-way risk (when
exposure to a counterparty is increasing and the credit quality of that counterparty improves) are
taken into account in the measurement of the valuation adjustment.
To include the funding risk, ING Bank applies an additional ‘Funding Valuation Adjustment’ (FVA) to
the uncollateralised derivatives based on the market price of funding liquidity.
ING Bank also applies to certain positions other valuation adjustments to arrive at the fair value: Bid-
Offer adjustments, Model Risk Adjustments and Collateral Valuation Adjustments (CollVA).
Significant judgements and critical accounting estimates and assumptions:
Even if market prices are available, when markets are less liquid there may be a range of prices for
the same security from different price sources. Selecting the most appropriate price requires
judgement and could result in different estimates of fair value.
Valuation techniques are subjective in nature and significant judgement is involved in establishing
fair values for certain financial assets and liabilities. Valuation techniques involve various
assumptions regarding pricing factors. The use of different valuation techniques and assumptions
could produce significantly different estimates of fair value.
Price testing is performed to assess whether the process of valuation has led to an appropriate fair
value of the position and to minimise the potential risks of economic losses due to incorrect or
misused models.
Assessing whether a market is active, and whether an input is observable and significant, requires
judgement. ING Bank categorises its financial instruments that are either measured in the statement
of financial position at fair value or of which the fair value is disclosed, into a three level hierarchy
based on the observability and significance of the valuation inputs. The use of different approaches
to assess whether a market is active, whether an input is observable, and whether an unobservable
input is significant could produce different classification within the fair value hierarchy as well as
potentially different deferral of the Day One profit or loss.
Reference is made to note 36 ‘Fair value of assets and liabilities’ and to the ‘Market risk’ paragraph in
the ‘Risk management’ section of the Annual Report for the basis of the determination of the fair
value of financial instruments and related sensitivities.
1.6.4 Derivatives and hedge accounting
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered
into and are subsequently measured at fair value. Fair values are obtained from quoted market
prices in active markets, including market transactions and valuation techniques (such as discounted
cash flow models and option pricing models), as appropriate. All derivatives are carried as assets
when their fair value is positive and as liabilities when their fair value is negative. Fair value
movements on derivatives are presented in profit or loss in Valuation result and net trading income,
except for derivatives in either a formal hedge relationship and so-called economic hedges that are
not in a formal hedge accounting relationship where a component is presented separately in interest
result in line with ING Bank’s risk management strategy.
Embedded derivatives are separated from financial liabilities and other non-financial contracts and
accounted for as a derivative if, and only if:
a)
the economic characteristics and risks of the embedded derivative are not closely related to the
economic characteristics and risks of the host contract;
b)
a separate instrument with the same terms as the embedded derivative would meet the
definition of a derivative; and
c)
the combined instrument is not measured at fair value with changes in fair value reported in
profit or loss.
If an embedded derivative is separated, the host contract is accounted for as a similar free-standing
contract.
The method of recognising the resulting fair value gain or loss depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item being hedged. ING Bank
designates certain derivatives as hedges of the fair value of recognised assets or liabilities or firm
commitments (fair value hedge), hedges of highly probable future cash flows attributable to a
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recognised asset or liability or a forecast transaction (cash flow hedge), or hedges of a net
investment in a foreign operation. Hedge accounting is used for derivatives designated in this way
provided certain criteria are met.
At the inception of the transaction ING Bank documents the relationship between hedging
instruments and hedged items, its risk management objective, together with the methods selected
to assess hedge effectiveness. ING Bank also documents its assessment, both at hedge inception and
on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in fair values or cash flows of the hedged items.
ING Bank applies also macro cash flow hedge accounting to hedge the variability in future cash flows
of non-trading assets and liabilities due to the interest rate risk and foreign currency exchange rate
risk. The designated hedged items are floating rated assets or liabilities, such as floating rate
mortgages and corporate loans. The effective portion of changes in the fair value of the derivatives
are recognised in the Other Comprehensive Income.
Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are
recognised in the statement of profit or loss, together with fair value adjustments to the hedged item
attributable to the hedged risk. If the hedge relationship no longer meets the criteria for hedge
accounting, the cumulative adjustment of the hedged item is, in the case of interest bearing
instruments, amortised through the statement of profit or loss over the remaining term of the
original hedge or recognised directly when the hedged item is derecognised. For non-interest bearing
instruments, the cumulative adjustment of the hedged item is recognised in the statement of profit
or loss only when the hedged item is derecognised.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as
cash flow hedges are recognised in the Other Comprehensive Income. The gain or loss relating to the
ineffective portion is recognised immediately in the statement of profit or loss. Amounts
accumulated in the Other Comprehensive Income are recycled to the statement of profit or loss in
the periods in which the hedged item affects net result. When a hedging instrument expires or is
sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss
existing in the Other Comprehensive Income at that time remains in the Other Comprehensive
Income and is recognised when the forecast transaction is ultimately recognised in the statement of
profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss
that was reported in the Other Comprehensive Income is transferred immediately to the statement
of profit or loss.
Net investment hedges
Hedges of net investments in foreign operations are accounted for in a similar way to cash flow
hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is
recognised in the Other Comprehensive Income and the gain or loss relating to the ineffective portion
is recognised immediately in the statement of profit or loss. Gains and losses accumulated in the
Other Comprehensive Income are included in the statement of profit or loss when the foreign
operation is disposed.
IBOR Transition - specific policies applicable from 1 January 2019 for hedges directly
affected by IBOR reform
As further explained in the ‘IBOR Transition’ paragraph of the ‘Risk management’ section, the
financial markets are going through a significant reform of interbank offered rates (IBOR) and
financial institutions are obligated to implement a replacement of major interest rate reference
rates.
Given that IBOR reform may have various accounting implications, the International Accounting
Standards Board (IASB) has undertaken a two phase project. Phase 1 addresses those issues that
affect financial reporting before the replacement of an existing benchmark (Phase 1 amendments to
IFRS were issued by the IASB in 2019). Phase 2 focuses on issues that may affect financial reporting
when the existing benchmark rate is reformed or replaced. Phase 2 amendments to IFRS were issued
by the IASB in 2020.
In 2019, ING Bank early adopted the Phase 1 amendments to IFRS which allowed ING Bank to apply a
set of temporary exceptions to continue hedge accounting even when there is uncertainty about
contractual cash flows arising from the reform. Under these temporary exceptions, interbank offered
rates are assumed to continue unaltered for the purposes of hedge accounting until such time as the
uncertainty is resolved.
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More specifically, the following temporary reliefs are part of the Phase 1 amendments:
◾
Highly probable requirement for cash flow hedges
When determining whether a forecast transaction is highly probable, it is assumed that the
interest rate benchmark on which the hedged cash flows are based is not altered as a result
of the reform.
◾
Prospective assessment of hedge effectiveness
When performing the prospective assessment it is assumed that the interest rate benchmark
on which the hedged cash flows are based is not altered as a result of the reform.
◾
Retrospective assessment of hedge effectiveness
When performing the retrospective assessment hedges are allowed to pass the assessment
even if actual results are outside the 80-125% range, during the period of uncertainty arising
from the IBOR reform.
◾
Designation of a component of an item as a hedged item
For hedges of the benchmark component of interest rate risk affected by the reform, the
separately identifiable requirement only needs to be demonstrated at the inception of such
hedging relationships (including macro hedges).
The amendments are relevant given that ING Bank hedges and applies hedge accounting to
benchmark interest rate exposure part of IBOR reform. ING Bank hedges are being progressively
amended, where necessary, to incorporate the new benchmark rates. During 2021, ING transitioned
significant portions of its financial instruments (designated in hedge accounting relationships) linked
to benchmarks ceasing in 2021. In the coming year, ING Bank will shift the focus to USD LIBOR
contracts (USD LIBOR tenors will continue to be published until the end of June 2023).
As at 31 December 2021, ING Bank still maintains hedging instruments and hedged items indexed by
the IBOR benchmark rates (mainly, USD LIBOR). Therefore, although the path for IBOR transition is
well progressed (including the timeline of IBOR cessation and for some contracts the replacement
rate and spread adjustment), some uncertainties still remain in 2021 over the timing and the
amount of the replacement rate cash flows and, thus, temporary exceptions under Phase 1
continued to be relevant for ING Bank as at 31 December 2021. ING Bank will completely cease to
apply the amendments when this uncertainty is no longer present or when the hedging relationship
is discontinued. Refer to note 37 ‘Derivatives and hedge accounting’ for the disclosures relating to the
application of the amendments as part of Phase 1. Refer to note Risk management/ IBOR Transition
for more information regarding the end of Phase 1 reliefs for ING Bank’s hedging relationships
In 2021 Phase 2 amendments became effective for ING Bank. For hedge accounting, Phase 2
amendments require that hedge accounting continues on transition to risk free rates provided that
the modifications made to financial instruments are those necessary to implement the IBOR Reform
and that the new basis for calculating cash flows is ‘economically equivalent’ to the previous basis.
Particularly, Phase 2 amendments allow the continuation of hedging relationships, subject to
amending their documentation to reflect changes in hedged instruments, hedging instruments,
hedged risk, and/or the method for measuring effectiveness during the transition to the new
benchmark rates.
More specifically, the following temporary reliefs are part of the Phase 2 amendments:
◾
Relief from discontinuing hedging relationships
◾
Amendments in the hedge documentation as a consequence of changes required by the
IBOR reform do not result in the discontinuation of the hedge relationship nor the
designation of a new hedge relationship. The changes can be in form of designating an
alternative benchmark rate as a hedged risk, the description of the hedging instrument, the
description of the hedged item, or the method to measure the effectiveness.
◾
When the hedged item is amended as a consequence of the IBOR reform (or if the hedge
has previously been discontinued), amounts accumulated in the cash flow hedge reserve
are deemed to be based on the RFR. This results in the release of the cash flow hedge
reserve to profit or loss in the same period or periods in which the hedged cash flows that
are now based on the RFR affect profit or loss.
◾
When the items within a designated group of hedged items are amended as a consequence
of the IBOR reform, the hedging strategy remains and is not discontinued. As items within
the hedged group transition at different times from IBORs to RFRs, they are transferred to
sub-groups of instruments that reference RFRs as the hedged risk. The existing IBORs
remain designated as the hedged risk for the other sub-group of hedged items, until they
are also updated to reference the new RFR. The usual hedge accounting requirements are
applied to the hedge relationship in its entirety.
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◾
For the assessment of retrospective hedge effectiveness, the cumulative fair value changes may
be reset to zero when the exception to the retrospective assessment of the Phase 1 reliefs ends.
This election is made separately for each hedging relationship (i.e., on a hedge-by-hedge basis).
◾
Temporary relief from having to meet the separately identifiable requirement: a RFR is
considered a separately identifiable risk component if it is reasonably expected to meet the
separately identifiable requirement within 24 months from the date it is first designated as a
non-contractually specified risk component (i.e. when the entity first designates the RFR as a
non-contractually specified risk component). This relief applies to each RFR on a rate-by-rate
basis.
Reference is made to paragraph 1.4.1 ‘Changes in IFRS effective in 2021’ of this note.
Non-trading derivatives that do not qualify for hedge accounting
Derivative instruments that are used by ING Bank as part of its risk management strategies, but
which do not qualify for hedge accounting under ING Bank’s accounting policies, are presented as
non-trading derivatives. Non-trading derivatives are measured at fair value with changes in the fair
value taken to the statement of profit or loss.
1.6.5 Offsetting of financial assets and financial liabilities
Financial assets and financial liabilities are offset, and the net amount reported, in the statement of
financial position when ING Bank has a current legally enforceable right to set off the recognised
amounts and intends to either settle on a net basis or to realise the asset and settle the liability
simultaneously. Offsetting is applied to certain interest rate swaps for which the services of a central
clearing house are used.
1.6.6 Repurchase transactions and reverse repurchase transactions
Securities sold subject to repurchase agreements (repos), securities lending and similar agreements
continue to be recognised in the Consolidated statement of financial position. The counterparty
liability is measured at FVPL (designated) and included in Other financial liabilities at FVPL if the asset
is measured at FVPL. Otherwise, the counterparty liability is included in Deposits from banks,
Customer deposits, or Trading, as appropriate.
Securities purchased under agreements to resell (reverse repos), securities borrowings and similar
agreements are not recognised in the Consolidated statement of financial position. The
consideration paid to purchase securities is recognised as Loans and advances to customers, Loans
and advances to banks, Other financial assets at FVPL or Trading assets, as appropriate. The
difference between the sale and repurchase price is treated as interest and amortised over the life of
the agreement using the effective interest method for instruments that are not measured at FVPL.
1.6.7 Credit risk management classification and maximum credit risk exposure
Credit risk management disclosures are provided in the ‘Credit risk’ paragraph ‘Credit risk categories’
of the ‘Risk management’ section in the Annual Report.
The maximum credit risk exposure for items in the statement of financial position is generally the
carrying value for the relevant financial assets. For the off-balance sheet items the maximum credit
exposure is the maximum amount that could be required to be paid. Reference is made to Note 42
‘Contingent liabilities and commitments’ for these off-balance sheet items. Collateral received is not
taken into account when determining the maximum credit risk exposure.
The manner in which ING Bank manages credit risk and determines credit risk exposures for that
purpose is explained in the Credit risk paragraph ‘Credit Risk Appetite and Concentration Risk
Framework’ of the ‘Risk management’ section in the Annual Report.
1.6.8 Impairment of financial assets
An Expected Credit Loss (ECL) model is applied to financial assets accounted for at AC or FVOCI such
as loans, debt securities and lease receivables, as well as off-balance sheet items such as undrawn
loan commitments, certain financial guarantees issued, and undrawn committed revolving credit
facilities. Under the ECL model ING Bank calculates the expected credit losses (ECL) by considering on
a discounted basis the cash shortfall it would incur in case of a default and multiplying the shortfall
by the probability of a default occurring. The ECL is the sum of the probability-weighted outcomes.
The ECL estimates are unbiased and include reasonable and supportable information about past
events, current conditions, and forecasts of future economic conditions. ING Bank’s approach
leverages the Advanced Internal Ratings Based (AIRB) models that are used for regulatory purposes.
Adjustments are applied to make these models suitable for determining ECL. ECL is recognised on
the balance sheet as loan loss provisions (LLP).
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Three stage approach
Financial assets are classified in one of the below three Stages at each reporting date. A financial
asset can move between Stages during its lifetime. The Stages are based on changes in credit quality
since initial recognition and defined as follows:
◾
Stage 1
Financial assets that have not had a significant increase in credit risk since initial recognition
(i.e. no Stage 2 or 3 triggers apply). Assets are classified as Stage 1 upon initial recognition
(with the exception of purchased or originated credit impaired (POCI) assets) and ECL is
determined by the probability that a default occurs in the next 12 months (12 months ECL);
◾
Stage 2
Financial assets showing a significant increase in credit risk since initial recognition. For assets
in Stage 2 ECL reflects an estimate on the credit losses over the remaining maturity of the
asset (lifetime ECL); or
◾
Stage 3
Financial assets that are credit-impaired. Also for these assets ECL is determined over the
remaining maturity of the asset.
Significant increase in credit risk
ING Bank established a framework, incorporating quantitative and qualitative indicators, to identify
and assess significant increases in credit risk (SICR). This is used to determine the appropriate ECL
Stage for each financial asset.
The main determinate of SICR is a quantitative test, whereby the lifetime Probability of Default (PD)
of an asset at each reporting date is compared against its lifetime PD determined at the date of
initial recognition. If the delta is above pre-defined absolute or relative thresholds the item is
considered to have experienced a SICR. Consequently, the item moves from Stage 1 to Stage 2
(unless the item is credit-impaired). In these instances, items are no longer assigned a 12 month ECL
and instead are assigned a lifetime ECL. Items can return to Stage 1 if there is sufficient evidence
that there is no longer a significant increase in credit risk. Refer to ‘Criteria for identifying a significant
increase in credit risk’ in the ‘Risk Management’ section of the Annual Report for more details on
relative and absolute PD thresholds, including quantitative disclosures on those thresholds.
ING Bank also relies on a number of qualitative indicators to identify and assess SICR. These include:
◾
Forbearance status;
◾
Watch List status. Loans on the Watch List are individually assessed for Stage 2 classification;
◾
Intensive care management;
◾
Substandard Internal rating; and
◾
Arrears status (including 30 days past due used as a backstop).
An asset that is in Stage 2 will move back to Stage 1 when none of the above criteria are in place
anymore. However, if the asset was moved to Stage 2 based on the forbearance status, then the
asset stays in Stage 2 for at least 24 months. If the asset was classified as Stage 2 due to 30 days
past due trigger, then the asset is moved back to Stage 1 only after three months from when the
trigger no longer applies.
Credit-impaired financial assets (Stage 3)
Financial assets are assessed for credit-impairment at each reporting date and more frequently
when circumstances warrant further assessment. Evidence of credit-impairment includes arrears of
over 90 days on any material credit obligation, indications that the borrower is experiencing
significant financial difficulty, a breach of contract, bankruptcy or distressed restructuring. The
definition of credit-impaired under IFRS 9 (Stage 3) is aligned with the definition of default used by
ING Bank for internal risk management purposes, which is also the definition used for regulatory
purposes.
An asset (other than a POCI asset) that is in Stage 3 will move back to Stage 2 when, as at the
reporting date, it is no longer considered to be credit-impaired subject to certain probation periods.
The asset will migrate back to Stage 1 when its credit risk at the reporting date is no longer
considered to have increased significantly since initial recognition.
Macroeconomic scenarios
ING Bank has established a quarterly process whereby forward-looking macroeconomics scenarios
and probability weightings are developed for the purpose of ECL. ING Bank applies data
predominantly from a leading service provider (Oxford Economics (OE)) enriched with the internal
ING Bank view. A baseline, up-scenario and a down-scenario are determined to reflect an unbiased
and probability-weighted ECL amount. As a baseline scenario, ING Bank applies the market-neutral
view combining consensus forecasts for economic variables such as unemployment rates, GDP
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growth, house prices, commodity prices, and short-term interest rates. Applying market consensus
in the baseline scenario ensures unbiased estimates of the expected credit losses.
The alternative scenarios are based on observed forecast errors in the past, adjusted for the risks
affecting the economy today and the forecast horizon. The probabilities assigned are based on the
likelihoods of observing the three scenarios and are derived from confidence intervals on a
probability distribution. The forecasts for the economic variables are adjusted on a quarterly basis.
Measurement of ECL
ING Bank applies a collective assessment method to measure ECL for Stage 1, Stage 2, and certain
Stage 3 assets. Other credit-impaired assets subject to ECL measurement apply the individual
assessment method.
Collectively assessed assets (Stages 1 to 3)
For collective assessed assets, ING Bank applies a model-based approach. ECL is determined by,
expressed simplistically, multiplying the probability of default (PD) with the loss given default (LGD)
and exposure at default (EAD), adjusted for the time value of money. Assets that are collectively
assessed are grouped on the basis of similar credit risk characteristics, taking into account loan type,
industry, geographic location, collateral type, past due status and other relevant factors. These
characteristics are relevant to the estimation of future cash flows for groups of such assets by being
indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the
assets being evaluated and the loss in case the debtor is not able to pay all amounts due.
For Stage 3 assets the PD equals 100% and the LGD and EAD represent a lifetime view of the losses
based on characteristics of defaulted facilities.
For the purpose of ECL, ING Bank’s expected credit loss models (PD, LGD, EAD) used for regulatory
purposes have been adjusted. These adjustments include removing embedded prudential
conservatism (such as floors) and converted through-the-cycle estimates to point-in-time estimates.
The models assess ECL on the basis of forward-looking macroeconomic forecasts and other inputs.
For most financial assets, the expected life is limited to the remaining maturity. For overdrafts and
certain revolving credit facilities, such as credit cards, the maturity is estimated based on historical
data as these do not have a fixed term or repayment schedule.
Individually assessed assets (Stage 3)
ING Bank estimates ECL for individually significant credit-impaired financial assets within Stage 3 on
an individual basis. ECL for these Individually assessed assets are determined using the discounted
expected future cash flow method. To determine expected future cash flows, one or more scenarios
are used. Each scenario is analysed based on the probability of occurrence and include forward
looking information.
In determining the scenarios, all relevant factors impacting the future cash flows are taken into
account. These include expected developments in credit quality, business and economic forecasts,
and estimates of if/when recoveries will occur taking into account ING Bank’s restructuring/recovery
strategy.
The best estimate of ECL is calculated as the weighted-average of the shortfall (gross carrying
amount minus discounted expected future cash flow using the original EIR) per scenario, based on
best estimates of expected future cash flows. Recoveries can arise from, among others, repayment
of the loan, collateral recovery and the sale of the asset. Cash flows from collateral and other credit
enhancements are included in the measurement of ECL of the related financial asset when it is part
of or integral to the contractual terms of the financial asset and the credit enhancement is not
recognised separately. For the individual assessment, with granular (company or asset-specific)
scenarios, specific factors can have a larger impact on the future cash flows than macroeconomic
factors.
When a financial asset is credit-impaired, interest is no longer recognised based on the accrual
income based on the gross carrying amount of the asset. Rather, interest income is calculated by
applying the original EIR to the AC of the asset, which is the gross carrying amount less the related
loan loss provision.
Purchased or Originated Credit Impaired (POCI) assets
POCI assets are financial assets that are credit-impaired on initial recognition. Impairment on a POCI
asset is determined based on lifetime ECL from initial recognition. POCI assets are recognised initially
at an amount net of ECL and are measured at AC using a credit-adjusted effective interest rate. In
subsequent periods any changes to the estimated lifetime ECL are recognised in profit or loss.
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Favourable changes are recognised as an impairment gain even if the lifetime ECL at the reporting
date is lower than the estimated lifetime ECL at origination.
Modifications
In certain circumstances ING Bank grants borrowers postponement, reduction of loan principal
and/or interest payments on a temporary period of time to maximise collection opportunities, and if
possible, avoid default, foreclosure, or repossession. When such postponement, reduction of loan
principal and/or interest payments is executed based on credit concerns it is also referred to as
forbearance (refer to the ‘Risk Management’ section of the Annual Report for more details). In such
cases, the net present value of the postponement, reduction of loan principal and/or interest
payments is taken into account in the determination of the appropriate level of ECL. If the
forbearance results in a substantial modification of the terms of the loan, the original loan is
derecognised and a new loan is recognised at fair value at the modification date. ING Bank
determines whether there has been a substantial modification using both quantitative and
qualitative factors.
Write-off and debt forgiveness
Loans and debt securities are written off (either partially or in full) when there is no reasonable
expectation of recovery and/or collectability of amounts due. The following events can lead to a
write-off:
◾
After a restructuring has been completed and there is a high improbability of recovery of part
of the remaining loan exposure (including partial debt forgiveness);
◾
In a bankruptcy liquidation scenario;
◾
After divestment or sale of a credit facility at a discount;
◾
Specific fraud cases with no recourse options.
When a loan is uncollectable, it is written off against the related loan loss provision. Subsequent
recoveries of amounts previously written off are recognised in ‘Addition to loan loss provisions’ in the
Consolidated statement of profit or loss..
Debt forgiveness (or debt settlement) involves write-off but additionally involves the forgiveness of a
legal obligation, in whole or in part. This means that ING Bank forfeits the legal right to recover the
debt. As a result, the financial asset needs to be derecognised. Distinction is made in situations
where ING Bank ends the relationship with the client and situations where ING Bank (partially)
continues the financing of the client.
Presentation of ECL
ECL for financial assets measured at AC are deducted from the gross carrying amount of the assets.
For debt instruments at FVOCI, the ECL is recognised in OCI, instead of deducted the carrying amount
of the asset. ECL also reflects any credit losses related to the portion of the loan commitment that is
expected to be drawn down over the remaining life of the instrument. The ECL on issued financial
guarantee contracts, in scope of IFRS 9 and not measured at FVPL, are recognised as liabilities and
presented in Other provisions. ECL are presented in profit or loss in Addition to loan loss provision.
Significant judgements and critical accounting estimates and assumptions:
Considerable management judgement is exercised in determining the amount of ECL for financial
assets assessed on both a collective and an individual basis. The need for management judgement
has increased even further due to the Covid-19 pandemic. In particular, this judgement requires ING
Bank to make various assumptions about the risk of default, the credit loss rates in case of a default
and expected future cash flows. These assumptions are based on a combination of ING Bank’s past
history, existing market conditions and forward-looking estimates at the end of each reporting
period. Changes in these assumptions may lead to changes in the ECL over time. Given they are
subjective and complex in nature, and because the ECL and the underlying exposures subject to ECL
are material, these assumptions are considered critical accounting assumptions. The sensitivity of
these assumptions is assessed in the credit risk section of the ‘Risk Management’ section in the
Annual Report.
The use of forward-looking macroeconomic scenarios in both collective and individual impairment
assessments
Forward-looking macroeconomic scenarios are uncertain in nature. The process ING Bank follows
involves two internal groups, the Macroeconomics Scenarios Team and the Macroeconomics
Scenarios Expert Panel. The latter team consists of senior management representatives from the
Business, Risk and Finance. These groups review inputs obtained from a third party provider and
subject these to internal expert challenge to ensure the inputs used in the models reflect ING Bank’s
view on the macro economy. The use of alternate forward-looking macroeconomic scenarios can
produce significantly different estimates of ECL. This is demonstrated in the sensitivity analysis in the
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‘Risk Management’ section of the Annual Report, where the un-weighted ECL under each of the three
scenarios for some significant portfolios is disclosed.
The probability weights applied to each of the three scenarios
ING Bank uses three macroeconomic scenarios when determining IFRS 9 ECL (baseline, upside and
downside). Management judgement is applied in the design of the approach used to determine the
weights of each scenario and in selecting the parts of the distribution of forecast errors from which
the weights are derived. Reference is made to the ‘Alternative scenarios and probability weights’ and
the sensitivity analysis in the ‘Risk Management’ section of the Annual Report for further details.
The criteria for identifying a significant increase in credit risk
When determining whether the credit risk on a financial asset has increased significantly, ING Bank
considers reasonable and supportable information to compare the risk of default occurring at
reporting date with the risk of a default occurring at initial recognition of the financial asset. Whilst
judgement is required in applying a PD rating to each financial asset, there is significant judgement
used in determining the Stage allocation PD banding thresholds. The process of comparing a financial
asset’s PD with the PD banding thresholds determines its ECL Stage. Assets in Stage 1 are allocated a
12 month ECL, and those in Stage 2 are allocated a lifetime ECL, and the difference is often
significant. As such, the judgement made in assigning financial asset PDs and the PD banding
thresholds constitute a significant judgement. Analysis of the sensitivity associated with the
assessment of significant increase in credit risk is presented in the ‘Risk Management’ section of the
Annual Report.
The definition of default
Judgement is exercised in management’s evaluation of whether there is objective evidence that
larger exposures are credit-impaired. Management judgement is required in assessing evidence of
credit-impairment.
Management adjustments applied as at 31 December 2021
As Covid-19 continues to bring uncertainties, management adjustments to the model-based ECL
were still necessary as at 31 December 2021, although they decreased compared to 2020. The
Covid-19 related management adjustments comprised EUR 373 million as at 31 December 2021 (31
December 2020: EUR 638 million) consisting of economic sector-based and payment holidays
management adjustments. Reference is made to the ‘Management adjustments applied this year’
paragraph in the ‘Risk management’ section of the Annual Report.
1.6.9 Accounting for Targeted Longer-Term Refinancing Operations (TLTRO)
ING Bank participates in Targeted Longer-Term Refinancing Operations (TLTRO III), reference is made
to Note 12 ‘Deposits from banks’.
ING Bank considers TLTRO funding provided by the ECB to banks to be on market terms on the basis
that the ECB has established a separate market with TLTRO programmes. They have specific terms
which are different from other sources of funding available to banks, including those provided by the
ECB. Consequently, the rate under TLTRO is considered to be a market conforming rate and TLTRO
funding is recognized fully as a financial liability.
ING Bank interprets the whole rate set by the ECB under TLTRO as a floating rate on the financial
liability, being the market rate for each specific period in time. This results in discrete rates for
discrete interest periods over the life of TLTRO. The change in the applicable rate between interest
periods is seen as a change in the floating rate and is accounted for prospectively. Similarly, if the
ECB announces changes in the rate for the amounts already drawn under the existing TLTRO, then
such changes also represent a change in a floating rate. Following this, such changes lead to the
recognition of an increased interest in the relevant period of life of the exposure, rather than by the
recognition of an immediate modification gain or loss at the moment of the change of terms by the
ECB.
Furthermore, the change in the TLTRO rate driven by changes in expectations of meeting the targets
impacts interest income. As a result, interest income which relates to the period that already passed
until the moment when the change in expectations occurs, is recognised as a catch up adjustment in
Consolidated statement of profit or loss. This change occurs only when ING Bank has a reasonable
expectation that the lending targets will be met.
ING Bank views ‘reasonable expectation’ in case of TLTRO funding as a high hurdle. This is the
moment when it becomes highly probable, i.e. the probability of meeting the lending targets is
substantially greater than the probability that it will not. As a result, if interest income is recognised
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during the period based on the expectation of meeting the targets, there should only be a limited
possibility that the interest may need to be reversed in future reporting periods.
Reference is made to note 12 ‘Deposits from banks’ and to note 20 ‘Net interest income’ for the
presentation of ING Bank’s participation in TLTRO programmes.
Significant judgements:
Significant management judgement is exercised in determining the accounting treatment of TLTRO
transactions. In particular, ING Bank applied judgement in:
●
assessing and concluding that in ING Bank’s view the rate under TLTRO is considered to be a
market conforming rate and, hence, accounting for TLTRO in accordance with IFRS 9; and
●
selecting accounting policies regarding the calculation of the effective interest rate under TLTRO,
including treatment of changes in expectations of meeting the lending targets.
In addition, estimation uncertainty exists when the end of the observation period for lending growth
does not coincide with the end of the reporting period. At 31 December 2021, however, no
estimation uncertainty exists as the lending targets were met as at 31 December 2021 (subject to
the final confirmation by the ECB), which is the end of the observation period 2 and determines the
conditional rate applicable during the period between June 2021 and June 2022.
1.7 Consolidation
ING Bank comprises ING Bank N.V. (the Parent Company) and all other subsidiaries. Subsidiaries are
entities controlled by ING Bank N.V. Control exists if ING Bank N.V. is exposed or has rights to variable
returns and has the ability to affect those returns through the power over the investee. Control is
usually achieved through situations including, but not limited to:
◾
Ownership, directly or indirectly, of more than half of the voting power;
◾
Ability to appoint or remove the majority of the board of directors;
◾
Power to govern operating and financial policies under statute or agreement; and
◾
Power over more than half of the voting rights through an agreement with other investors.
The existence and effect of potential voting rights that are currently exercisable or convertible are
considered in assessing whether ING Bank controls another entity.
For interests in structured entities, the existence of control requires judgement as these entities are
designed so that voting or similar rights are not the dominant factor in deciding who controls the
entity. This judgement includes, for example, the involvement in the design of the structured entity,
contractual arrangements that give rights to direct the structured entities relevant activities and
commitment to ensure that the structured entity operates as designed.
A list of principal subsidiaries is included in Note 45 ‘Principal subsidiaries’.
A list containing the information referred to in Section 379 (1), Book 2 of the Dutch Civil Code has
been filed with the office of the Commercial Register of Amsterdam, in accordance with Section 379
(5), Book 2 of the Dutch Civil Code.
The results of the operations and the net assets of subsidiaries are included in the statement of profit
or loss and the statement of financial position from the date control is obtained until the date control
is lost. On disposal, the difference between the sales proceeds, net of directly attributable transaction
costs, and the net assets is included in net result.
A subsidiary which ING Bank has agreed to sell but is still legally owned by ING Bank may still be
controlled by ING Bank at the balance sheet date and therefore, still be included in the consolidation.
Such a subsidiary may be presented as a held for sale disposal group if certain conditions are met.
All intercompany transactions, balances and unrealised surpluses and deficits on transactions
between group companies are eliminated. Where necessary, the accounting policies used by
subsidiaries are changed to ensure consistency with group policies. In general, the reporting dates of
subsidiaries are the same as the reporting date of ING Bank N.V.
ING Bank N.V. and its Dutch group companies are subject to legal restrictions regarding the amount
of dividends they can pay to their shareholders. The Dutch Civil Code contains the restriction that
dividends can only be paid up to an amount equal to the excess of the company’s own funds over
the sum of the paid-up capital and reserves required by law. Certain Group companies are also
subject to other restrictions in certain countries, in addition to the restrictions on the amount of
funds that may be transferred in the form of dividends, or otherwise, to the parent company.
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Furthermore, in addition to the restrictions in respect of minimum capital requirements that are
imposed by industry regulators in the countries in which the subsidiaries operate, other limitations
exist in certain countries.
1.8 Segment reporting
An operating segment is a distinguishable component of ING Bank, engaged in providing products or
services, whose operating results are regularly reviewed by the Management Board Banking of ING
Bank (the Chief Operating Decision Maker (CODM)) to make decisions about resources to be allocated
to the segments and assess its performance. A geographical area is a distinguishable component of
ING Bank engaged in providing products or services within a particular economic environment that is
subject to risks and returns that are different from those of segments operating in other economic
environments.
The CODM examines ING Bank’s performance both by line of business and geographic perspective
and has identified five reportable segments by line of business. The geographical analyses are based
on the location of the office from which the transactions are originated.
1.9 Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of ING Bank’s entities are measured using the
currency of the primary economic environment in which the entity operates (the functional
currency). The Consolidated financial statements are presented in euros, which is ING Bank’s
presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rate
prevailing at the date of the transactions. Exchange rate differences resulting from the settlement of
such transactions and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the statement of profit or loss, except
when deferred in equity as part of qualifying cash flow hedges or qualifying net investment hedges.
Non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rate at the date of the transaction.
Exchange rate differences on non-monetary items, measured at fair value through profit or loss, are
reported as part of the fair value gain or loss. Non-monetary items are retranslated at the date the
fair value is determined. Exchange rate differences on non-monetary items measured at fair value
through other comprehensive income are included in other comprehensive income and get
accumulated in the revaluation reserve in equity.
Exchange rate differences in the statement of profit or loss are generally included in ‘Valuation
results and net trading income’. Reference is made to Note 22 ‘Valuation results and net trading
income’, which discloses the amounts included in the statement of profit or loss. Exchange rate
differences relating to the disposal of debt and FVPL equity securities are considered to be an
inherent part of the capital gains and losses recognised in Investment income. As mentioned below,
in Group companies relating to the disposals of group companies, any exchange rate difference
deferred in equity is recognised in the statement of profit or loss in ‘Result on disposal of group
companies’. Reference is also made to Note 19 ‘Equity’, which discloses the amounts included in the
statement of profit or loss.
Group companies
The results and financial positions of all group companies that have a functional currency different
from the presentation currency are translated into the presentation currency as follows:
◾
Assets and liabilities included in each statement of financial position are translated at the
closing rate at the date of that statement of financial position;
◾
Income and expenses included in each statement of profit or loss are translated at average
exchange rates (unless this average is not a reasonable approximation of the cumulative effect
of the rates prevailing on the transaction dates, in which case income and expenses are
translated at the dates of the transactions); and
◾
All resulting exchange rate differences are recognised in a separate component of equity.
On consolidation, exchange rate differences arising from the translation of a monetary item that
forms part of the net investment in a foreign operation, and of borrowings and other instruments
designated as hedges of such investments, are taken to shareholders’ equity. When a foreign
operation is sold, the corresponding exchange rate differences are recognised in the statement of
profit or loss as part of the gain or loss on sale.
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Goodwill and fair value adjustments arising from the acquisition of a foreign operation are treated as
assets and liabilities of the foreign operation and translated at the exchange rate prevailing at the
balance sheet date.
1.10 Investments in associates and joint ventures
Associates are all entities over which ING Bank has significant influence but not control. Significant
influence is the ability to participate in the financial and operating policies of the investee. It
generally results from a shareholding of between 20% and 50% of the voting rights or through
situations including, but not limited to one or more of the following:
◾
Representation on the board of directors;
◾
Participation in the policymaking process; and
◾
Interchange of managerial personnel.
Joint ventures are entities over which ING Bank has joint control. Joint control is the contractually
agreed sharing of control over an arrangement or entity, which exists only when decisions about the
relevant activities require the unanimous consent of the parties sharing control. Joint control means
that no party to the agreement is able to act unilaterally to control the activity of the entity. The
parties to the agreement must act together to control the entity and therefore exercise the joint
control.
Investments in associates and joint ventures are initially recognised at cost and subsequently
accounted for using the equity method of accounting.
ING Bank’s investment in associates and joint ventures (net of any accumulated impairment loss)
includes goodwill identified on acquisition. ING Bank’s share of its associates and joint ventures post-
acquisition profits or losses is recognised in the statement of profit or loss, and its share of post-
acquisition changes in reserves is recognised in equity. The cumulative post-acquisition changes are
adjusted against the carrying amount of the investment. When ING Bank’s share of losses in an
associate or joint venture equals or exceeds its interest in the associate or joint venture, including
any long-term interests in the associate like uncollateralised loans that are neither planned nor likely
to be settled in the foreseeable future, ING Bank does not recognise further losses, unless it has
incurred obligations or made payments on behalf of the associate or joint venture.
Unrealised gains on transactions between ING Bank and its associates and joint ventures are
eliminated to the extent of ING Bank’s interest in the associates and joint ventures. Unrealised losses
are also eliminated unless they provide evidence of an impairment of the asset transferred.
Accounting policies of associates and joint ventures have been changed where necessary to ensure
consistency with the policies adopted by ING Bank.
The recoverable amount, being the higher of fair value less cost of disposal and value in use, of the
investment in associate and joint venture is determined when there is an indication of potential
(reversal of) impairment. An impairment loss is recognised when the carrying amount of the
investment exceeds its recoverable amount. Goodwill on acquisitions of interests in associates and
joint ventures is not tested separately for impairment, but is assessed as part of the carrying amount
of the investment. An impairment loss is subsequently reversed if there is indication of a reversal and
there is a change in the estimates used to determine the recoverable amount. An impairment loss is
reversed to the extent that the recoverable amount exceeds its carrying amount, but cannot exceed
the original impairment loss.
Significant judgements and critical accounting estimates and assumptions:
The most significant estimates and assumptions relate to the assessment of (reversal of) impairment
of the investment in TMBThanachart Bank Public Company Limited (hereafter: TTB) which involves
estimation of value in use.
Management’s best estimate of TTB’s expected future earnings are based on forecasts derived from
broker consensus over the short to medium term and TTB observable targets for steady state
earnings into perpetuity. A capital maintenance charge is applied, which is management’s forecast
of the earnings that need to be withheld in order for TTB to meet target regulatory requirements
over the forecast period. Both of these factors are subject to a high degree of uncertainty.
Key assumptions used in estimating TTB’s value in use and the sensitivity of the value in use
calculations to different assumptions are described in note 8 ‘Investments in associates and joint
ventures’.
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1.11 Property and equipment
Property in own use
Land and buildings held for own use are stated at fair value at the balance sheet date. Increases in
the carrying amount arising on revaluation of land and buildings held for own use are credited to the
revaluation reserve in shareholders’ equity. Decreases in the carrying amount that offset previous
increases of the same asset are charged against the revaluation reserve directly in equity; all other
decreases are charged to the statement of profit or loss. Increases that reverse a revaluation
decrease on the same asset previously recognised in net result are recognised in the statement of
profit or loss. Depreciation is recognised based on the fair value and the estimated useful life (in
general 20–50 years). Depreciation is calculated on a straight-line basis. On disposal, the related
revaluation reserve is transferred to retained earnings.
The fair values of land and buildings are appraised annually by independent qualified valuers.
Subsequent expenditure is included in the asset’s carrying amount when it is probable that future
economic benefits associated with the item will flow to ING Bank and the cost of the item can be
measured reliably.
Equipment
Equipment is stated at cost less accumulated depreciation and any impairment losses. The cost of
the assets is depreciated on a straight line basis over their estimated useful lives, which are generally
as follows: for data processing equipment two to five years, and four to ten years for fixtures and
fittings. Expenditure incurred on maintenance and repairs is recognised in the statement of profit or
loss as incurred. Expenditure incurred on major improvements is capitalised and depreciated.
Disposals of property and equipment
The difference between the proceeds on disposal and net carrying value is recognised in the
statement of profit or loss under Other income.
Right-of-use assets
ING Bank as the lessee
A lessee is required to recognise a right-of-use asset representing its right to use the underlying
leased asset and a corresponding liability representing its obligation to make lease payments at the
date at which the leased asset is available for use by ING Bank. Each lease payment is allocated
between the repayment of the liability and finance cost. The finance costs are charged to profit or
loss over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the
asset’s useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease
liabilities include the net present value of the following lease payments:
◾
Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
◾
Variable lease payments that are based on an index or a rate;
◾
Amounts expected to be payable by the lessee under residual value guarantees;
◾
The exercise price of a purchase option if the lessee is reasonably certain to exercise that option;
and
◾
Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising
that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be
readily determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee
would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar
economic environment with similar terms and conditions. This rate is approximated by using the risk
free rate applicable to the lease term, the currency of the lease payment and jurisdiction, with the
Fund Transfer Pricing (FTP) rate as an add-on. The FTP rate is used to transfer interest rate risk and
funding and liquidity risk positions between the ING Bank business and treasury departments. It is
determined by either ING Bank or Local Asset and Liability Committee (ALCO). Reference is made to
the ‘Risk management’ section of the Annual Report.
Right-of-use assets are measured at cost comprising the amount of the initial measurement of the
lease liability, any lease payments made at or before the commencement date less any lease
incentives received and any initial direct costs and restoration costs.
Payments associated with short-term leases and leases of low-value assets are recognised on a
straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12
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months or less. Low-value assets comprise mainly IT-equipment (for example mobile phones or
laptops) and small items of office furniture.
The right-of-use asset is included in the statement of financial position line-item ‘Property and
equipment’, the lease liability is included in the statement of financial position line-item ‘Other
liabilities’. Refer to note 9 ‘Property and equipment’ and to note 16 ‘Other liabilities’.
Subsequent to initial recognition, the right-of-use asset amortises using a straight-line method to the
income statement over the life of the lease. The lease liability increases for the accrual of interest
and decrease when payments are made. Any remeasurement of the lease liability due to a lease
modification or other reassessment results in a corresponding adjustment to the carrying amount of
the right-of-use asset.
ING Bank as the lessor
When ING Bank acts as a lessor, a distinction should be made between finance leases and operating
leases. For ING Bank as a lessor these are mainly finance leases. The present value of the lease
payments is recognised as a receivable under Loans and advances to customers or Loans and
advances to banks. The difference between the gross receivable and the present value of the
receivable is unearned finance lease income. Lease income is recognised over the term of the lease
using the net investment method (before tax), which reflects a constant periodic rate of return.
1.12 Acquisitions, goodwill and other intangible assets
Goodwill resulting from a business combination
ING Bank’s business combinations are accounted for using the acquisition method of accounting. The
consideration for each business combination is measured at the aggregate of the fair values (at the
date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued in
exchange for control of the acquiree. Goodwill, being the difference between the cost of the
acquisition (including assumed debt) and the Bank’s interest in the fair value of the fair value of
investee's identifiable assets, liabilities and contingent liabilities as at the date of acquisition, is
capitalised as an intangible asset. Goodwill is only recognised separately on acquisitions. The results
of the operations of the acquired companies are included in the statement of profit or loss from the
date control is obtained.
Where applicable, the consideration for the business combination includes any asset or liability
resulting from a contingent consideration arrangement, the contingent consideration is measured at
its acquisition-date fair value. Contingent consideration arrangements classified as an asset or a
liability, are subsequently measured at fair value and the changes in fair value will be recognised in
the statement of profit or loss. Changes in the fair value of the contingent consideration classified as
equity, are not recognised.
Where a business combination is achieved in stages, ING Bank’s previously held interests in the
assets and liabilities of the acquired entity are remeasured to fair value at the acquisition date (i.e.
the date ING Bank obtains control) and the resulting gain or loss, if any, is recognised in the
statement of profit or loss. Amounts arising from interests in the acquiree prior to the acquisition
date that have previously been recognised in other comprehensive income are reclassified to the
statement of profit or loss, where such treatment would be appropriate if that interest were disposed
of. Acquisition related costs are recognised in the statement of profit or loss as incurred and
presented in the statement of profit or loss as Other operating expenses.
The initial accounting for the fair value of the net assets of the companies acquired during the year
may be determined only provisionally as the determination of the fair value can be complex and the
time between the acquisition and the preparation of the Financial statements can be limited. The
initial accounting shall be completed within a year after acquisition. Adjustments to the fair value as
at the date of acquisition of acquired assets and liabilities, that are identified within one year after
acquisition are recognised as an adjustment to goodwill; any subsequent adjustment is recognised
as income or expense. On disposal of group companies where control is lost, the difference between
the sale proceeds and carrying value (including goodwill) and the unrealised results (including the
currency translation reserve in equity) is included in the statement of profit or loss.
Impairment of goodwill and other non-financial assets
ING Bank assesses at each reporting period, whether there is an indication that a non-financial asset
may be impaired. Irrespective of whether there is an indication of impairment, intangible assets with
an indefinite useful life, including goodwill acquired in a business combination, and intangible assets
not yet available for use, are tested annually for impairment. Goodwill is allocated to groups of CGUs
(that is, the group of cash generating units or CGUs) for the purpose of impairment testing. These
groups of CGUs represent the lowest level at which goodwill is monitored for internal management
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purposes. Goodwill is tested for impairment by comparing the carrying value of the group of CGUs to
the recoverable amount of that group of CGUs. The carrying value is determined as the IFRS net asset
value including goodwill. The carrying value is determined on a basis that is consistent with the way
in which the recoverable amount of the CGU is determined. The recoverable amount is estimated as
the higher of fair value less costs of disposal and value in use. Impairment of goodwill, if applicable, is
included in the statement of profit or loss in Other operating expenses and is not subsequently
reversed.
Computer software
Computer software that has been purchased or generated internally for own use is stated at cost
less amortisation and any impairment losses. Amortisation is calculated on a straight-line basis over
its useful life. This period will generally not exceed five years. Amortisation is included in Other
operating expenses.
Other intangible assets
Other intangible assets are capitalised and amortised over their expected economic life, which is
generally between three and ten years. Intangible assets with an indefinite life are not amortised.
1.13 Taxation
Income tax on the result for the year consists of current and deferred tax. Income tax is recognised in
the statement of profit or loss but it is recognised directly in equity if the tax relates to items that are
recognised directly in equity.
Deferred income tax
Deferred income tax is provided in full, using the liability method, for temporary differences arising
between the tax basis of assets and liabilities and their carrying amounts in the Consolidated
statement of financial position. Deferred income tax is determined using tax rates (and laws) that
have been enacted or substantively enacted at the balance sheet date and are expected to apply
when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets and liabilities are not discounted.
Deferred tax assets are recognised when it is probable that future taxable profit will be available
against which the temporary differences can be utilised. Deferred income tax is provided for
temporary differences arising from investments in subsidiaries and associates, except where the
timing of the reversal of the temporary difference is controlled by ING Bank and it is probable that
the difference will not reverse in the foreseeable future. The tax effects of income tax losses available
for carry forward are recognised as an asset where it is probable that future taxable profits will be
available against which these losses can be utilised.
Fair value remeasurements of debt and equity instruments measured at FVOCI and cash flow hedges
are recognised directly in equity. Deferred tax related to this fair value remeasurement is also
recognised directly in equity and is subsequently recognised in the statement of profit or loss
together with the deferred gain or loss.
Uncertain tax positions are assessed continually by ING Bank and in case it is probable that there will
be a cash outflow, a current tax liability is recognised.
1.14 Other assets
Investment property
Investment properties are recognised at fair value at the balance sheet date. The fair values of
investment properties are appraised annually by independent qualified valuers. Changes in the
carrying amount resulting from revaluations are recognised in the statement of profit or loss. On
disposal, the difference between the sale proceeds and carrying value is recognised in the statement
of profit or loss.
Property obtained from foreclosures
Property obtained from foreclosures is stated at the lower of cost and net realisable value. Net
realisable value is the estimated selling price, less applicable variable selling expenses. Property
obtained from foreclosures is included in Other assets - Property development and obtained from
foreclosures.
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Property development
Property developed and under development is included in Other assets – Property development and
obtained from foreclosures. Depending on the intention of ING Bank after completion of the
development, the property is measured as follows:
◾
Intention to sell: at the lower of cost and net realisable value;
◾
Intention to use as a real estate investment: at fair value.
1.15 Disposal groups held for sale and discontinued operations
Disposal groups (and non-current assets) are classified as held for sale if their carrying amount will
be recovered principally through a sale transaction rather than through continuing use. This is only
the case when the sale is highly probable and the disposal group (or non-current assets) is available
for immediate sale in its present condition; management must be committed to the sale, which is
expected to occur within one year from the date of classification as held for sale.
Upon classification as held for sale, the disposal group is measured at the lower of its carrying
amount and fair value less costs to sell, except where specifically exempt from IFRS 5 ‘Non-current
Assets Held for Sale and Discontinued Operations. An impairment loss is recognised for any initial or
subsequent write-down of the disposal group to fair value less costs to sell. A gain is recognised for
any subsequent increases in fair value less costs to sell of the disposal group, but not in excess of any
cumulative impairment loss previously recognised. A gain or loss not previously recognised by the
date of the sale of the disposal group is recognised at the date of derecognition. Assets within the
disposal group are not depreciated or amortised while they are classified as held for sale. Interest
and other expenses attributable to the liabilities of a disposal group classified as held for sale
continue to be recognised. The assets of the disposal group classified as held for sale are presented
separately from the other assets in the balance sheet. The liabilities of a disposal group classified as
held for sale are presented separately from other liabilities in the balance sheet.
When a group of assets that is classified as held for sale represents a major line of business or
geographical area the disposal group is classified as discontinued operations. Upon classification of a
business as held for sale and discontinued operations the individual income and expenses are
presented within the Total net result from discontinued operations instead of being presented in the
usual line items in the Consolidated statement of profit or loss. All comparative years in the
Consolidated statement of profit or loss are restated and presented as discontinued operations for all
periods presented. Furthermore, the individual assets and liabilities are presented in the Consolidated
statement of financial position as Assets and liabilities held for sale and are no longer included in the
usual line items in the Consolidated statement of financial position. Changes in assets and liabilities
as a result of classification as held for sale are included in the notes in the line ‘Changes in
composition of the group and other changes’.
1.16 Provisions, contingent liabilities and contingent assets
A provision is a present obligation arising from past events, the settlement of which is expected to
result in an outflow of resources embodying economic benefits, however the timing or the amount is
uncertain. Provisions are discounted when the effect of the time value of money is significant using a
pre-tax discount rate.
Reorganisation provisions include employee termination benefits when ING Bank is demonstrably
committed to either terminate the employment of current employees according to a detailed formal
plan without possibility of withdrawal, or providing termination benefits as a result of an offer made
to encourage voluntary redundancy.
A liability is recognised for a levy when the activity that triggers payment, as identified by the
relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the
liability is recognised only upon reaching the specified minimum threshold.
A contingent liability is a possible obligation that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of ING Bank; or a present obligation that arises from past events but is not
recognised because it is either not probable that an outflow of economic benefits will be required to
settle the obligation or the amount of the obligation cannot be measured reliably. Contingent
liabilities are not recognised in the statement of financial position, but are rather disclosed in the
notes unless the possibility of the outflow of economic benefits is remote.
A contingent asset is a possible asset that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of ING Bank. Contingent assets are recognised in the statement of financial
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position only when realisation of the income that arises from such an asset is virtually certain.
Contingent assets are disclosed in the notes when an inflow of economic benefits is probable.
Significant judgements and critical accounting estimates and assumptions:
The recognition and measurement of provisions is an inherently uncertain process involving using
judgement to determine when a present obligation exists and estimates regarding probability,
amounts and timing of cash flows.
ING Bank may become involved in governmental, regulatory, arbitration and legal proceedings and
investigations and may be subject to third party claims. With or without reference to the above, ING
Bank may also offer compensation to certain of its customers. Judgement is required to assess
whether a present obligation exists and to estimate the probability of an unfavourable outcome and
the amount of potential loss. The degree of uncertainty and the method of making the accounting
estimate depends on the individual case, its nature and complexity. Such cases are usually one of a
kind. For the assessment of related provisions ING Bank consults with internal and external legal
experts. Even taking into consideration legal experts’ advice, the probability of an outflow of
economic benefits can still be uncertain and the provision recognised can remain sensitive to the
assumptions used. Reference is made to note 15 ‘Provisions’. For proceedings where it is not possible
to make a reliable estimate of the expected financial effect, that could result from the ultimate
resolution of the proceedings, no provision is recognised, however disclosure is included in the
financial statements, where relevant. Reference is made to note 43 ‘Legal proceedings’.
Critical accounting estimates and assumptions for the reorganisation provision are in estimating the
amounts and timing of cash flows as the announced transformation initiatives are implemented over
a period of several years. Reference is made to note 15 ‘Provisions’.
1.17 Other liabilities
Defined benefit plans
The net defined benefit asset or liability recognised in the statement of financial position in respect of
defined benefit pension plans is the fair value of the plan assets less the present value of the defined
benefit obligation at the balance sheet date.
Plan assets are measured at fair value at the balance sheet date. For determining the pension
expense, the return on plan assets is determined using a high quality corporate bond rate identical
to the discount rate used in determining the defined benefit obligation.
Changes in plan assets that effect Shareholders’ equity and/or Net result, include mainly:
◾
Return on plan assets using a high quality corporate bond rate at the start of the reporting
period which are recognised as staff costs in the statement of profit or loss; and
◾
Remeasurements which are recognised in Other comprehensive income.
The defined benefit obligation is calculated by internal and external independent qualified actuaries
through actuarial models and calculations using the projected unit credit method. This method
considers expected future payments required to settle the obligation resulting from employee
service in the current and prior periods, discounted using a high quality corporate bond rate. Inherent
in these actuarial models are assumptions including discount rates, rates of increase in future salary
and benefit levels, mortality rates, consumer price index and the expected level of indexation. The
assumptions are based on available market data as well as management expectations and are
updated regularly. The actuarial assumptions may differ significantly from the actual results due to
changes in market conditions, economic and mortality trends, and other assumptions. Any changes
in these assumptions could have a significant impact on the defined benefit plan obligation and
future pension costs.
Changes in the defined benefit obligation that effects Shareholders’ equity and/or Net result, include
mainly:
◾
Service cost which are recognised as staff costs in the statement of profit or loss;
◾
Interest expenses using a high quality corporate bond rate at the start of the period which are
recognised as staff costs in the Statement of profit or loss; and
◾
Remeasurements which are recognised in Other comprehensive income (equity).
Remeasurements recognised in other comprehensive income are not recycled to profit or loss. Any
past service cost relating to a plan amendment is recognised in profit or loss in the period of the plan
amendment. Gains and losses on curtailments and settlements are recognised in the statement of
profit or loss when the curtailment or settlement occurs.
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The recognition of a net defined benefit asset in the Consolidated statement of financial position is
limited to the present value of any economic benefits available in the form of refunds from the plans
or reductions in future contributions to the plans.
Defined contribution plans
For defined contribution plans, ING Bank pays contributions to publicly or privately administered
pension insurance plans on a mandatory, contractual or voluntary basis. ING Bank has no further
payment obligations once the contributions have been paid. The contributions are recognised as
staff expenses in the profit or loss when they are due. Prepaid contributions are recognised as an
asset to the extent that a cash refund or a reduction in the future payments is available.
Other post-employment obligations
Some group companies provide other post-employment benefits to former employees. The
entitlement to these benefits is usually conditional on the employee remaining in service up to
retirement age and the completion of a minimum service period. The expected costs of these
benefits are accrued over the period of employment using an accounting methodology similar to
that for defined benefit pension plans.
1.18 Income recognition
Interest
Interest income and expense are recognised in the statement of profit or loss using the effective
interest method. The effective interest method is a method of calculating the amortised cost of a
financial asset or a financial liability and of allocating the interest income or interest expense over
the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash payments or receipts through the expected life of the financial instrument or, when
appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.
When calculating the effective interest rate, ING Bank estimates cash flows considering all
contractual terms of the financial instrument (for example, prepayment options) but does not
consider future credit losses.
The calculation includes all fees and points paid or received between parties to the contract that are
an integral part of the effective interest rate, transaction costs and all other premiums or discounts.
Once a financial asset or a group of similar financial assets has been written down as a result of an
impairment loss, interest income is recognised using the rate of interest used to discount the future
cash flows for the purpose of measuring the impairment loss.
Interest results on instruments classified at Amortised Cost, assets measured at FVOCI and
derivatives in a formal hedge accounting relationship is presented in ‘Interest income (expense) using
effective interest rate method’. Interest result on financial assets and liabilities voluntarily designated
as at FVPL and derivatives in so called economic hedges and instruments designated at fair value are
presented in ‘Other interest income (expense)’. Interest result on all other financial assets and
liabilities at FVTPL is recognised in ‘Valuation results and net trading income’.
Fees and commissions
Fees and commissions are generally recognised as the service is provided. Loan commitment fees for
loans that are likely to be drawn down are deferred (together with related direct costs) and
recognised as an adjustment to the effective interest rate on the loan. Loan syndication fees are
recognised as income when the performance obligation has been satisfied based on the particular
contract and ING Bank has retained no part of the loan package for itself or has retained a part at the
same effective interest rate as the other participants. Commission and fees arising from negotiating,
or participating in the negotiation of, a transaction for a third party – such as the arrangement of the
acquisition of shares or other securities or the purchase or sale of businesses – are recognised on
completion of the underlying transaction. Portfolio and other management advisory and service fees
are recognised based on the applicable service contracts as the service is provided. Asset
management fees related to investment funds and investment contract fees are recognised on a
pro-rata basis over the period the service is provided. The same principle is applied for wealth
management, financial planning and custody services that are continuously provided over an
extended period of time. Fees received and paid between banks for payment services are classified
as commission income and expenses.
Lease income
The proceeds from leasing out assets under operating leases are recognised on a straight-line basis
over the life of the lease agreement. Lease payments received in respect of finance leases when ING
Bank is the lessor are divided into an interest component (recognised as interest income) and a
repayment component based on a pattern reflecting a constant periodic rate of return on the
lessor’s net investment in the lease.
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1.19 Expense recognition
Expenses are recognised in the statement of profit or loss as incurred or when a decrease in future
economic benefits related to a decrease in an asset or an increase in a liability has arisen that can be
measured reliably. Fee and commission expenses are generally a result from a contract with ING
service providers in order to perform the service for ING Bank’s customers. Costs are generally
presented as ‘Commission expenses’ if they are specific, incremental, directly attributable and
identifiable to generate commission income.
Share-based payments
ING Bank only engages in share-based payment transactions with its staff and directors. Share-
based payment expenses are recognised as a staff expense over the vesting period. A corresponding
increase in equity is recognised for equity-settled share-based payment transactions. A liability is
recognised for cash-settled share-based payment transactions. The fair value of equity-settled
share-based payment transactions are measured at the grant date, and the fair value of cash-
settled share-based payment transactions are measured at each balance sheet date. Rights granted
will remain valid until the expiry date, even if the share based payment scheme is discontinued. The
rights are subject to certain conditions, including a pre-determined continuous period of service.
1.20 Statement of cash flows
The statement of cash flows is prepared in accordance with the indirect method, distinguishing cash
flows from operating, investing and financing activities. In the net cash flow from operating activities,
the result before tax is adjusted for those items in the statement of profit or loss and changes in
items per the statement of financial position, which do not result in actual cash flows during the
year.
For the purposes of the statement of cash flows, Cash and cash equivalents comprise balances with
less than three months’ maturity from the date of acquisition, including cash and balances with
central banks, treasury bills and other eligible bills, amounts due from other banks, and deposits from
banks. Investments qualify as a cash equivalent if they are readily convertible to a known amount of
cash and are subject to an insignificant risk of changes in value.
Cash flows arising from foreign currency transactions are translated into the functional currency
using the exchange rates at the date of the cash flows.
The net cash flow shown in respect of Loans and advances to customers relates only to transactions
involving actual payments or receipts. The Addition to loan loss provision which is deducted from the
item Loans and advances to customers in the statement of financial position has been adjusted
accordingly from the result before tax and is shown separately in the statement of cash flows.
The difference between the Net cash flow in accordance with the statement of cash flows and the
change between the opening and closing balance of Cash and cash equivalents in the statement of
financial position is due to exchange rate differences and is presented separately in the cash flow
statement.
Liabilities arising from financing activities are debt securities, lease liabilities and subordinated loans.
1.21 Parent company accounts
The parent company accounts of ING Bank N.V. are prepared in accordance with the financial
reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code. In accordance with
subsection 8 of section 362, Book 2 of the Dutch Civil Code, the recognition and measurement
principles applied in the Parent company accounts are the same as those applied in the Consolidated
financial statements.
>
2 Cash and balances with central banks
ING Bank Annual Report 2021
206
Notes to the Consolidated statement of financial position
2 Cash and balances with central banks
Cash and balances with central banks
in EUR million
2021
2020
Amounts held at central banks
1
104,870
109,237
Cash and bank balances
1,650
1,851
106,520
111,087
1 Amounts held at central banks include an amount of EUR -6 million (2020: EUR -3 million) of Loan loss provisions.
The movement in Cash and balances with central banks reflects ING’s active liquidity management.
Amounts held at central banks reflect on demand balances.
Reference is made to Note 40 ‘Transfer of financial assets, assets pledged and received as collateral’ for
restrictions on amounts held at central banks.
3 Loans and advances to banks
Loans and advances to banks
Netherlands
Rest of the world
Total
in EUR million
2021
2020
2021
2020
2021
2020
Loans and advances to banks
7,018
7,441
16,595
17,945
23,613
25,386
Loan loss provisions
-10
-10
-13
-13
-22
-23
7,009
7,431
16,582
17,933
23,591
25,363
Loans include balances (mainly short-term deposits) with central banks amounting to EUR 1,952
million (2020: EUR 2,519 million).
As at 31 December 2021, Loans include receivables related to finance lease contracts amounting to
EUR 5 million (2020: EUR 6 million). Reference is made to Note 7 ‘Loans and advances to customers’ for
information on finance lease receivables.
As at 31 December 2021, all loans and advances to banks are non-subordinated.
4 Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
in EUR million
2021
2020
Trading assets
51,389
51,361
Non-trading derivatives
1,536
3,583
Designated at fair value through profit or loss
6,355
4,126
Mandatorily measured at fair value through profit or loss
42,684
44,305
101,964
103,374
(Reverse) repurchase transactions
Financial assets at fair value through profit or loss includes securities lending and sales and repurchase
transactions which were not derecognised, because ING Bank continues to be exposed to substantially
all risks and rewards of the transferred financial asset. For repurchase agreements the gross amount of
assets must be considered together with the gross amount of related liabilities, which are presented
separately on the statement of financial position since IFRS does not always allow netting of these
positions in the statement of financial position.
ING Bank’s exposure to (reverse) repurchase transactions is included in the following lines in the
statement of financial position:
>
4 Financial assets at fair value through profit or loss
ING Bank Annual Report 2021
207
Exposure to (reverse) repurchase agreements
in EUR million
2021
2020
Reverse repurchase transactions
Loans and advances to banks
3,403
4,869
Loans and advances to customers
71
624
Trading assets, loans and receivables
8,026
10,947
Loans and receivables mandatorily measured at fair value through profit or loss
39,823
41,735
51,322
58,175
Repurchase transactions
Deposits from banks
4,138
1,971
Trading liabilities, funds on deposit
7,127
5,787
Funds entrusted designated and measured at fair value through profit or loss
34,608
41,177
45,873
48,935
Securities purchased under agreements to resell (reverse repos), securities borrowings and similar
agreements are not recognised in the consolidated statement of financial position. Based on the
business model assessment and counterparty, the consideration paid to purchase securities is
recognised as Loans and advances to customers, Loans and advances to banks, Other financial assets
at FVPL or Trading assets.
Securities sold subject to repurchase agreements (repos), securities lending and similar agreements
continue to be recognised in the consolidated statement of financial position. The counterparty liability
is measured at FVPL (designated) and included in Other financial liabilities at FVPL if the asset is
measured at FVPL. Otherwise, the counterparty liability is included in Deposits from banks, Customer
deposits, or Trading, as appropriate.
Reference is made to Note 40 ‘Transfer of financial assets, assets pledged and received as collateral’ for
information on transferred assets which were not derecognised.
Trading assets
Trading assets by type
in EUR million
2021
2020
Equity securities
17,574
7,813
Debt securities
5,319
5,183
Derivatives
19,764
27,238
Loans and receivables
8,733
11,126
51,389
51,361
Trading assets include assets that are classified under IFRS as Trading, but are closely related to
servicing the needs of the clients of ING Bank. ING offers institutional clients, corporate clients, and
governments, products that are traded on the financial markets. A significant part of the derivatives in
the trading portfolio is related to servicing corporate clients in their risk management to hedge for
example currency or interest rate exposures. In addition, ING provides its customers access to equity
and debt markets for issuing their own equity or debt securities (securities underwriting).
Reference is made to Note 14 ‘Financial liabilities at fair value through profit or loss’ for information on
trading liabilities.
Non-trading derivatives
Non-trading derivatives by type
in EUR million
2021
2020
Derivatives used in
- fair value hedges
365
486
- cash flow hedges
300
1,376
- hedges of net investments in foreign operations
18
69
Other non-trading derivatives
852
1,653
1,536
3,583
Reference is made to Note 37 ‘Derivatives and hedge accounting’ for information on derivatives
designated in hedge accounting.
Other non-trading derivatives mainly includes interest rate swaps and foreign exchange currency
swaps for which no hedge accounting is applied.
>
5 Financial assets at fair value through other comprehensive income
ING Bank Annual Report 2021
208
Designated at fair value through profit or loss
Designated at fair value through profit or loss by type
in EUR million
2021
2020
Debt securities
5,870
3,544
Loans and receivables
485
582
6,355
4,126
‘Financial assets designated at fair value through profit or loss’ is partly economically hedged by credit
derivatives. The hedges do not meet the criteria for hedge accounting and the loans and debt
securities are recorded at fair value to avoid an accounting mismatch. The maximum credit exposure
of the loans and receivables and debt securities included in ‘Financial assets designated at fair value
through profit or loss’ approximates its carrying value. The cumulative change in fair value of the loans
and debt securities attributable to changes in credit risk is not significant.
The notional value of the related credit derivatives is EUR 2,640 million (2020: EUR 1,077 million). The
cumulative change in fair value of the credit derivatives attributable to changes in credit risk since the
financial assets were first designated, amounts to EUR -69 million (2020: EUR -16 million) and the
change for the current year amounts to EUR -53 million (2020: EUR -45 million).
These have been calculated by determining the changes in credit spread implicit in the fair value of
bonds issued by entities with similar credit characteristics.
Mandatorily at fair value through profit or loss
Mandatorily at fair value through profit or loss by type
in EUR million
2021
2020
Equity securities
161
228
Debt securities
787
787
Loans and receivables
41,735
43,290
42,684
44,305
None of the equity securities are individually significant for ING Bank.
Loans and receivables mainly include reverse repurchase agreements.
For details on ING Bank’s total exposure to debt securities reference is made to Note 6 ‘Securities at
amortised cost’.
5 Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income by type
in EUR million
2021
2020
Equity securities
2,457
1,862
Debt securities
1
27,340
32,977
Loans and advances
1
838
1,056
30,635
35,895
1 Debt securities include an amount of EUR -12 million (2020: EUR -12 million) and the Loans and advances includes EUR -1
million (2020: EUR -2 million) of Loan loss provisions.
Exposure to equity securities
Equity securities designated as at fair value through other comprehensive income
Carrying
value
Carrying
value
Dividend
income
Dividend
income
in EUR million
2021
2020
2021
2020
Investment in Bank of Beijing
1,700
1,662
97
95
Other Investments
757
200
25
12
2,457
1,862
122
107
For strategic equity securities, ING decided to apply the option to irrevocably designate these
investments at fair value through other comprehensive income, instead of the IFRS 9 default
measurement of fair value through profit or loss.
As at 31 December 2021 ING holds approximately 13% (2020: 13%) of the shares of Bank of Beijing, a
bank listed on the stock exchange of Shanghai. As per regulatory requirements set by China Banking
and Insurance Regulatory Commission, ING, as a shareholder holding more than 5% or more of the
shares, is required to supply additional capital when necessary. No request for additional capital was
received in 2021 (2020: nil).
>
6 Securities at amortised cost
ING Bank Annual Report 2021
209
Changes in fair value through other comprehensive income
The following table presents changes in financial assets at fair value through other comprehensive
income.
Changes in fair value through other comprehensive income financial assets
FVOCI equity
securities
FVOCI debt
instruments
1
Total
in EUR million
2021
2020
2021
2020
2021
2020
Opening balance
1,862
2,306
34,033
32,163
35,895
34,468
Additions
518
13
12,669
16,936
13,186
16,949
Amortisation
-46
-9
-46
-9
Transfers and reclassifications
-7
-107
0
-7
-107
Changes in unrealised revaluations
2
-88
-283
-1,209
520
-1,296
237
Impairments
-5
-2
-5
-2
Reversals of impairments
4
-4
4
-4
Disposals and redemptions
-19
-13
-17,730
-14,557
-17,750
-14,571
Exchange rate differences
191
-53
460
-1,017
651
-1,070
Changes in the composition of the group and other
changes
0
-0
2
2
2
2
Closing balance
2,457
1,862
28,178
34,033
30,635
35,895
1 Fair value through other comprehensive income debt instruments includes both debt securities and loans and advances.
2 Changes in unrealized revaluations of FVOCI debt instruments include changes on hedged items which are recognized in the
statement of profit or loss. Reference is made to Note 19 ‘Equity’ for details on the changes in revaluation reserve.
FVOCI equity securities
In 2021, additions of EUR 518 million mainly relates to new investments in HQLA eligible equity
instruments. This is a diversified buy-and-hold portfolio aimed at generating a stable dividend income
stream.
In 2021, exchange rate differences of EUR 191 million are fully related to the stake in Bank of Beijing
following the appreciation of CNY vs EUR.
In 2021, changes in unrealised revaluations of equity securities decreased mainly related to negative
revaluation of the stake in Bank of Beijing following a decline in share price (EUR -153 million)
compensated by positive revaluation in several other equity stakes of EUR 65 million.
In 2020, transfers and reclassifications of EUR -107 million mainly relates to ING’s investment in Visa
preference series C shares (EUR -116 million) that have been reclassified from equity at fair value
through other comprehensive income to debt securities at mandatorily fair value through profit or loss'
based on variable conversion rate.
FVOCI debt instruments
In 2021, changes in unrealised revaluations of EUR -1,209 million relates to increased yield curves.
Reference is made to Note 6 ‘Securities at amortised cost’ for details on ING Bank’s total exposure to
debt securities.
6 Securities at amortised cost
Securities at amortised cost fully consist of Debt securities.
ING Bank’s exposure to debt securities is included in the following lines in the statement of financial
position:
Exposure to debt securities
in EUR million
2021
2020
Debt securities at fair value through other comprehensive income
27,340
32,977
Debt securities at amortised cost
48,319
50,587
Debt securities at fair value through other comprehensive income and amortised cost
75,659
83,564
Trading assets
5,319
5,183
Debt securities at fair value through profit or loss
6,658
4,331
1
Total debt securities at fair value through profit or loss
11,976
9,514
87,635
93,078
1 The prior period has been updated to improve consistency and comparability of exposure to debt
securities.
>
7 Loans and advances to customers
ING Bank Annual Report 2021
210
ING Bank’s total exposure to debt securities (excluding debt securities held in the trading portfolio) of
EUR 82,316 million (31 December 2020: EUR 87,895 million) is specified as follows:
Debt securities by type of exposure
Debt Securities
at FVPL
Debt Securities
at FVOCI
Debt Securities
at AC
Total
in EUR million
2021
2020
2021
2020
2021
2020
2021
2020
Government bonds
48
48
16,271
22,448
26,588
26,801
42,908
49,296
Sub-sovereign,
Supranationals and Agencies
3,115
2,331
7,587
7,510
13,752
14,858
24,454
24,699
Covered bonds
1,729
1,821
5,063
5,965
6,792
7,786
Corporate bonds
778
26
156
207
90
131
1,024
364
Financial institutions' bonds
1,993
1,199
1
798
523
1,932
1,956
4,724
3,679
ABS portfolio
723
726
810
480
913
894
2,445
2,100
6,658
4,331
27,352
32,990
48,338
50,604
82,347
87,924
Loan loss provisions
-12
-12
-19
-17
-31
-29
Debt securities portfolio
6,658
4,331
27,340
32,977
48,319
50,587
82,316
87,895
1 The prior period has been updated to improve consistency and comparability of exposure to debt securities.
7 Loans and advances to customers
Loans and advances to customers by type
Netherlands
Rest of the world
Total
in EUR million
2021
2020
2021
2020
2021
2020
Loans to, or guaranteed by, public authorities
23,770
24,292
17,563
17,210
41,333
41,502
Loans secured by mortgages
116,666
117,967
250,312
238,370
366,978
356,337
Loans guaranteed by credit institutions
259
305
6,022
4,896
6,282
5,201
Personal lending
2,577
3,019
24,682
24,776
27,260
27,794
Corporate loans
42,819
37,724
148,153
135,527
190,972
173,251
186,091
183,306
446,733
420,780
632,824
604,086
Loan loss provisions
-1,119
-1,286
-4,156
-4,493
-5,274
-5,779
184,972
182,020
442,577
416,287
627,550
598,306
For details on credit quality and loan loss provisioning, refer to ‘Risk management – Credit risk’
paragraph ‘Credit quality’.
Loans and advances to customers by subordination
in EUR million
2021
2020
Non-subordinated
627,390
598,207
Subordinated
160
99
627,550
598,306
No individual loan or advance has terms and conditions that significantly affect the amount, timing or
certainty of the consolidated cash flows of ING Bank.
Loans and advances to customers and Loans and advances to banks include finance lease receivables
and are detailed as follows:
Finance lease receivables
in EUR million
2021
2020
Maturities of gross investment in finance lease receivables
- within 1 year
3,204
3,175
- between 1-2 years
2,311
2,212
- between 2-3 years
1,716
1,722
- between 3-4 years
1,178
1,166
- between 4-5 years
734
711
- more than 5 years
1,495
1,487
10,637
10,473
Unearned future finance income on finance leases
-525
-508
Net investment in finance leases
10,112
9,965
Included in Loans and advances to banks
5
6
Included in Loans and advances to customers
10,106
9,958
10,112
9,965
The finance lease receivables mainly relate to the financing of equipment and are part of corporate
loans. To a lesser extent, the finance lease receivables relate to real estate for third parties, where ING
>
8 Investment in associates and joint ventures
ING Bank Annual Report 2021
211
is the lessor. These finance lease receivables are part of loans secured by mortgages. Interest income
in 2021 on Finance lease receivables amounts to EUR 217 million (2020: EUR 229 million).
The total loan loss provision of EUR 167 million (2020: EUR 164 million) for finance lease receivables is
classified into the following loan loss provision stages:
◾
Stage 1: EUR 8 million (2020: EUR 8 million)
◾
Stage 2: EUR 30 million (2020: EUR 25 million)
◾
Stage 3: EUR 129 million (2020: EUR 131 million)
8 Investment in associates and joint ventures
Investments in associates and joint ventures
2021
Interest
held (%)
Fair value
of listed
invest-
ments
Balance
sheet
value
Total
assets
Total
liabilities
Total
income
Total
expenses
TMBThanachart Bank Public Company
23
866
1,208
46,478
40,957
1,286
1,038
Other investments in associates and joint
ventures
379
1,587
Investments in associates and joint ventures
2020
Interest
held (%)
Fair value
of listed
invest-
ments
Balance
sheet
value
Total
assets
Total
liabilities
Total
income
Total
expenses
TMBThanachart Bank Public Company
23
653
1,202
50,123
44,597
1,388
1,093
Other investments in associates and joint
ventures
273
1,475
The reporting dates of certain associates and joint ventures can differ from the reporting date of the
Group, but by no more than three months.
TMBThanachart Bank Public Company Limited
ING Bank has a 23% investment in TMBThanachart Bank Public Company Limited (hereafter: TTB), a
bank listed on the Stock Exchange of Thailand. TTB is providing products and services to Wholesale,
Small and Medium Enterprise (SME), and Retail customers. TTB is accounted for as an investment in
associate based on the size of ING shareholding and representation on the Board.
Impairment testing
The fair value has been below the purchase cost of the investment for a prolonged period of time
(since 1Q 2020). This is considered to be objective evidence of impairment. As a result ING performed
an impairment test at 31 December 2021 that did not lead to an impairment loss (2020: EUR 230
million). Furthermore, no reversal of impairment was recognised.
Methodology
The recoverable amount is determined as the higher of the fair value less costs of disposal and Value in
Use (‘VIU’). Fair value less costs of disposal is based on observable share price. The VIU calculation uses
discounted cash flow projections based on management’s best estimates. VIU is derived using a
Dividend Discount Model (DDM) where distributable equity, i.e. future earnings available to ordinary
shareholders, is used as a proxy for future cash flows. The valuation looks at expected cash flows into
perpetuity resulting in two main components to the VIU calculation:
i) the estimation of future earnings over a 5 year forecast period; and
ii) the terminal value being the extrapolation of earnings into perpetuity applying a long term
growth rate. The earnings that are used for extrapolation represent the stable long term
financial results and position of TTB, i.e. a steady state. The terminal value comprises the
majority of the total VIU.
Key assumptions used in the VIU calculation as at 31 December 2021
The VIU is determined using a valuation model which is subject to multiple management assumptions.
The key assumptions, i.e. those to which the overall result is most sensitive to, are the following:
Expected future earnings of TTB: based on forecasts derived from broker consensus over the short
to medium term and TTB observable targets for steady state earnings into perpetuity. A capital
maintenance charge is applied, which is management’s forecast of the earnings that need to be
withheld in order for TTB to meet target regulatory requirements over the forecast period;
>
9 Property and equipment
ING Bank Annual Report 2021
212
Discount rate (cost of equity): 8.74% (2020: 8.49%), based on the capital asset pricing model
(CAPM) calculated for TTB using current market data.
Terminal growth rate: 2.30% (2020: 1.60%) consistent with current long term government bond
yield in Thailand as a proxy for a risk-free rate;
To assess the risk of further impairment at 31 December 2021, the model was evaluated for
reasonably possible changes to key assumptions in the model. This reflects the sensitivity of the VIU to
each key assumption on its own and it is possible that more than one favourable and/or unfavourable
change may occur at the same time. Holding the other key assumptions constant, a reduction in all of
the forecasted annual cash flows, including terminal value, of 13.0% or an increase in the discount of
112bps would reduce the recoverable amount to the carrying amount. A reasonably possible change
in the terminal growth rate to zero would not cause the VIU to equal the carrying amount.
Reversal of the impairment loss recognised in 2020 was not considered appropriate as at 31 December
2021 mainly due to the lack of sufficiently positive changes observed in the underlying performance of
TTB since the impairment loss in 2020 as reflected in the broker consensus. Furthermore, the share
price remains below the original cost of the investment for a prolonged period of time.
Other investments in associates and joint ventures
Included in Other investments in associates and joint ventures are mainly financial services and
financial technology funds or vehicles operating predominantly in Europe.
Other investments in associates and joint ventures represents a number of associates and joint
ventures that are individually not significant to ING Bank.
Significant influence for associates in which the interest held is below 20%, is based on the
combination of ING Bank’s financial interest and other arrangements, such as participation in the
Board of Directors.
The associates and joint ventures of ING are subject to legal and regulatory restrictions regarding the
amount of dividends they can pay to ING. These restrictions are for example dependent on the laws in
the country of incorporation for declaring dividends or as a result of minimum capital requirements
that are imposed by industry regulators in the countries in which the associates and joint ventures
operate. In addition, the associates and joint ventures also consider other factors in determining the
appropriate levels of equity needed. These factors and limitations include, but are not limited to, rating
agency and regulatory views, which can change over time.
Changes in Investments in associates and joint ventures
in EUR million
2021
2020
Opening balance
1,475
1,790
Additions
91
24
Revaluations
-24
-3
Share of results
141
66
Dividends received
-34
-12
Disposals
-23
-12
Impairments
-3
-235
Exchange rate differences
-31
-144
Other
-5
0
Closing balance
1,587
1,475
Share of results from associates and joint ventures of EUR 141 million (2020: EUR 66 million) as
included in the table above is mainly attributable to results of TTB of EUR 61 million (2020: EUR 70
million), EUR 28 million gain on our stake in Ebusco and other share of results. In 2020 impairments is
predominantly attributable to TTB.
9 Property and equipment
Property and equipment by type
in EUR million
2021
2020
Property in own use
702
745
Equipment:
- Data processing equipment
207
281
- Other equipment
493
561
Right- of- use assets:
- ROU property
1,009
1,129
- ROU cars
83
89
- ROU other leases
21
38
2,515
2,841
>
10 Intangible assets
ING Bank Annual Report 2021
213
Changes in property and equipment
Property in own use
Equipment
Right-of-use assets
Total
in EUR million
2021
2020
2021
2020
2021
2020
2021
2020
Opening balance
745
757
842
940
1,255
1,476
2,841
3,172
Additions
9
10
175
277
164
134
348
421
Transfers
-5
57
1
-42
-20
-4
-24
11
Depreciation
-15
-12
-287
-291
-271
-275
-573
-578
Impairments
-10
-8
-8
-9
-15
-35
-33
-52
Reversals of impairments
6
9
0
0
1
0
7
9
Remeasurements
17
20
6
8
24
28
Disposals
-24
-63
-15
-12
-10
-14
-49
-89
Exchange rate differences
-21
-24
-7
-22
4
-35
-25
-81
Closing balance
702
745
699
842
1,113
1,255
2,515
2,841
Costprice
910
948
3,581
3,786
1,738
1,737
6,229
6,472
Accumulated depreciation
-373
-378
-2,871
-2,940
-644
-492
-3,888
-3,810
Accumulated impairments
-134
-135
-10
-5
-29
-36
-173
-175
Accumulated revaluation
surplus
299
310
299
310
Accumulated
remeasurement
48
45
48
45
Net carrying value
702
745
699
842
1,113
1,255
2,515
2,841
Right-of-use assets relate to leased land and buildings, cars, data-processing equipment and other
leases. ING considers valuations from third party experts in determining the fair values of property in
own use.
Property in own use purchase costs amounted to EUR 910 million (2020: EUR 948 million). Cost or the
purchase price less accumulated depreciation and impairments would have been EUR 403 million
(2020: EUR 435 million) had property in own use been valued at cost instead of at fair value.
The reported impairment losses of EUR 33 million (2020: EUR 52 million) mainly result from anticipation
of a change in the post-pandemic way of working and phasing out of activities.
10 Intangible assets
Changes in intangible assets
Goodwill
Software
Other
Total
in EUR million
2021
2020
2021
2020
2021
2020
2021
2020
Opening balance
533
907
846
958
15
52
1,394
1,916
Additions
44
86
44
87
Capitalised expenses
135
213
135
213
Amortisation
-260
-249
-1
-2
-261
-251
Impairments
1
-310
-82
-167
-12
-35
-94
-513
Exchange rate differences
-61
-63
-0
-6
0
-0
-62
-69
Disposals
-0
-9
-0
-9
Changes in the composition of the group and
other changes
-1
19
0
-0
19
Closing balance
472
533
682
846
2
15
1,156
1,394
Gross carrying amount
472
843
2,521
2,642
59
60
3,052
3,545
Accumulated amortisation
-1,710
-1,621
-9
-9
-1,719
-1,630
Accumulated impairments
-310
-129
-175
-48
-37
-177
-522
Net carrying value
472
533
682
846
2
15
1,156
1,394
1 Impairments of intangible assets are presented within Other operating expenses in the statement of Profit or Loss.
Goodwill
Goodwill is allocated to groups of cash generating units (CGUs) as follows:
Goodwill allocation to group of CGUs
Method used for
recoverable amount
Discount rate
Terminal
growth rate
Goodwill
Goodwill
Group of CGU’s
2021
2020
Retail Netherlands
8.84%
0.19%
30
30
Retail Germany
8.81%
0.67%
349
349
Retail Growth Markets
12.87%
3.68%
92
153
472
533
Impairment testing
Goodwill is tested for impairment annually in the fourth quarter by comparing the recoverable amount
of each goodwill-carrying CGU with its carrying amount. The key assumptions used in the calculation
>
10 Intangible assets
ING Bank Annual Report 2021
214
of the recoverable amounts are included in the table above. In addition ING Bank tests goodwill
whenever a triggering event is identified.
The recoverable amount exceeds the carrying value of the CGUs as at 31 December 2021 and
therefore no impairment is required.
In 2020, Covid-19 has resulted in adverse changes in the market and economic environment. Due to
the impact of the significant deterioration in the economic environment on the cash flow outlook of
our businesses, we also completed a goodwill impairment review across ING Bank in 2020. The goodwill
impairment test resulted in the recognition of goodwill impairments on the CGU Retail Belgium of EUR
50 million (of which EUR 43 million is reported in Retail Belgium segment and EUR 8 million in Corporate
Line segment) and on the CGU Wholesale Banking of EUR 260 million (fully reported in the Wholesale
Banking segment). For both CGUs the impairment resulted from the negative developments in the
macro-economic outlook in the context of the Covid-19 pandemic.
Methodology
In line with IFRS, the recoverable amount is determined as the higher of the fair value less costs of
disposal and Value in Use (VIU). The VIU calculation is based on a Dividend Discount model using three
year management approved plans, updated for expected changes in the macroeconomic
environment. When estimating the VIU of a CGU, local conditions and requirements determine the
capital requirements, discount rates, and terminal growth rates. These local conditions and
requirements determine the ability to upstream excess capital and profits to ING Bank. The discount
rate calculation includes other inputs such as equity market premium, country risk premium, and long
term inflation which are based on market sources and management’s judgement. The long term
growth rate for EU-countries is based on long term risk-free rate by reference to the yield of a
composite index consisting of Euro generic government bonds, with a maturity of 30 years. For other
countries, the growth rate includes long term inflation rate obtained from market sources.
Sensitivity of key assumptions
Key assumptions in the goodwill impairment test model are the projected locally available cash flows
(based on local capital requirements and projected profits), discount rates (cost of equity), and long
term growth rates.
The recoverable amounts of the CGUs are sensitive to the above key assumptions. A decrease in the
available cash flows of 10%, an increase in the discount rate of 1 percent point or a reduction of future
growth rate to zero are considered reasonably possible changes in key assumptions. If the
aforementioned changes occur to the above key assumptions holding the other key assumptions
constant, goodwill of the remaining CGUs will continue to be recoverable and no impairment will occur.
Other changes
Other changes in goodwill in 2021 related to changes in currency exchange rates of Retail Growth
Markets goodwill.
Software
Software, includes internally developed software amounting to EUR 573 million (2020: EUR 688 million).
In 2021 an impairment of EUR 51 million with regard to software in the payments and cash management
business was recognised. The remaining software impairments in 2021 related to various, individually
immaterial items.
In 2020, following the decision to discontinue the Maggie programme an impairment of EUR 141 million
was recognised, primarily related to capitalised software development costs. In addition, an impairment
of EUR 19 million with regard to software in the payments and cash management business was
recognised. The remaining software impairments in 2020 related to various, individually immaterial
items.
Other intangible assets
In 2021 an impairment of an indefinite useful life asset related to brand names of EUR 7 million (2020:
14 million) was recognised. Additionally EUR 5 million (2020: EUR 20 million) was recognised related to
intangible assets from a previous acquisition (customer relationships), following a re-evaluation of the
business plan.
>
11 Other assets
ING Bank Annual Report 2021
215
11 Other assets
Other assets by type
in EUR million
2021
2020
Net defined benefit assets
783
725
Investment properties
26
20
Property development and obtained from foreclosures
52
72
Accrued assets
795
773
Amounts to be settled
2,424
2,215
Other
1,910
2,074
5,991
5,879
Disclosures in respect of Net defined benefit assets are provided in Note 34 ‘Pension and other post-
employment benefits’.
Amounts to be settled include primarily transactions not settled at the balance sheet date. The nature
of these transaction is short term and they are expected to settle shortly after the closing date of the
balance sheet.
Other relates to various receivables in the normal course of business, amongst others, short term
receivables relating to mortgage issuance and other amounts receivable from customers.
12 Deposits from banks
Deposits from banks includes non-subordinated deposits and repurchase agreements from banks.
Deposits from banks by type
Netherlands
Rest of the world
Total
in EUR million
2021
2020
2021
2020
2021
2020
Non-interest bearing
570
596
321
196
891
792
Interest bearing
51,893
49,336
32,307
27,971
84,201
77,306
52,463
49,931
32,629
28,166
85,092
78,098
Deposits from banks includes ING’s participation in the Targeted Longer-Term Refinancing Operations
of EUR 65.5 billion (2020: EUR 59.5 billion). ING participated in a new series of Targeted Longer-Term
Refinancing Operations (TLTRO III) for EUR 6.0 billion in March 2021.
For the details of the applicable rates and impact on net interest income reference is made to note 20
‘Net interest income’.
13 Customer deposits
Customer deposits
in EUR million
2021
2020
Savings accounts
314,893
336,517
Credit balances on customer accounts
280,028
256,899
Corporate deposits
28,183
22,720
Other
34,727
27,001
657,831
643,138
Customer deposits by type
Netherlands
Rest of the world
Total
in EUR million
2021
2020
2021
2020
2021
2020
1
Non-interest bearing
1,860
24,206
27,712
24,223
29,573
48,429
Interest bearing
254,752
208,169
373,507
386,539
628,258
594,708
256,612
232,375
401,219
410,762
657,831
643,138
1 The prior period has been updated to improve consistency and comparability of customer deposits by type.
Savings accounts relate to the balances on savings accounts, savings books, savings deposits, and time
deposits of private individuals.
In 2021 Customer deposits includes EUR 39,759 million (2020: EUR 31,768 million) of deposits received
from ING Group.
>
14 Financial liabilities at fair value through profit or loss
ING Bank Annual Report 2021
216
14 Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
in EUR million
2021
2020
Trading liabilities
27,113
32,709
Non-trading derivatives
2,120
1,629
Designated at fair value through profit or loss
41,808
48,445
71,042
82,782
Trading liabilities
Trading liabilities by type
in EUR million
2021
2020
Equity securities
322
191
Debt securities
753
577
Funds on deposit
7,513
6,204
Derivatives
18,525
25,737
27,113
32,709
Non-trading derivatives
Non-trading derivatives by type
in EUR million
2021
2020
Derivatives used in:
- fair value hedges
270
444
- cash flow hedges
485
230
- hedges of net investments in foreign operations
88
98
Other non-trading derivatives
1,278
857
2,120
1,629
Reference is made to Note 37 ‘Derivatives and hedge accounting’ for information on derivatives used
for hedge accounting.
Other non-trading derivatives mainly includes interest rate swaps and foreign currency swaps for
hedging purposes, but for which no hedge accounting is applied.
Designated at fair value through profit or loss
Designated at fair value through profit or loss by type
in EUR million
2021
2020
Debt securities
5,585
5,887
Funds entrusted
35,993
42,300
Subordinated liabilities
230
258
41,808
48,445
As at 31 December 2021, the change in the fair value of financial liabilities designated at fair value
through profit or loss attributable to changes in credit risk is EUR 95 million (2020: EUR 141 million) on a
cumulative basis. This change has been determined as the amount of change in fair value of the
financial liability that is not attributable to changes in market conditions that gave rise to market risk
(i.e. mainly interest rate risk based on yield curves).
The amount that ING Bank is contractually required to pay at maturity to the holders of financial
liabilities designated at fair value through profit or loss excluding repurchase agreements (part of funds
entrusted) is EUR 6,853 million (2020: EUR 6,682 million).
15 Provisions
Provisions by type
in EUR million
2021
2020
Reorganisation provisions
421
381
Litigation provisions
132
105
Other provisions
420
180
973
666
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16 Other liabilities
ING Bank Annual Report 2021
217
Changes in provisions
Reorganisation
Litigation
Other
Total
in EUR million
2021
2020
2021
2020
2021
2020
1
2021
2020
Opening balance
381
385
105
102
180
200
666
688
Additions
310
165
50
46
354
66
715
277
Interest
-2
-1
-2
-1
Releases
-96
-16
-11
-25
-79
-47
-186
-88
Utilised
-172
-152
-18
-16
-25
-13
-215
-180
Exchange rate differences
0
-1
-3
-3
-2
-5
-4
-9
Other changes
-3
-0
9
0
-7
-22
-1
-21
Closing balance
421
381
132
105
420
180
973
666
1 The prior period additions and releases have been updated to improve consistency and comparability
of Other Provisions.
In 2021, the additions to the reorganisation provision mainly relate to the discontinuation of retail
banking activities in France and the restructuring of the branch network and retail advice organisation
in the Netherlands.
The additions to the reorganisation provision in 2020 are mainly attributable to refocusing of our
activities in Wholesale Banking and decision on the Maggie project, as well as additional restructuring
costs in Retail Benelux and Other Challengers & Growth Markets.
These initiatives are implemented over a period of several years and the estimate of the reorganisation
provisions is inherently uncertain.
Reference is made to Note 43 ‘Legal proceedings’ for developments in litigation provisions.
The additions to the Other provisions in 2021 include an EUR 180 million provision for the
compensation of Dutch retail customers for past interest charges that did not sufficiently track market
rates.
In 2021, Other provisions includes provisions of EUR 34 million (2020: EUR 17 million) that relate to
credit replacement facilities and EUR 114 million (2020: EUR 75 million) that relate to non-credit
replacement off balance facilities.
As at 31 December 2021, amounts expected to be settled within twelve months in Other provisions
amount to EUR 396 million (2020: EUR 113 million). The amounts included are based on best estimates
with regard to amounts and timing of cash flows required to settle the obligation.
Additions to provisions and unused amounts released are presented in Note 28 ‘Other operating
expenses’.
16 Other liabilities
Other liabilities by type
In EUR million
2021
2020
Net defined benefit liability
227
350
Other post-employment benefits
72
83
Other staff-related liabilities
612
490
Other taxation and social security contributions
409
435
Rents received in advance
19
15
Costs payable
2,015
2,017
Amounts to be settled
5,082
4,877
Lease liabilities
1,220
1,339
Other
3,038
1,998
12,695
11,605
Disclosures in respect of Net defined benefit liabilities are provided in Note 34 ‘Pension and other post-
employment benefits’.
Other staff-related liabilities includes vacation leave provisions, variable compensation provisions,
jubilee provisions, and disability/illness provisions.
Amounts to be settled includes primarily transactions not settled at the balance sheet date. The
nature of these transactions is short term and these are expected to settle shortly after the closing
date of the balance sheet.
>
17 Debt securities in issue
ING Bank Annual Report 2021
218
Lease liabilities relate to right-of-use assets. Disclosures in respect to right-of-use assets are provided
in Note 9 ‘Property and Equipment’.
The total cash outflow for leases in 2021 was EUR 301 million (2020: EUR 273 million).
The line other relates mainly to balances on margin accounts or amounts payable to customers.
17 Debt securities in issue
Debt securities in issue relates to debentures and other issued debt securities with either fixed interest
rates or interest rates based on floating interest rate levels, such as certificates of deposit and
accepted bills issued by ING Bank, except for subordinated items. Debt securities in issue does not
include debt securities presented as Financial liabilities at fair value through profit or loss. ING Bank
does not have debt securities that are issued on terms other than those available in the normal course
of business.
Debt securities in issue – maturities
In EUR million
2021
2020
Fixed rate debt securities
Within 1 year
31,785
18,315
More than 1 year but less than 2 years
3,135
5,667
More than 2 years but less than 3 years
1,235
3,158
More than 3 years but less than 4 years
1,729
1,222
More than 4 years but less than 5 years
2,914
1,730
More than 5 years
13,133
13,807
Total fixed rate debt securities
53,930
43,898
Floating rate debt securities
Within 1 year
2,266
8,699
More than 1 year but less than 2 years
130
1,998
More than 2 years but less than 3 years
137
155
More than 3 years but less than 4 years
194
138
More than 4 years but less than 5 years
192
91
More than 5 years
593
593
Total floating rate debt securities
3,513
11,675
Total debt securities
57,443
55,573
In 2021 Debt securities in issue increased by EUR 1.9 billion because of liquidity and funding needs.
Reference is made to Note 30 ‘Changes in liabilities arising from financing activities’ for further
information on issuances and redemptions.
>
18 Subordinated loans
ING Bank Annual Report 2021
219
18 Subordinated loans
Subordinated loans
In EUR million
2021
2020
Subordinated loans
16,719
15,897
16,719
15,897
Subordinated loans relate to subordinated capital debentures and private loans which may be included
in the calculation of the capital ratio.
Subordinated loans include loans that qualify as Tier 1 and Tier 2 (CRD IV eligible) capital. Subordinated
loans of EUR 15.9 billion (2020 : EUR 13.1 billion) have been placed with ING Bank N.V. by ING Groep N.V.
In 2021 ING Groep N.V. issued in June EUR 500 million 0.875 % Fixed Rate Subordinated Tier 2 Green
Notes, in September USD 1 billion 3.875% and USD 1 billion 4.250% Perpetual Additional Tier 1
Contingent Convertible Capital Securities and in November EUR 1 billion 1.000% Fixed Rate
Subordinated Tier 2 Notes.
These issuances were subsequently placed by ING Groep N.V. with ING Bank N.V. against the same
conditions.
In 2021 ING Bank N.V. redeemed in February EUR 1.5 billion 3.625% Fixed Rate Subordinated Tier 2
notes on the first call date. ING Bank N.V. redeemed with ING Groep N.V. EUR 563 million and EUR 432
million Perpetual Debt Securities in September.
Reference is made to Note 30 ‘Changes in liabilities arising from financing activities’ for further
information on issuances and redemptions and to the Parent company financial statements, Note 17
‘Subordinated loans’ for additional information.
The average interest rate on subordinated loans is 3.74% (2020: 3.73%). The interest expense during
the year 2021 was EUR 573 million (2020: EUR 613 million).
19 Equity
Total equity
In EUR million
2021
2020
2019
Share capital and share premium
525
525
525
16,542
16,542
16,542
17,067
17,067
17,067
Other reserves
1,282
1,181
1,580
92
296
299
-153
1,450
1,208
-80
-117
-114
208
221
253
-212
-307
-336
-3,483
-3,636
-2,079
3,416
3,246
3,189
1,069
2,334
4,000
Retained earnings
29,778
28,273
25,857
Shareholders’ equity (parent)
47,914
47,675
46,924
Non-controlling interests
736
1,022
893
Total equity
48,650
48,697
47,817
The following components of equity, as included in Other reserves, cannot be freely distributed:
Revaluation reserve, Net defined benefit asset/liability remeasurement reserve, Currency translation
reserve, Share of associates and joint ventures reserve and Other reserves including the part related to
the former Stichting Regio Bank and the former Stichting Vakbondsspaarbank SPN.
>
19 Equity
ING Bank Annual Report 2021
220
Share capital and share premium
Share capital
Share capital
Ordinary shares (par value EUR 1.13)
Number x 1,000
Amount
2021
2020
2019
2021
2020
2019
Authorised share capital
1,600,000
1,600,000
1,600,000
1,808
1,808
1,808
Unissued share capital
1,134,965
1,134,965
1,134,965
1,283
1,283
1,283
Issued share capital
465,035
465,035
465,035
525
525
525
No change occurred in the issued share capital and share premium in 2021, 2020 and 2019.
All ordinary shares are in registered form. No share certificates have been issued. Ordinary shares may
be transferred by means of a deed of transfer, subject to the approval of the general meeting of ING
Bank. The par value of ordinary shares is EUR 1.13.
The authorised ordinary share capital of ING Bank N.V. consists of 1,600 million shares of which as at
31 December 2021, 465 million ordinary shares were issued and fully paid.
ING Bank has 50 authorised preference shares with par value of EUR 1.13 per preference share. As at
31 December 2021, 7 preference shares were issued and fully paid (2020: 7 preference shares; 2019: 7
preference shares) amounting to EUR 8 (2020: EUR 8 and 2019: EUR 8).
Dividend restrictions
ING Bank N.V. and its Dutch group companies are subject to legal restrictions regarding the amount of
dividends they can pay to their shareholders. The Dutch Civil Code contains the restriction that
dividends can only be paid up to an amount equal to the excess of the company’s own funds over the
sum of the paid-up capital and reserves required by law. Additionally, certain Bank companies are
subject to restrictions on the amount of funds they may transfer in the form of dividends or otherwise
to the parent company.
Furthermore, in addition to the restrictions in respect of minimum capital requirements that are
imposed by industry regulators in the countries in which subsidiaries operate, other limitations exist in
certain countries.
>
19 Equity
ING Bank Annual Report 2021
221
Other reserves
Revaluation reserves
Changes in revaluation reserve
Equity securities at FVOCI
Debt instruments at FVOCI
Cash flow hedge
Credit liability
Property in own use
In EUR million
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
Opening balance
1,181
1,580
1,914
296
299
365
1,450
1,208
604
-117
-114
8
221
253
202
Changes in credit liability reserve
37
-19
-116
Unrealised revaluations
94
-337
137
-164
31
-33
-1,603
242
604
-2
-7
60
Realised gains/losses transferred to the statement of profit or loss
-40
-33
-33
Realised revaluations transferred to retained earnings
6
-1
-472
16
-6
-11
-26
-9
Other changes
-62
Closing balance
1,282
1,181
1,580
92
296
299
-153
1,450
1,208
-80
-117
-114
208
221
253
Equity securities at FVOCI
In 2021, the unrealised revaluation of EUR 94 million includes revaluation of shares in Bank of Beijing
for EUR 38 million.
In 2020, the unrealised revaluations of EUR -337 million includes revaluation of shares in Bank of Beijing
for EUR -339 million. Other changes of EUR -62 million is related to prior years revaluations of Visa
shares, which are reclassified to Financial assets at fair value through profit or loss and for which the
unrealised revaluation up until 2019 is transferred to retained earnings. Reference is made to note 5
‘Financial assets at fair value through other comprehensive income’.
In 2019, the unrealised revaluations of EUR 137 million are due to the revaluation of shares in Bank of
Beijing EUR 35 million and shares in EquensWorldLine EUR 101 million. The EUR -472 million transfer of
revaluation reserve to retained earnings is mainly related to the sale of shares in Kotak Mahindra Bank
EUR -320 million and EquensWorldLine EUR -149 million.
Cash flow hedge
ING mainly hedges floating rate lending with interest rate swaps. Due to an increase in yield curves in
2021 the interest rate swaps had a negative revaluation of EUR -1,603 million which is recognised in
the cash flow hedge reserve.
Net defined benefit asset/liability remeasurement reserve
Reference is made to Note 34 ‘Pension and other post-employment benefits’.
>
19 Equity
ING Bank Annual Report 2021
222
Currency translation reserve
Changes in currency translation reserve
In EUR million
2021
2020
2019
Opening balance
-3,636
-2,079
-2,068
Unrealised revaluations
-61
106
-134
Realised gains/losses transferred to the statement of profit or loss
-1
-128
Exchange rate differences
214
-1,662
251
Closing balance
-3,483
-3,636
-2,079
Unrealised revaluations relates to changes in the value of hedging instruments that are designated as
net investment hedges. The hedging strategy is to hedge the CET1 ratio. The net increase of unrealized
revaluations and Exchange rate differences of EUR 153 million is related to several currencies including
USD (EUR 456 million), TRY (EUR -466 million) GBP (EUR 86 million), CHF (EUR 32 million), CNY (EUR 27
million) and other currencies (EUR 18 million).
In 2019 realised gains/losses transferred to the statement of profit or loss is related to the sale of
shares in Kotak Mahindra Bank (EUR -119 million) and the effect of the merger transaction of TTB (EUR
-9 million).
Share of associates and joint ventures and other reserves
Changes in share of associates, joint ventures and other reserves
In EUR million
2021
2020
2019
Opening balance
3,246
3,189
2,872
Result for the year
191
94
180
Transfer to/from retained earnings
-21
-37
137
Closing balance
3,416
3,246
3,189
The Share of associates, joint ventures and other reserves includes non-distributable profits from
associates and joint ventures of EUR 738 million (2020: EUR 644 million). Other reserves includes a
statutory reserve of EUR 2,103 million (2020: EUR 1,912 million) related to the former Stichting Regio
Bank and the former Stichting Vakbondsspaarbank SPN and a legal reserve of EUR 573 million (2020:
EUR 688 million) related to own developed software.
Retained earnings
Changes in retained earnings
In EUR million
2021
2020
2019
Opening balance
28,273
25,857
23,602
Transfer to/from other reserves
26
108
350
Result for the year
4,579
2,321
4,663
Dividend and other distributions
-3,125
-43
-2,819
Employee stock options and share plans
28
23
39
Changes in composition of the group and other changes
-3
7
22
Closing balance
29,778
28,273
25,857
Dividend
In 2021, a cash dividend of EUR 3,125 million (2020: EUR 43 million and 2019: EUR 2,819 million) was
paid to the shareholder of ING Bank.
Restrictions with respect to dividend and repayment of capital
The following equity components cannot be freely distributed: Revaluation reserves, Net defined
benefit asset/liability remeasurement reserve, Currency translation reserve, Share of associates and
joint ventures reserve and Other reserves including the part related to the former Stichting Regio Bank
and the former Stichting Vakbondsspaarbank SPN.
As at 31 December 2021, an amount of EUR 2,103 million (2020: EUR 1,912 million) related to the
former Stichting Regio Bank and the former Stichting Vakbondsspaarbank SPN is included.
ING Bank N.V. is subject to legal restrictions regarding the amount of dividends it can pay to its
shareholder. Pursuant to the Dutch Civil Code, dividends can only be paid up to an
amount equal to the excess of the company’s own funds over the sum of the paid-up capital and
reserves required by law.
>
19 Equity
ING Bank Annual Report 2021
223
Moreover, ING Bank N.V.’s ability to pay dividends is dependent on the dividend payment ability of its
subsidiaries, associates and joint ventures. ING Bank N.V. is legally required to create a non-
distributable reserve insofar as profits of its subsidiaries, associates and joint ventures are subject to
dividend payment restrictions which apply to those subsidiaries, associates and joint ventures
themselves.
Non distributable reserves, determined in accordance with the financial reporting requirements
included in Part 9 of Book 2 of the Dutch Civil Code, from ING Bank’s subsidiaries, associates and joint
amounts to EUR 8,205 million (2020: 9,829 million).
Furthermore there are restrictions to the ability of subsidiaries, associates and joint ventures to
distribute reserves to ING Bank N.V. as a result of minimum capital requirements that are imposed by
industry regulators in the countries in which the subsidiaries operate.
In addition to the legal and regulatory restrictions on distributing dividends from subsidiaries,
associates and joint ventures to ING Bank N.V. there are various other considerations and limitations
that are taken into account in determining the appropriate levels of equity in the Bank’s subsidiaries,
associates and joint ventures. These considerations and limitations include, but are not restricted to,
minimum capital requirements that are imposed by industry regulators in the countries in which the
subsidiaries, associates and joint ventures operate, or other limitations which may exist in certain
countries and may or may not be temporary in nature. It is not possible to disclose a reliable
quantification of these limitations. For an overview of the minimal capital requirements of ING Bank
refer to the ‘Capital Management’ section.
Without prejudice to the authority of the Executive Board to allocate profits to reserves and to the fact
that the shares are the most junior securities issued by ING Bank N.V., no specific dividend payment
restrictions with respect to the shares exist.
Furthermore, ING Bank N.V. is subject to legal restrictions with respect to repayment of capital to Its
shareholder. Pursuant to the Dutch Civil Code, capital may only be repaid if none of ING Bank N.V.’s
creditors opposes such a repayment within two months following the announcement of a
resolution to that effect.
>
20 Net interest income
ING Bank Annual Report 2021
224
Notes to the Consolidated statement of profit or loss
20 Net interest income
Net interest income
in EUR million
2021
2020
2019
2021
2020
2019
Interest income on loans
13,979
15,766
19,322
Interest expense on deposits from banks
109
177
361
Interest income on financial assets at fair value through OCI
346
512
615
Interest expense on customer deposits
1,999
2,022
3,559
Interest income on debt securities at amortised cost
468
508
673
Interest expense on debt securities in issue
597
1,145
1,767
Interest income on non-trading derivatives (hedge accounting)
2,361
3,392
4,318
Interest expense on subordinated loans
573
613
654
Negative interest on liabilities
1,502
686
428
Negative interest on assets
572
353
349
Total interest income using effective interest rate method
18,657
20,865
25,355
Interest expense on non-trading derivatives (hedge accounting)
1,700
3,198
4,615
Total interest expense using effective interest rate method
5,550
7,507
11,305
Interest income on financial assets at fair value through profit or loss
435
658
1,897
Interest income on non-trading derivatives (no hedge accounting)
2,025
1,156
1,183
Interest expense on financial liabilities at fair value through profit or loss
304
514
1,695
Interest income other
14
31
29
Interest expense on non-trading derivatives (no hedge accounting)
1,605
1,029
1,312
Total other interest income
2,474
1,846
3,110
Interest expense on lease liabilities
14
18
25
Total interest income
21,131
22,711
28,465
Interest expense other
43
42
53
Total other interest expense
1,966
1,603
3,085
Total interest expense
7,516
9,110
14,391
Net interest income
13,615
13,600
14,074
Total net interest income amounts to EUR 13,615 million (2020: EUR 13,600 million). Higher interest
results were recorded on lending products (driven by a higher total lending margin). These increases
were offset by lower revenues on current accounts and savings, reflecting continued liability margin
pressure.
Negative interest on liabilities in 2021, amounting to EUR 1,502 million (2020: EUR 686 million) includes
ECB funding rate benefit from the TLTRO III programme of EUR 808 million (2020: EUR 164 million). This
amount includes EUR 325 million of unconditional interest benefit and EUR 483 million of conditional
interest benefit which depends on meeting the lending growth targets (2020: the full amount of EUR
164 million represented unconditional interest benefit).
As at 31 December 2020, ING Bank did not have a reasonable expectation of meeting the lending
growth targets for the first special reference period (1 March 2020 to 31 March 2021), hence ING Bank
did not accrue for the conditional benefit and recognised unconditional interest benefit at -50 bps in
2020. In the first quarter of 2021, ING Bank met the lending growth targets for the first special
reference period (1 March 2020 to 31 March 2021) and therefore the interest rate applicable under
TLTRO III during the period 24 June 2020 to 23 June 2021 changed from -50bps to -100bps. The effect
of the revised interest rate has been recognised in the statement of profit or loss (net interest income)
in 2021 including EUR 158 million related to the year 2020. Based on the developments in the eligible
asset base, ING Bank met the lending growth targets for the second special reference period (1 October
2020 to 31 December 2021), therefore the funding rate remains at -100 bps for the period 24 June
2021 – 23 June 2022.
>
21 Net fee and commission income
ING Bank Annual Report 2021
225
21 Net fee and commission income
Net fee and commission income
in EUR million
2021
2020
2019
Fee and commission income
Payment Services
1,661
1,566
1,638
Securities business
853
700
485
Insurance and other broking
734
705
674
Portfolio management
617
525
490
Lending business
477
368
411
Financial guarantees and other commitments
458
364
338
Other
204
286
404
Total fee and commission income
5,004
4,514
4,439
Fee and commission expenses
Payment Services
563
611
669
Securities business
164
133
127
Distribution of products (Externally)
591
548
504
Other
169
211
272
Total fee and commission expenses
1,487
1,503
1,571
Net fee and commission income
3,517
3,011
2,868
ING Bank changed the presentation of net fee and commission income as of 2021 to better align with
internal management and monitoring. Comparative figures for 2020 and 2019 have been updated
accordingly. The reclassifications do not affect the total amount of Net Fee and Commission Income.
Payment services fees are earned for providing services for deposit accounts and cards, cash
management and transaction processing including interchange. Securities fees and commissions are
fees for securities brokerage and securities underwriting. Portfolio management fees include fees
earned for asset management activities, fiduciary and related activities in which ING holds or invests
assets on behalf of its customers. Fees and commissions from Lending business include income earned
for lending advisory, origination, underwriting and loan commitments which are not part of the
effective interest rate. Financial guarantees and other commitments fees and commissions are earned
from bank guarantees, letters of credit and other trade finance related products, factoring and leasing.
Fees paid for distribution of products are all fees paid for the distribution of ING’s products and services
through external providers.
All of ING’s net fee and commission income are in scope of IFRS 15 ‘Revenue from Contracts with
Customers’. Reference is made to Note 32 ‘Segments’ which includes net fee and commission income,
as reported to the Management Board Banking, disaggregated by line of business and by geographical
segment.
22 Valuation results and net trading income
Valuation results and net trading income
in EUR million
2021
2020
2019
Securities trading results
787
-500
974
Derivatives trading results
-554
701
-998
Other trading results
84
72
117
Change in fair value of derivatives relating to
– fair value hedges
-85
246
-305
– cash flow hedges (ineffective portion)
1
-5
47
– other non-trading derivatives
-53
222
105
Change in fair value of assets and liabilities (hedged items)
113
-183
382
Valuation results on assets and liabilities designated at FVPL (excluding trading)
-12
-121
-359
Foreign exchange transactions results
566
422
801
847
852
765
Securities trading results includes the results of market making in instruments such as government
securities, equity securities, corporate debt securities, money-market instruments. Derivatives trading
results includes the results of derivatives such as interest rate swaps, options, futures, and forward
contracts.
Trading gains and losses relating to trading securities still held as at 31 December 2021 amount to EUR
-268 million (2020: EUR -690 million; 2019: EUR -82 million).
The majority of the risks involved in security and currency trading is economically hedged with
derivatives. The securities trading results are partly offset by results on these derivatives. The result of
these derivatives is included in Derivatives trading results.
>
23 Investment income
ING Bank Annual Report 2021
226
Other trading results include the results of trading loans and funds entrusted.
Foreign exchange transactions results include gains and losses from spot and forward contracts,
options, futures, and translated foreign currency assets and liabilities. The result on currency trading is
included in foreign exchange transactions results.
Net trading income relates to trading assets and trading liabilities which include assets and liabilities
that are classified under IFRS as Trading but are closely related to servicing the needs of the clients of
ING. ING offers products that are traded on the financial markets to institutional clients, corporate
clients, and governments. ING Bank’s trading books are managed based on internal limits and
comprise a mix of products with results which could be offset. A significant part of the derivatives in the
trading portfolio are related to servicing corporate clients in their risk management to hedge for
example currency or interest rate exposures. From a risk perspective, the gross amount of trading
assets must be considered together with the gross amount of trading liabilities, which are presented
separately on the statement of financial position. However, IFRS does not always allow netting of these
positions in the statement of financial position. Reference is made to Note 4 ‘Financial assets at fair
value through profit or loss’ and Note 14 ‘Financial liabilities at fair value through profit or loss’ for
information on trading assets and trading liabilities respectively.
‘Valuation results and net trading income’ include the fair value movements on derivatives (used for
both hedge accounting and economically hedging exposures) as well as the changes in the fair value
of assets and liabilities included in hedging relationships as hedged items. Reference is made to Note
37 ‘Derivatives and hedge accounting’ for information on derivatives used for hedge accounting.
In general, the fair value movements are influenced by changes in the market conditions, such as stock
prices, credit spreads, interest rates and currency exchange rates. The Covid-19 pandemic is still
ongoing, but markets have recovered and stabilised further during 2021 and volatility has largely
returned to pre-pandemic levels.
Furthermore, derivatives trading results is also impacted by fair value movements arising from
changes in credit spreads (CVA and DVA), bid offer spreads, model risk and incremental cost of funding
on derivatives (FVA and CollVA). Spreads tightened in 2021 compared to 2020 and the fair value
changes decreased.
In 2021, Derivatives trading results include EUR 98 million CVA/DVA adjustments on trading derivatives
(2020: EUR 17 million; 2019: EUR 39 million).
‘Valuation results on assets and liabilities designated at fair value through profit or loss (excluding
trading)’ include fair value changes on financial assets and financial liabilities driven by changed
market conditions. Refer to Note 4 'Financial assets at fair value through profit or loss' and to Note 14
‘Financial liabilities at fair value through profit or loss’.
In addition, ‘Valuation results on assets and liabilities designated at fair value through profit or loss
(excluding trading)’ include fair value adjustments on own issued notes amounting to EUR 56 million
(2020: EUR 8 million; 2019: EUR -403 million).
Interest income from trading assets in 2021 amounted to EUR 13,737 million (2020: EUR 13,412
million; 2019: 15,187 million). Interest expense from trading liabilities in 2021 amounted to EUR 14,079
million (2020: EUR 13,052 million; 2019: 14,922 million).
23 Investment income
Investment income
in EUR million
2021
2020
2019
Dividend income
122
107
115
Realised gains/losses on disposal of debt instruments measured at FVOCI
45
44
46
Income from and fair value gains/losses on investment properties
-0
1
27
Investment income
167
152
188
In 2021, 2020 and 2019 dividend income mainly consists of dividend received from ING’s equity stake
in Bank of Beijing.
>
24 Result on disposal of group companies
ING Bank Annual Report 2021
227
24 Result on disposal of group companies
Result on disposal of group companies
in EUR million
2021
2020
2019
ING Austria (Retail Banking activities)
-26
Makelaarsland
-3
Cel Data Services
-3
ING Lease Italy
-2
ING Mauritius
119
-29
-3
117
At 12 July 2021, ING announced that it has reached an agreement to transfer ING’s Retail Banking
operations in Austria to bank99. Per 1 December 2021 ING completed the transaction and realized a loss on
settlement of
EUR 26 million.
ING and the board of Makelaarsland agreed during 2021 to continue Makelaarsland independently.
The negative result on disposal of group companies from this management buyout amounted to a loss
of approximately EUR 3 million.
In 2020 ING realized a EUR 3 million loss on the sale of Cel Data Services N.V. against net assets
disposed of EUR 4 million. Cel Data Services N.V. is active in ATM services including cash loading and ICT
managed services for ING’s Belgian retail branches, other Belgian financial institutions and retail shops.
In 2019 the Result on disposal of group companies is mainly impacted by the sale of ING’s stake in
Kotak Mahindra Bank by ING Mauritius during 1Q 2019. ING Mauritius is in the process of being
liquidated and consequently, the release of the currency translation reserve (CTA) and the release of
the Net Investment Foreign Entities reserve resulted in a one-off gain of EUR 119 million.
25 Net result on derecognition of financial assets measured at amortised
cost
Net result on derecognition of financial assets measured at amortised cost
in EUR million
2021
2020
2019
Loans at amortised cost
1
4
13
Securities at amortised cost
-1
185
24
Net result on derecognition of financial assets measured at amortised cost
-0
189
38
In 2020, driven by exceptional market circumstances in the first quarter, ING realised a profit on the
sale of debt securities at amortised cost of EUR 186 million.
26 Other income
In 2021, Other income of EUR 230 million (2020: EUR 12 million; 2019: EUR 213 million) includes the
recognition of EUR 72 million relating to a better than expected recovery of the insolvency of a
financial institution in the Netherlands and EUR 34 million proceeds of the agreement with
Raiffeisenbank due to the withdrawal from the retail banking market in the Czech Republic.
Furthermore, it includes the positive recovery of defaulted receivables of EUR 25 million (2020: EUR 27
million).
In 2020, Other income is impacted by positive and negative non-recurring results, including a loss of
EUR 58 million following a settlement with the Australian Tax Authorities related to former insurance
activities, that were fully indemnified by NN Group. This was offset by a tax profit for the same amount
resulting from the release of the provision for uncertain tax positions in current tax liabilities.
In 2019, Other income also included the recognition of EUR 79 million receivable related to the
insolvency of a financial institution.
>
27 Staff Expenses
ING Bank Annual Report 2021
228
27 Staff Expenses
Staff expenses
in EUR million
2021
2020
2019
Salaries
4,011
3,751
3,572
Pension costs and other staff-related benefit costs
408
395
366
Social security costs
563
538
530
Share-based compensation arrangements
28
23
39
External employees
699
881
974
Education
47
43
64
Other staff costs
182
186
208
5,938
5,817
5,753
Share-based compensation arrangements include EUR 29 million (2020: EUR 17 million; 2019: EUR 38
million) relating to equity-settled share-based payment arrangements and EUR 2 million (2020: EUR 2
million; 2019: EUR 3 million) relating to cash-settled share-based payment arrangements.
Number of employees
Netherlands
Rest of the world
Total
2021
2020
2019
2021
2020
2019
2021
2020
2019
Total average number
of internal employees at full
time equivalent basis
15,138
15,201
14,415
42,523
40,701
39,016
57,660
55,901
53,431
Remuneration of senior management, Management Board Banking and Supervisory Board
Reference is made to Note 47 ‘Related parties’.
Stock option and share plans
ING Bank N.V. has granted option rights on ING Groep N.V. shares and conditional rights on shares to a
number of senior executives (members of the Management Board Banking, general managers and
other officers nominated by the Management Board Banking), and to a considerable number of
employees of ING Bank. The purpose of the option and share schemes, apart from promoting a lasting
growth of ING Bank, is to attract, retain and motivate senior executives and staff.
In 2010, the Group Executive Board has decided not to continue the option scheme as from 2011.
These option schemes have run off during the financial year 2020.
The obligations with regard to the existing stock option plan and the share plans is funded by newly
issued shares at the discretion of ING Group.
ING grants four types of share awards, deferred shares, performance shares and upfront shares, which
form part of the variable remuneration offering via the Long term Sustainable Performance Plan (LSPP),
as well as fixed shares. The entitlement to the LSPP share awards is granted conditionally. If the
participant remains in employment for an uninterrupted period between the grant date and the
vesting date, the entitlement becomes unconditional, with the exception of the upfront shares which
are immediately vested upon grant. Additionally, a condition before vesting was applied to
performance shares until 2018. As of 2019, this performance condition is no longer applicable. Upfront
and deferred shares awarded to the Management Board members of ING Bank as well as identified
staff, have a retention obligation that must be adhered to upon vesting, a minimum retention of 12
months applies. ING has the authority to apply a hold back to awarded but unvested shares and a
clawback to vested shares.
In addition to the LSPP share awards, ING also pays a number of senior employees fixed shares. The
number of shares are determined each month from a cash value that forms part of the employee fixed
remuneration. The shares are immediately vested to the employee, but have a minimum holding
requirement of two years before the employee can dispose of the shares. The fixed shares are not
subject to holdback or clawback.
The share awards granted in 2021 relate to the performance year 2020. In 2021, 123,750 share
awards (2020: 186,176; 2019: 2,837) were granted to the Management Board Banking. To senior
management and other employees 3,267,372 share awards (2020: 3,678,775; 2019: 2,167,817) were
granted.
>
28 Other operating expenses
ING Bank Annual Report 2021
229
Changes in share awards
Share awards (in numbers)
Weighted average grant date
fair values (in euros)
2021
2020
2019
2021
2020
2019
Opening balance
3,876,206
3,855,035
5,852,986
7.25
11.14
11.62
Granted
3,391,122
3,864,951
2,170,654
9.69
5.12
10.04
Performance effect
11.12
Vested
-3,459,163
-3,690,340
-3,945,020
9.25
9.01
11.23
Forfeited
-135,506
-153,440
-223,585
7.61
8.55
11.39
Closing balance
3,672,659
3,876,206
3,855,035
7.60
7.25
11.14
The fair value of share awards granted is recognised as an expense under Staff expenses and is
allocated over the vesting period of the share awards. The fair value calculation takes into account the
current stock prices, expected volatilities and the dividend yield of ING shares.
As at 31 December 2021, total unrecognised compensation costs related to share awards amount to
EUR 13 million (2020: EUR 10 million; 2019: EUR 15 million). These costs are expected to be recognised
over a weighted average period of 1.7 years (2020: 1.6 years; 2019: 1.4 years).
Other operating expenses
in EUR million
2021
2020
2019
Regulatory costs
1,265
1,105
1,021
Audit and non-audit services
34
29
30
IT related expenses
781
812
759
Advertising and public relations
305
335
391
External advisory fees
297
413
410
Office expenses
280
320
325
Travel and accommodation expenses
52
68
140
Contributions and subscriptions
112
109
108
Postal charges
38
38
46
Depreciation of property and equipment
573
578
551
Amortisation of intangible assets
261
251
237
(Reversals of) impairments of tangible assets
26
43
-3
(Reversals of) impairments of intangible assets
95
515
62
Addition to / (unused amounts reversed of) provision for reorganisations
214
149
6
Addition to / (unused amounts reversed of) other provisions
254
39
29
Other
669
541
477
5,257
5,344
4,590
Reference is made to Note 9 for (reversals of) impairments of property and equipment and Note 10 for
(reversals of) impairments of intangible assets.
Regulatory costs
Regulatory costs represent contributions to the Deposit Guarantee Schemes (DGS), The Single
Resolution Fund (SRF), local bank taxes and local resolution funds. Included in Regulatory costs for
2021, are contributions to DGS of EUR 435 million (2020: EUR 413 million; 2019: EUR 362 million) mainly
related to the Netherlands, Germany, Belgium, and Poland and contributions to the SRF and local
resolution funds of EUR 308 million (2020: EUR 277 million; 2019: EUR 239 million). In 2021 local bank
taxes increased by EUR 107 million from EUR 414 million in 2020 to EUR 522 million (2019: EUR 420
million).
>
29 Net cash flow from operating activities
ING Bank Annual Report 2021
230
Audit and non-audit services
Audit and non-audit services include fees for services provided by the Bank’s auditors. The increase of
audit fees in 2021 follow from the re-appointment of the current auditor that also triggered a revision
of the audit fees.
Addition to / (unused amounts reversed of) provision for reorganisations
For further information reference is made to Note 15 ‘Provisions’.
Addition to / (unused amounts reversed of) other provisions
For further information reference is made to Note 15 ‘Provisions’ and Note 43 ‘Legal proceedings’.
29 Net cash flow from operating activities
The table below shows a detailed overview of the net cash flow from operating activities.
Cash flows from operating activities
in EUR million
2021
2020
2019
Cash flows from operating activities
Result before tax
6,774
3,810
6,831
Adjusted for:
- Depreciation and amortisation
834
829
789
- Addition to loan loss provisions
516
2,675
1,120
- Other non-cash items included in result before tax
413
1,259
64
Taxation paid
-1,871
-1,735
-2,369
Changes in:
– Loans and advances to banks, not available on demand
262
10,032
-1,336
– Deposits from banks, not payable on demand
8,438
43,044
-2,574
Net change in loans and advances to/ from banks, not available/
payable on demand
8,700
53,076
-3,909
– Trading assets
-29
-2,095
606
– Trading liabilities
-5,596
4,667
-3,173
Net change in Trading assets and Trading liabilities
-5,624
2,571
-2,567
Loans and advances to customers
-27,772
2,888
-16,696
Customer deposits
18,339
40,576
24,828
– Non–trading derivatives
290
-1,420
1,047
– Assets designated at fair value through profit or loss
-1,905
-1,371
-7
– Assets mandatorily at fair value through profit or loss
1,650
-1,963
23,343
– Other assets
-121
1,092
1,359
– Other financial liabilities at fair value through profit or loss
-6,795
1,190
-12,211
– Provisions and other liabilities
-1,298
-298
-2,068
Other
-8,179
-2,770
11,463
Net cash flow from/(used in) operating activities
-7,869
103,179
19,553
>
30 Changes in liabilities arising from financing activities
ING Bank Annual Report 2021
231
30 Changes in liabilities arising from financing activities
Changes in liabilities arising from financing activities
Debt securities in
issue
Subordinated Loans
Lease liabilities
Total Liabilities from
financing activities
in EUR million
2021
2020
2021
2020
2021
2020
2021
2020
Opening balance
55,573
93,721
15,897
16,515
1,339
1,507
72,809
111,742
Cashflows:
Additions
77,298
63,269
3,169
2,138
80,467
65,407
Redemptions / Disposals
-76,150
-99,212
-2,538
-2,608
-301
-273
-78,989
-102,093
Non cash changes:
Amortisation
-22
52
8
-14
14
18
56
Other
-120
-98
-27
-12
161
118
14
8
Changes in unrealised
revaluations
-962
198
-414
397
-1,376
595
Foreign exchange movement
1,827
-2,357
624
-519
6
-31
2,456
-2,907
Closing balance
57,443
55,573
16,719
15,897
1,220
1,339
75,382
72,809
31 Cash and cash equivalents
Cash and cash equivalents
in EUR million
2021
2020
2019
Treasury bills and other eligible bills
23
0
43
Deposits from banks/Loans and advances to banks
1,121
477
784
Cash and balances with central banks
106,520
111,087
53,202
Cash and cash equivalents at end of year
107,664
111,565
54,029
Treasury bills and other eligible bills included in cash and cash equivalents
in EUR million
2021
2020
2019
Treasury bills and other eligible bills included in securities at AC
23
43
23
0
43
in EUR million
2021
2020
2019
Included in cash and cash equivalents:
– Deposits from banks
-7,059
-8,788
-8,519
– Loans and advances to banks
8,180
9,265
9,303
1,121
477
784
Not included in cash and cash equivalents:
– Deposits from banks
-78,033
-69,310
-26,307
– Loans and advances to banks
15,411
16,098
25,830
-62,621
-53,212
-478
Total as included in the statement of financial position:
– Deposits from banks
-85,092
-78,098
-34,826
– Loans and advances to banks
23,591
25,363
35,133
-61,501
-52,734
307
Cash and cash equivalents includes deposits from banks and loans and advances to banks that are on
demand.
Included in Cash and cash equivalents, are minimum mandatory reserve deposits to be held with
various central banks. Reference is made to Note 40 ‘Transfer of financial assets, assets pledged and
received as collateral’ for restrictions on Cash and balances with central banks.
>
32 Segments
ING Bank Annual Report 2021
232
Segment reporting
32 Segments
ING Bank’s segments are based on the internal reporting structure by lines of business.
The Management Board Banking of ING Bank (Chief Operating Decision Maker (CODM)) set the
performance targets, approve and monitor the budgets prepared by the business lines. Business lines
formulate strategic, commercial, and financial plans in conformity with the strategy and performance
targets set by the CODM.
Recognition and measurement of segment results are in line with the accounting policies as described
in Note 1 ‘Basis of preparation and significant accounting policies’. The results for the period for each
reportable segment are after intercompany and intersegment eliminations and are those reviewed by
the CODM to assess performance of the segments. Corporate expenses are allocated to business lines
based on time spent by head office personnel, the relative number of staff, or on the basis of income,
expenses and/or assets of the segment.
The following table specifies the segments by line of business and main sources of income of each of
the segments:
Specification of the main sources of income of each of the segments by line of business
Segments by line of business
Main source of income
Retail Netherlands
(Market Leaders)
Income from retail and private banking activities in the Netherlands,
including the SME and mid-corporate segments, and the Real Estate Finance
portfolio related to Dutch domestic mid-corporates. The main products
offered are current and savings accounts, business lending, mortgages and
other consumer lending in the Netherlands.
Retail Belgium
(Market Leaders)
Income from retail and private banking activities in Belgium (including
Luxembourg), including the SME and mid-corporate segments. The main
products offered are similar to those in the Netherlands.
Retail Germany
(Challengers and Growth Markets)
Income from retail and private banking activities in Germany (including
Austria). The main products offered are current and savings accounts,
mortgages and other customer lending.
Retail Other
(Challengers and Growth Markets)
Income from retail banking activities in the rest of the world, including the
SME and mid-corporate segments in specific countries. The main products
offered are similar to those in the Netherlands.
Wholesale Banking
Income from wholesale banking activities. The main products are: lending,
debt capital markets, working capital solutions, export finance, daily banking
solutions, treasury and risk solutions, and corporate finance.
Specification of geographical split of the segments
Geographical split of the segments
Main countries
The Netherlands
Belgium
Including Luxembourg
Germany
Including Austria
Other Challengers
Australia, Czech Republic, France, Italy, Spain, Portugal, Other
Growth Markets
Poland, Romania, Turkey, Philippines and Asian stakes
Wholesale Banking Rest of World
UK, Americas, Asia and other countries in Central and Eastern Europe
Other
Corporate Line
ING Bank monitors and evaluates the performance of ING Bank at a consolidated level and by
segment. The Management Board Banking consider this to be relevant to an understanding of the
Bank’s financial performance, because it allows investors to understand the primary method used by
management to evaluate the Bank’s operating performance and make decisions about allocating
resources.
>
32 Segments
ING Bank Annual Report 2021
233
ING Bank reconciles the total segment results to the total result using Corporate Line. The Corporate
Line is a reflection of capital management activities and certain income and expenses that are not
allocated to the banking businesses, including the recognition of value-added tax (VAT) refunds in the
Netherlands (recorded under expenses). In 2021, income was supported by a EUR 143 million
conditional TLTRO III benefit and the recognition of a EUR 72 million receivable related to the insolvency
of a financial institution, while expenses included EUR 87 million of regulatory costs due to an
incidental 50% increase in the Dutch bank tax as well as a significantly lower VAT refund compared
with the previous year. In 2020, net interest income on the Corporate Line sharply declined, mainly due
to lower interest results from foreign currency hedging due to lower interest rate differentials. In 2019,
a EUR 119 million gain from the release of a currency translation reserve following the sale of ING’s
stake in Kotak Mahindra Bank was included, and the recognition of a EUR 79 million receivable related
to the insolvency of a financial institution (both recorded under income). Furthermore, the Corporate
Line includes the isolated legacy costs (mainly negative interest results) caused by the replacement of
short-term funding with long-term funding during 2013 and 2014. ING Group applies a system of
capital charging for its banking operations in order to create a comparable basis for the results of
business units globally, irrespective of the business units’ book equity and the currency they operate
in.
The information presented in this note is in line with the information presented to the Management
Board Banking of ING Bank.
This note does not provide information on the revenue specified to each product or service as this is
not reported internally and is therefore not readily available.
>
32 Segments
ING Bank Annual Report 2021
234
Segments by line of business
12 month period
2021
2020
2019
in EUR million
Retail
Nether-
lands
Retail
Belgium
Retail
Ger-
many
1
Retail
Other
1
Whole-
sale
Banking
Corporat
e Line
Total
Retail
Nether-
lands
Retail
Belgium
Retail
Ger-
many
Retail
Other
Whole-
sale
Banking
Corporat
e Line
Total
Retail
Nether-
lands
Retail
Belgium
Retail
Ger-
many
Retail
Other
Whole-
sale
Banking
Corporat
e Line
Total
Income
– Net interest income
3,290
1,747
1,447
2,712
4,151
268
13,615
3,511
1,816
1,587
2,760
3,718
208
13,600
3,541
1,907
1,579
2,787
3,794
466
14,074
– Net fee and commission income
771
519
497
530
1,197
3
3,517
681
413
437
412
1,069
-1
3,011
674
374
268
423
1,135
-6
2,868
– Total investment and other income
201
209
65
361
568
-51
1,354
279
145
93
89
609
-180
1,034
290
161
138
298
369
95
1,352
Total income
4,262
2,475
2,009
3,602
5,916
221
18,485
4,471
2,373
2,117
3,261
5,396
27
17,645
4,505
2,442
1,985
3,509
5,298
556
18,295
Expenditure
– Operating expenses
2,403
1,667
1,174
2,452
2,926
574
11,195
2,236
1,737
1,110
2,469
3,218
390
11,160
2,210
1,609
1,080
2,210
2,937
298
10,343
– Addition to loan loss provisions
-76
225
49
202
117
516
157
514
57
593
1,351
3
2,675
91
186
-53
364
532
1,120
Total expenses
2,326
1,892
1,223
2,654
3,042
574
11,711
2,393
2,251
1,167
3,063
4,568
393
13,835
2,301
1,794
1,027
2,574
3,469
298
11,463
Result before taxation
1,936
583
786
949
2,874
-353
6,774
2,078
122
950
199
827
-366
3,810
2,204
647
957
935
1,830
258
6,831
Taxation
499
146
252
212
703
64
1,876
523
51
331
105
295
13
1,317
558
192
328
234
464
114
1,889
Non-controlling interests
4
98
26
128
-1
4
55
20
78
3
82
14
99
Net result IFRS
1,437
437
529
639
2,144
-417
4,770
1,556
71
615
39
512
-378
2,415
1,646
455
627
619
1,352
145
4,843
1 In the fourth quarter of 2021, ING exited from the retail banking markets in Austria and the Czech Republic.
>
32 Segments
ING Bank Annual Report 2021
235
Geographical split of the segments
12 month period
2021
2020
2019
in EUR million
Nether-
lands
Belgium
Ger-
many
1
Other
Challen
gers
1
Growth
markets
Whole-
sale
Banking
Rest of
World
Other
Total
Nether-
lands
Belgium
Ger-
many
Other
Challen
gers
Growth
markets
Whole-
sale
Banking
Rest of
World
Other
Total
Nether-
lands
Belgium
Ger-
many
Other
Challen
gers
Growth
markets
Whole-
sale
Banking
Rest of
World
Other
Total
Income
– Net interest income
4,068
2,109
1,943
1,889
1,532
1,805
269
13,615
4,178
2,116
2,090
1,781
1,578
1,654
204
13,600
4,213
2,233
2,122
1,808
1,610
1,633
457
14,074
– Net fee and
commission income
1,070
717
525
331
351
520
3
3,517
981
583
468
276
286
418
-1
3,011
994
533
315
283
304
446
-6
2,868
– Total investment and
other income
314
265
121
88
446
171
-51
1,354
398
196
127
27
215
243
-172
1,034
119
233
169
16
420
292
104
1,352
Total income
5,452
3,092
2,589
2,308
2,330
2,496
221
18,485
5,557
2,896
2,684
2,084
2,078
2,315
31
17,645
5,325
2,999
2,606
2,107
2,334
2,370
554
18,295
Expenditure
– Operating expenses
3,279
1,960
1,346
1,547
1,276
1,214
574
11,195
3,347
2,037
1,270
1,566
1,272
1,273
395
11,160
2,994
1,925
1,237
1,318
1,277
1,293
299
10,343
– Addition to loan loss
provisions
28
184
117
99
110
-21
516
421
589
267
298
412
684
3
2,675
146
268
-40
171
271
303
1,120
Total expenses
3,307
2,143
1,463
1,646
1,386
1,192
574
11,711
3,769
2,627
1,537
1,864
1,684
1,957
397
13,835
3,140
2,194
1,197
1,489
1,548
1,596
299
11,463
Result before taxation
2,145
948
1,125
662
944
1,303
-353
6,774
1,788
269
1,146
220
395
357
-366
3,810
2,185
805
1,409
618
785
774
255
6,831
Retail Banking
1,936
583
786
206
742
4,253
2,078
122
950
-27
225
3,348
2,204
647
957
307
628
4,744
Wholesale Banking
209
365
340
456
202
1,303
2,874
-290
147
197
247
169
357
827
-19
158
451
311
157
774
-3
1,830
Corporate Line
-353
-353
-366
-366
258
258
Result before taxation
2,145
948
1,125
662
944
1,303
-353
6,774
1,788
269
1,146
220
395
357
-366
3,810
2,185
805
1,409
618
785
774
255
6,831
Taxation
556
240
359
194
178
287
63
1,876
518
89
381
91
141
85
12
1,317
549
247
476
207
159
144
107
1,889
Non-controlling
interests
4
124
128
-1
4
75
78
3
96
99
Net result IFRS
1,589
708
762
468
641
1,016
-415
4,770
1,271
180
761
129
178
273
-378
2,415
1,637
558
929
411
530
630
148
4,843
1 In the fourth quarter of 2021, ING exited from the retail banking markets in Austria and the Czech Republic.
>
33 Information on geographical areas
ING Bank Annual Report 2021
236
33 Information on geographical areas
ING Bank’s business lines operate in seven main geographical areas: the Netherlands, Belgium,
Germany, Poland, Rest of Europe, North America, Latin America, Asia and Australia. A geographical
area is a distinguishable component of the Group engaged in providing products or services within a
particular economic environment that is subject to risks and returns that are different from those of
geographical areas operating in other economic environments. The geographical analyses are based
on the location of the office from which the transactions are originated and do not include countries
where ING only has representation offices. The Netherlands is ING Bank’s country of domicile.
In order to increase ING Bank’s tax transparency, additional financial information on a per country
basis has been included in this disclosure: Tax paid represents all income tax paid to and/or received
from tax authorities in the current year, irrespective of the fiscal year to which these payments or
refunds relate. Total assets by country does not include intercompany balances and reconciles to the
total assets in the consolidated statement of financial position of ING Bank.
The table below provide additional information, for the years 2021, 2020 and 2019 respectively, on
names of principal subsidiaries and branches, nature of main activities and average number of
employees on a full time equivalent basis by country/tax jurisdiction.
Additional information by country
Geographical
area
Country/Tax
jurisdiction
Name of principal
subsidiary
Main (banking)
activity
Average number of employees
at full time equivalent basis
Total Income
Total assets
Result before tax
Taxation
Tax paid
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
Netherlands
Netherlands
ING Bank N.V.
Wholesale / Retail
15,138
15,201
14,415
5,671
5,422
5,552
301,446
286,119
269,730
1,442
934
1,771
506
493
466
428
591
709
Belgium
Belgium
ING Belgi
ë
Wholesale / Retail
6,965
7,397
7,694
2,719
2,581
2,721
130,687
133,843
122,546
808
156
735
204
61
236
174
66
258
Luxemburg
ING Luxembourg S.A.
Wholesale / Retail
856
855
841
338
300
322
20,452
15,335
16,634
161
120
153
41
30
37
20
24
17
Rest of Europe
Poland
1
ING Bank Slaski S.A
Wholesale / Retail
10,674
9,425
8,968
1,509
1,399
1,344
43,888
40,928
37,220
660
438
533
154
131
141
235
232
166
Germany
ING DiBa A.G.
Wholesale / Retail
5,521
5,059
4,639
2,387
2,545
2,484
159,805
162,935
147,924
1,012
1,065
1,374
338
364
465
493
409
460
Romania
1
Branch of ING Bank N.V.
Wholesale / Retail
3,319
3,049
2,575
495
456
457
9,635
8,526
7,424
273
141
221
41
20
34
21
24
34
Spain
Branch of ING Bank N.V.
Wholesale / Retail
1,380
1,228
1,233
743
679
706
32,559
29,899
26,118
212
104
249
57
37
72
59
52
90
Italy
Branch of ING Bank N.V.
Wholesale / Retail
1,099
1,025
959
335
337
269
13,983
13,747
15,726
73
44
-39
25
24
4
2
2
4
UK
Branch of ING Bank N.V.
Wholesale
698
709
692
636
546
594
50,734
64,676
61,088
277
97
214
73
15
52
50
32
40
France
2
Branch of ING Bank N.V.
Wholesale / Retail
764
737
659
271
266
302
12,381
11,570
12,053
-107
-43
63
-27
-10
33
-7
9
48
Russia
ING Bank (Eurasia) Z.A.O.
Wholesale
281
297
293
38
51
93
898
1,035
1,499
3
3
68
0
0
22
-7
-3
49
Czech Republic
3
Branch of ING Bank N.V.
Wholesale
285
355
339
121
83
94
2,894
3,851
4,486
54
-3
16
12
0
3
-2
4
5
Hungary
Branch of ING Bank N.V.
Wholesale
119
131
138
44
43
24
1,148
1,092
1,299
12
6
-7
3
2
2
2
1
2
Slovakia
1
Branch of ING Bank N.V.
Wholesale
983
878
703
15
18
14
352
385
587
3
7
2
0
3
0
2
1
-1
Ukraine
PJSC ING Bank Ukraine
Wholesale
96
108
111
22
26
43
409
335
481
11
16
31
2
3
9
2
3
6
Austria
3
Branch of ING DiBa A.G.
Wholesale
292
332
279
175
75
80
419
1,840
1,441
101
0
0
16
-5
1
6
-14
1
Bulgaria
Branch of ING Bank N.V.
Wholesale
61
65
68
14
13
12
420
406
358
2
2
2
0
0
0
0
0
0
Ireland
Branch of ING Bank N.V.
Wholesale
64
50
48
70
72
71
1,831
2,050
2,575
65
58
48
8
7
7
8
7
7
Portugal
Branch of ING Bank N.V.
Wholesale
11
13
12
15
16
18
675
790
899
9
11
14
3
7
4
3
4
5
Switzerland
Branch of ING Bank N.V.
Wholesale
259
256
257
241
187
234
11,081
7,939
8,577
148
88
126
21
13
-36
67
14
22
1 Includes significant amount of FTEs in relation to global services provided.
2 Public subsidies received, as defined in article 89 of the CRD IV, amounts to EUR 0.0 million (2020: EUR 0.3 million; 2019: EUR 0.3 million).
3 In the fourth quarter of 2021, ING exited from the retail banking markets in Austria and the Czech Republic.
>
33 Information on geographical areas
ING Bank Annual Report 2021
237
Additional information by country (continued)
Geographical
area
Country/Tax
jurisdiction
Name of principal subsidiary
Main (banking)
activity
Average number of
employees at full time
equivalent basis
Total Income
Total assets
Result before tax
Taxation
Tax paid
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
North America
Canada
Payvision Canada Services
Ltd.
Wholesale
0
1
1
0
3
3
0
0
1
0
0
0
0
0
0
0
0
0
USA
ING Financial Holdings Corp.
Wholesale
563
600
626
936
720
813
55,582
48,205
45,521
779
39
366
182
16
118
148
38
130
Latin America
Brazil
Branch of ING Bank N.V.
Wholesale
63
89
89
13
30
43
288
1,813
2,921
1
3
27
5
19
6
8
4
7
Colombia
ING Capital Colombia S.A.S.
Dissolved
0
3
3
0
1
1
0
2
2
0
0
0
0
0
0
0
0
0
Mexico
ING Consulting, S.A. de C.V.
Wholesale
6
7
8
1
1
1
3
2
2
-1
-1
-2
0
0
0
0
0
0
Asia
China
Branch of ING Bank N.V.
Wholesale
79
90
89
26
26
35
1,654
1,598
2,031
0
-2
7
6
1
-1
-1
-5
0
Japan
Branch of ING Bank N.V.
Wholesale
30
32
33
25
29
31
2,256
3,104
5,109
4
-1
22
2
-1
8
3
2
10
Singapore
Branch of ING Bank N.V.
Wholesale
573
608
592
331
353
349
24,163
24,498
27,982
133
42
76
19
8
13
9
7
22
Macau
Payvision Macau Ltd.
In liquidation
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Hong Kong
Branch of ING Bank N.V.
Wholesale
105
122
128
79
92
96
6,691
7,030
7,350
5
-9
38
1
-1
7
-7
15
2
Philippines
1
Branch of ING Bank N.V.
Wholesale/ Retail
2,414
1,857
1,420
6
13
25
567
497
412
-33
-26
-11
-5
6
-5
1
2
2
South Korea
Branch of ING Bank N.V.
Wholesale
75
77
79
65
66
60
5,800
6,692
5,457
26
18
25
6
4
7
-2
10
3
Taiwan
Branch of ING Bank N.V.
Wholesale
33
34
34
26
36
26
2,963
3,160
2,873
-3
19
10
-1
4
0
0
1
3
Indonesia
PT ING Securities Indonesia
In liquidation
0
0
0
0
0
0
5
5
6
0
0
0
0
0
0
0
0
0
Malaysia
Branch of ING Bank N.V.
In liquidation
4
6
5
0
1
1
1
141
166
-1
-1
0
0
0
0
0
0
0
Sri Lanka
Branch of ING Business
Shared Services B.V.
Global services
0
0
0
0
0
0
Turkey
ING Bank A.S.
Wholesale / Retail
3,338
3,724
4,074
335
420
677
5,818
7,316
9,927
144
125
304
35
27
66
33
25
92
United Arab
Emirates
Branch of ING Bank N.V.
Wholesale
10
10
11
0
0
-1
1
1
0
-1
-2
-2
0
0
0
0
0
0
Australia
Australia
ING Bank (Australia) Ltd.
Wholesale / Retail
1,503
1,472
1,319
782
740
701
49,826
46,014
43,482
500
362
400
149
40
121
121
181
177
Other
Mauritius
ING Mauritius Investment I
In liquidation
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
Total
57,660
55,901
53,431
18,485
17,645
18,295
951,317
937,379
891,910
6,774
3,810
6,831
1,876
1,317
1,889
1,871
1,735
2,369
1 Includes significant amount of FTEs in relation to global services provided.
>
34 Pensions and other post-employment benefits
ING Bank Annual Report 2021
238
2021
The higher tax charge of 35% in the Netherlands (compared to the statutory rate of 25%) is mainly
caused by the non-deductible Dutch bank tax (EUR 260 million) and the impairments on deferred tax
assets regarding Payvision and Yolt (EUR 26 million tax).
The lower tax charge in Austria is caused by previously not recognised tax losses (EUR -10 million
tax).
The higher tax charge in Poland is mainly caused by non-deductible regulatory- and other costs.
2020
The higher tax charge of 53% in the Netherlands (compared to the statutory rate of 25%) is mainly
caused by the non-deductible Dutch bank tax (EUR 169 million) and the non-deductible impairments
regarding goodwill (EUR 266 million) and TMB (EUR 230 million).
The lower tax charge in Australia is caused by a release of a tax provision after concluding a
settlement with the Australian Tax Authorities on an issue related to former Insurance activities,
which issue was fully indemnified by NN Group.
The higher tax charges in Brazil and the Philippines are mainly caused by the de-recognition of tax
benefits for incurred tax losses due to expected insufficient future taxable profits.
The higher tax charges in Poland and Belgium are mainly caused by non-deductible regulatory- and
other costs.
2019
The relatively low tax charge in Switzerland is caused by a deferred tax benefit following a tax rate
reduction in 2019.
Additional notes to the Consolidated financial statements
34 Pensions and other post-employment benefits
Most group companies sponsor defined contribution pension plans. The assets of all ING Bank’s
defined contribution plans are held in independently administered funds. Contributions are generally
determined as a percentage of remuneration. Contributions, including the defined contribution plan
in the Netherlands, are principally determined as a percentage of renumeration. These plans do not
give rise to provisions in the statement of financial position, other than relating to short-term timing
differences included in other assets/liabilities.
ING Bank maintains defined benefit retirement plans in some countries. These plans provide benefits
that are related to the remuneration and service of employees upon retirement. The benefits in
some of these plans are subject to various forms of indexation. The indexation is, in some cases, at
the discretion of management; in other cases it is dependent upon the sufficiency of plan assets.
Annual contributions are paid to the funds at a rate necessary to adequately finance the accrued
liabilities of the plans calculated in accordance with local legal requirements. Plans in all countries are
designed to comply with applicable local regulations governing investments and funding levels.
ING Bank provides other post-employment benefits to certain former employees. These are primarily
discounts on ING products.
Defined Contribution Plans
ING, as part of employee’s labour agreement, sponsors a number of defined contribution plans. ING’s
obligation is limited to contributions which are agreed in advance and also includes employee
contributions. The most significant plans are in The Netherlands and Belgium. The Employer
contribution are recognized as an expense which amounted for 2021 EUR 369 million (2020: EUR 356
million).
>
34 Pensions and other post-employment benefits
ING Bank Annual Report 2021
239
Defined benefit retirement plans
Statement of financial position - Net defined benefit asset/liability
Plan assets and defined benefit obligation per country
Plan assets
Defined benefit
obligation
Funded Status
in EUR million
2021
2020
2021
2020
2021
2020
The Netherlands
427
469
578
643
-152
-174
United States
332
311
312
291
20
20
United Kingdom
1,968
1,896
1,236
1,199
732
696
Belgium
606
591
617
681
-10
-90
Other countries
338
316
372
393
-34
-77
Funded status (Net defined benefit asset/liability)
3,671
3,583
3,115
3,208
556
375
Presented as:
- Other assets
783
725
- Other liabilities
-227
-350
556
375
The most recent (actuarial) valuations of the plan assets and the present value of the defined benefit
obligation were carried out as at 31 December 2021. The present value of the defined benefit
obligation, and the related current service cost and past service cost, were determined using the
projected unit credit method.
Changes in the fair value of plan assets for the period were as follows:
Changes in fair value of plan assets
in EUR million
2021
2020
Opening balance
3,583
3,377
Interest income
37
50
Remeasurements: Return on plan assets excluding amounts included in interest income
2
246
Employer's contribution
26
170
Participants contributions
2
2
Benefits paid
-136
-128
Exchange rate differences
158
-134
Closing balance
3,671
3,583
Actual return on the plan assets
39
296
As at 31 December 2021 the defined benefit plans did not hold any direct investments in ING Bank
N.V. (2020: nil). During 2021 and 2020 there were no purchases or sales of assets between ING and
the pension funds.
ING does not manage the pension funds and thus receives no compensation for fund management.
The pension funds have not engaged ING in any swap or derivative transactions to manage the risk
of the pension funds.
No plan assets are expected to be returned to ING Bank during 2022.
The overall funded status improved during the year because of increased interest rates, leading to
lower benefit obligations, and positive performance of plan assets. Covid-19 still has an impact on
most investment markets in 2021, the effect on the fair value of ING Bank’s plan assets is limited as a
large majority of our plan assets is invested in liquid asset categories which mark to market
frequently.
Changes in the present value of the defined benefit obligation and other post-employment benefits
for the period were as follows:
>
34 Pensions and other post-employment benefits
ING Bank Annual Report 2021
240
Changes in defined benefit obligation and other post-employment benefits
Defined benefit
obligation
Other post-
employment
benefits
in EUR million
2021
2020
2021
2020
Opening balance
3,208
3,151
83
84
Current service cost
33
31
1
-2
Interest cost
31
44
2
2
Remeasurements: Actuarial gains and losses arising from changes in
demographic assumptions
-5
4
Remeasurements: Actuarial gains and losses arising from changes in
financial assumptions
-122
190
-16
7
Participants’ contributions
1
2
1
0
Benefits paid
-141
-132
-1
-1
Past service cost
0
2
0
Effect of curtailment or settlement
-0
0
-2
Exchange rate differences
109
-85
4
-8
Closing balance
3,115
3,208
72
83
Amounts recognised directly in Other comprehensive income were as follows:
Changes in the net defined benefit assets/liability remeasurement reserve
in EUR million
2021
2020
Opening balance
-307
-336
Remeasurement of plan assets
2
246
Actuarial gains and losses arising from changes in demographic assumptions
5
-4
Actuarial gains and losses arising from changes in financial assumptions
122
-190
Taxation and Exchange rate differences
-34
-24
Total Other comprehensive income movement for the year
95
28
Closing balance
-212
-307
In 2021, EUR 2 million remeasurement of plan assets that is recognised as a gain in other
comprehensive income is driven by slightly higher yields on investments.
The EUR 122 million actuarial gains arising from changes in financial assumptions in the calculation
of the defined benefit obligation are mainly due to an increase in discount rates.
The accumulated amount of remeasurements recognised directly in Other comprehensive income is
EUR -262 million (EUR -212 million after tax) as at 31 December 2021 (2020: EUR -343 million; EUR -
307 million after tax).
Amounts recognised in the statement of profit or loss related to pension and other staff related
benefits are as follows:
Pension and other staff-related benefit costs
Net defined benefit
asset/liability
Other post-employment
benefits
Total
in EUR million
2021
2020
2019
2021
2020
2019
2021
2020
2019
Current service cost
33
31
28
1
-2
-1
34
29
27
Past service cost
0
2
-0
0
0
2
-0
Net Interest cost
-6
-6
-5
2
2
3
-4
-4
-3
Effect of curtailment or settlement
-0
0
0
-2
-2
0
0
Defined benefit plans
27
27
23
1
0
2
28
28
25
Defined contribution plans
369
356
340
Pension and other post employment
benefits
397
383
365
Other staff related benefits
11
12
2
Pension and other staff-related benefits
408
395
366
Determination of the net defined benefit asset/liability
The net defined benefit asset/liability is reviewed and adjusted annually. The assumptions used in
the determination of the net defined benefit asset/liability and the Other post-employment benefits
include discount rates, mortality rates, expected rates of salary increases (excluding promotion
increases), and indexation. The rates used for salary developments, interest discount factors, and
other adjustments reflect country-specific conditions.
The key assumption in the determination of the net defined benefit asset/liability is the discount
rate. The discount rate is the weighted average of the discount rates that are applied in different
regions where ING Bank has defined benefit pension plans (weighted by the defined benefit
obligation). The discount rate is based on a methodology that uses market yields on high quality
>
35 Taxation
ING Bank Annual Report 2021
241
corporate bonds of the specific regions with durations matching the pension liabilities as key input.
Market yields of high quality corporate bonds reflect the yield on corporate bonds with an AA rating
for durations where such yields are available. An extrapolation is applied in order to determine the
yield to the longer durations for which no AA-rated corporate bonds are available. As a result of the
limited availability of long-duration AA-rated corporate bonds, extrapolation is an important element
of the determination of the discount rate. The weighted average discount rate applied for net
defined benefit asset/liability for 2021 was 1.5% (2020: 1.0%) based on the pension plan in the
Netherlands, Germany, Belgium, The United States of America, and the United Kingdom. The average
discount rate applied for Other post-employment benefits was 2.9% (2020: 2.7%).
Sensitivity analysis of key assumptions
ING performs sensitivity analysis on the most significant assumptions: discount rates, mortality,
expected rate of salary increase, and indexation. The sensitivity analysis has been carried out under
the assumption that the changes occurred at the end of the reporting period.
The sensitivity analysis calculates the financial impact on the defined benefit obligation of an
increase or decrease of the weighted averages of each significant actuarial assumption, all other
assumptions held constant. In practice, this is unlikely to occur, and some changes of the
assumptions may be correlated. Changes to mortality, expected rate of salary increase, and
indexation would have no material impact on the defined benefit obligation. The most significant
impact would be from a change in the discount rate. An increase or decrease in the discount rate of
1% creates an impact on the defined benefit obligation of EUR-443 million (decrease) and EUR 549
million (increase), respectively.
Expected cash flows
Annual contributions are paid to the funds at a rate necessary to adequately finance the accrued
liabilities of the plans calculated in accordance with local supervisory requirements. Plans in all
countries are designed to comply with applicable local regulations governing investments and
funding levels. ING Bank’s subsidiaries should fund the cost of the entitlements expected to be
earned on a yearly basis.
For 2022 the expected contributions to defined benefit pension plans are EUR 33 million.
The benefit payments for defined benefit and other post-employment benefits expected to be made
by the plan between 2022-2026 are estimated to be between EUR 113 million and EUR 136 million
per year. From 2027 to 2031 the total payments made by the plan are expected to be EUR 743
million.
35 Taxation
Statement of financial position – Deferred tax
Deferred taxes are recognised on all temporary differences under the liability method using tax rates
applicable in the jurisdictions in which ING Bank is subject to taxation.
Changes in deferred tax
2021
Net liability (-)
Net asset (+)
opening
balance
Change
through
equity
Change
through
net result
Exchange
rate
differences
Changes
in the composi-
tion of the
group and
other changes
Net liability (-)
Net asset (+)
ending
balance
Financial assets at FVOCI
-103
26
-1
1
7
-70
Investment properties
2
-3
-1
Financial assets and liabilities at FVPL
134
-39
20
-7
107
Depreciation
-10
5
-2
-7
Cash flow hedges
-360
233
1
-126
Pension and post-employment benefits
36
-54
-23
-8
-49
Other provisions
-5
28
-4
-0
19
Loans and advances
517
-2
-83
-1
-0
430
Unused tax losses carried forward
63
129
7
199
Other
-83
-83
18
1
-0
-147
190
120
30
15
-1
354
Presented in the statement of financial
position as:
– Deferred tax liabilities
-584
-603
– Deferred tax assets
773
957
190
354
>
35 Taxation
ING Bank Annual Report 2021
242
The above table shows netted deferred tax amounts related to right-of-use assets and lease
liabilities included in the row ‘Other’ a deferred tax amount for right-of-use assets of EUR 220 million
(2020: EUR 306 million) and a deferred tax amount for lease liabilities of EUR 252 million (2020: EUR
326 million).
The deferred tax on cash flow hedges relate to floating rate lending with interest rate swaps. Due to
an increase in the interest rate yield curve in 2021 there was a negative revaluation through other
comprehensive income and an increase of the deferred tax asset of EUR 233 million.
Changes in deferred tax
2020
Net liability (-
)
Net asset (+)
opening
balance
Change
through
equity
Change
through
net result
Exchange
rate
difference
s
Changes in
the composi-
tion of the
group and
other
changes
Net liability (-
)
Net asset (+)
ending
balance
Financial assets at FVOCI
-99
7
-10
0
-103
Investment properties
-7
3
0
5
2
Financial assets and liabilities at FVPL
54
70
10
134
Depreciation
-19
6
2
-10
Cash flow hedges
-337
-23
0
-360
Pension and post-employment benefits
42
-8
-5
7
-0
36
Other provisions
6
-4
-7
0
-5
Loans and advances
490
-1
42
-15
0
517
Unused tax losses carried forward
61
7
-5
63
Other
-156
63
16
-1
-5
-83
Total
36
38
125
-9
0
190
Presented in the statement of financial
position as:
– deferred tax liabilities
-695
-584
– deferred tax assets
730
773
36
190
The above table shows netted deferred tax amounts related to right-of-use assets and lease
liabilities included in the row ‘Other’ a deferred tax amount for right-of-use assets of EUR 306 million
(2019: EUR 370 million) and a deferred tax amount for lease liabilities of EUR 326 million (2019: EUR
376 million).
Deferred tax in connection with unused tax losses carried forward
2021
2020
Total unused tax losses carried forward
2,165
1,675
Unused tax losses carried forward not recognised as a deferred tax asset
819
903
Unused tax losses carried forward recognised as a deferred tax asset
1,345
772
Average tax rate
22.3%
22.0%
Deferred tax asset
300
170
Total unused tax losses carried forward analysed by expiry terms
No deferred tax
asset recognised
Deferred tax
asset recognised
2021
2020
2021
2020
Within 1 year
1
More than 1 year but less than 5 years
3
4
642
57
More than 5 years but less than 10 years
9
92
8
More than 10 years but less than 20 years
Unlimited
808
806
704
707
819
903
1,345
772
The above mentioned deferred tax asset of EUR 300 million (2020: EUR 170 million) and the related
unused tax losses carried forward exclude the deferred tax liability recognised in the Netherlands
with respect to the recapture of tax losses originated in the United Kingdom but previously deducted
in the Netherlands for the amount of EUR 102 million (2020: EUR 107 million).
Deferred tax assets are recognised for temporary deductible differences, for tax losses carried
forward and unused tax credits only to the extent that realisation of the related tax benefit is
probable.
>
35 Taxation
ING Bank Annual Report 2021
243
Breakdown of certain net deferred tax asset positions by jurisdiction
2021
2020
86
265
66
28
7
12
2
1
1
354
114
The table above includes a breakdown of certain net deferred tax asset positions by jurisdiction for
which the utilisation of the deferred tax asset is dependent on future taxable profits in excess of the
profits arising from the reversal of existing taxable temporary differences whilst the related entities
have incurred losses in either the current or the preceding year.
In 2021 ING Bank Slaski (Poland) incurred a tax loss following the large value changes of the cash flow
hedge derivatives which are settled net via a central counter party. This tax loss can be carried
forward for 5 years. Based on a taxable profit forecast, ING considers it probable that the future
taxable profits will compensate for this tax loss carry forward position within 2 years. Based on this a
deferred tax asset on unused tax losses carried forward (EUR 117 million) is fully recognised during
2021. The remaining deferred tax amount in Poland of EUR 148 million relates to temporary tax
differences on loans and advances and financial assets at fair value through profit and loss.
Recognition is based on the fact that it is probable that the entity will have taxable profits and/or can
utilise tax planning opportunities before expiration of the deferred tax assets. Changes in
circumstances in future periods may adversely impact the assessment of the recoverability. The
uncertainty of the recoverability is taken into account in establishing the deferred tax assets.
As at 31 December 2021 and 31 December 2020, ING Bank N.V. had no significant temporary
differences associated with the parent company’s investments in subsidiaries as any economic
benefit from those investments will not be taxable at parent company level.
Statement of profit or loss – Taxation
Taxation by type
Netherlands
Rest of the world
Total
in EUR million
2021
2020
2019
2021
2020
2019
2021
2020
2019
Current taxation
459
428
424
1,447
1,015
1,480
1,906
1,442
1,904
Deferred taxation
47
64
42
-78
-189
-57
-30
-125
-15
507
492
466
1,369
826
1,423
1,876
1,317
1,889
Reconciliation of the weighted average statutory income tax rate to ING Bank’s effective income tax rate
2021
2020
2019
Result before tax from continuing operations
6,774
3,810
6,831
Weighted average statutory tax rate
24.3%
25.6%
25.9%
Weighted average statutory tax amount
1,645
975
1,770
Permanent differences affecting current tax
Participation exemption
-68
-46
-45
Other income not subject to tax
-32
-5
-76
Expenses not deductible for tax purposes
201
320
168
Current tax from previously unrecognised amounts
51
17
48
State and local taxes
64
44
72
Adjustments to prior periods
-12
-16
14
Differences affecting deferred tax
Impact on deferred tax from change in tax rates
9
10
-64
Deferred tax benefit from previously unrecognised amounts
-18
-6
Write-off/reversal of deferred tax assets
37
24
2
Effective tax amount
1,876
1,317
1,889
Effective tax rate
27.7%
34.6%
27.7%
The weighted average statutory tax rate in 2021 ( 24.3%) is 1.3% lower than that of 2020.
The effective tax rate of 27.7% in 2021 is higher than the weighted average statutory tax rate. This is
mainly caused by expenses non-deductible for tax purposes like the non-deductible bank tax and a
tax charge caused by the recapture of tax losses originated in the United Kingdom but previously
deducted in the Netherlands.
>
35 Taxation
ING Bank Annual Report 2021
244
Included in the “Adjustments to prior periods” in 2020 is a release of a tax provision of EUR -68 million
after concluding on a settlement with the Australian tax authorities with respect to an issue related
to former insurance activities, which issue was fully indemnified by NN Group. From the remaining on
balance prior year tax adjustments of EUR 52 million, EUR 33 million can be attributed to the
Netherlands, EUR 11 million to Germany and EUR 8 million to several other countries.
The weighted average statutory tax rate in 2020 was slightly lower compared to the rate of 25.9% in
2019.
The effective tax rate of 34.6% in 2020 is significantly higher than the weighted average statutory
tax rate. This is mainly caused by a high amount of expenses non-deductible for tax purposes like the
non-deductible bank tax and non-deductible losses with respect to goodwill impairments and
impairments on associates in the Netherlands and in some other European countries.
The effective tax rate of 27.7% in 2019 was higher than the weighted average statutory tax rate.
This was mainly caused by a high amount of expenses non-deductible for tax purposes due to non-
deductible bank tax in the Netherlands and regulatory expenses non-deductible for tax purposes in
some other European countries.
Equity – Other comprehensive income
Income tax related to components of other comprehensive income
in EUR million
2021
2020
2019
Unrealised revaluations financial assets at fair value through other comprehensive
income and other revaluations
14
-3
6
Realised gains/losses transferred to the statement of profit or loss
(reclassifications from equity to profit or loss)
12
10
12
Changes in cash flow hedge reserve
233
-23
-199
Remeasurement of the net defined benefit asset/liability
-54
-8
-14
Changes in fair value of own credit risk of financial liabilities at fair value through
profit or loss
-8
-1
7
Exchange rate differences and other
-77
63
7
Total income tax related to components of other comprehensive income
120
38
-181
Tax Contingency
The contingent liability (also disclosed in note 42 ‘Contingent liabilities’) in connection with taxation in
the Netherlands refers to a possible obligation arising from the deduction from Dutch taxable profit
of losses incurred by ING Bank in the United Kingdom in previous years. The existence of this
obligation will be confirmed only by the occurrence of future profits in the United Kingdom.
>
36 Fair value of assets and liabilities
ING Bank Annual Report 2021
245
36 Fair value of assets and liabilities
a) Valuation Methods
The estimated fair values represent the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. It
is a market-based measurement, which is based on assumptions that market participants would use
and takes into account the characteristics of the asset or liability that market participants would take
into account when pricing the asset or liability.
Fair values of financial assets and liabilities are based on quoted prices in active market where
available. When such quoted prices are not available, the fair value is determined by using valuation
techniques.
b) Valuation Control framework
The valuation control framework covers the product approval process (PARP), pricing, independent
price verification (IPV), valuation adjustments, and model use. Valuation processes are governed by
various governance bodies, including Local Parameter Committees, Global Price Testing and
Impairment Committee, Market Data Committee and Valuation Model Committee. All relevant
committees meet on a regular basis (monthly/quarterly), where agenda covers the aforementioned
valuation controls.
The Global Price Testing and Impairment Committee is responsible for the oversight and the approval
of the outcome of impairments (other than loan loss provisions) and valuation processes. It oversees
the quality and coherence of valuation methodologies and performance. The Valuation Model
Committee is responsible for the approval of fair value pricing models and fair and prudent valuation
adjustment models and the Local Parameter Committee monitors the appropriateness of (quoted)
pricing, any other relevant market info, as well as the appropriateness of pricing models themselves
related to the fair valued positions to which they are applied. The Local Parameter Committee
executes valuation methodology and processes at a local level. The Market Data Committee
approves and reviews all pricing inputs for the calculation of market parameters.
c) Valuation Adjustments
Valuation adjustments are an integral part of the fair value. They are included as part of the fair
value to provide better estimation of market exit value on measurement date. ING considers various
valuation adjustments to arrive at the fair value including Bid-Offer adjustments, Model Risk
adjustments, Credit Valuation Adjustments (CVA), Debit valuation Adjustments (DVA), including DVA
on derivatives and own issued liabilities, Collateral Valuation Adjustment (CollVA) and Funding
Valuation Adjustment (FVA)'.
For financial instruments measured by internal models where one or more unobservable market
inputs are significant for valuation, a difference between the transaction price and the theoretical
price resulting from the internal model can occur. ING defers material Day One profit or loss relating
to financial instruments classified as Level 3 and financial instruments with material unobservable
inputs into CVA which are not necessarily classified as Level 3. The Day One profit or loss is amortised
over the life of the instrument or until the observability improves. Both the impact on the profit and
loss per year end 2021 and the Day One profit or loss reserve in the balance sheet as per 31
December 2021 are deemed to be immaterial.
The following table presents the models reserves for financial assets and liabilities:
Valuation adjustment on financial assets and liabilities
as at 31 December
2021
2020
Bid/Offer
-143
-121
Model Risk
-11
-25
CVA
-159
-238
DVA
-66
-124
CollVA
-8
-16
FVA
-95
-111
Total Valuation Adjustments
-482
-634
>
36 Fair value of assets and liabilities
ING Bank Annual Report 2021
246
Bid-Offer Adjustment
Bid-Offer adjustments are required to adjust mid-market values to appropriate bid or offer value in
order to best represent the exit value, and therefore fair value. It is applicable to financial assets and
liabilities that are valued at mid-price initially. In practice this adjustment accounts for the difference
in valuation from mid to bid and mid to offer for long and short exposures respectively. In principle
assets are valued at the bid prices and liabilities are valued at the offer price. For certain assets or
liabilities, where a market quoted price is not available, the price used is the fair value that is most
representative within the bid-offer spread.
Model Risk Adjustment
Model risk adjustments addresses the risk of possible financial losses resulting from the use of a mis-
specified, misapplied, or incorrect implementation of a model.
Credit Valuation Adjustment (CVA)
Credit Valuation Adjustment (CVA) is the adjustment on the fair value of a derivative trade to
account for the possibility that a counterparty can go into default. In other words, it is the market
value of counterparty credit risk. On the contrary, Debit Valuation Adjustment (DVA) reflects the
credit risk of ING for its counterparty. CVA and DVA combinedly are regarded as the Bilateral
Valuation Adjustment (BVA). The calculation of CVA is based on the estimation of the expected
exposure, the counterparties’ risk of default, and taking into account the collateral agreements as
well as netting agreements. The counterparties’ risk of default is measured by probability of default
and expected loss given default, which is based on market information including credit default swap
(CDS) spread. Where counterparty CDS spreads are not available, relevant proxy spreads are used.
Additionally, wrong-way risk (when exposure to a counterparty is increasing and the credit quality of
that counterparty deteriorates) and right-way risk (when exposure to a counterparty is increasing
and the credit quality of that counterparty improves) are included in the adjustment.
Debit Valuation Adjustment (DVA)
ING recognises two types of Debit Valuation Adjustments, namely DVA on derivatives, as
aforementioned and DVA on own issued financial liabilities. The application of DVA on own issued
financial liabilities is for those financial liabilities measured at fair value through profit or loss, if the
credit risk component has not been included in the prices. In this DVA calculation, the default
probability of the institution are estimated based on the ING Credit spread.
Collateral Valuation Adjustment (CollVA)
Collateral Valuation Adjustment is a derivative valuation adjustment capturing specific features of
CSA (Credit Support Annex) with a counterparty that the regular valuation framework does not
capture. Non-standard CSA features may include deviations in relation to the currency in which ING
posts or receives collateral, deviations in remuneration rate on collateral which may pay lower or
higher rate than overnight rate or even no interest at all. Other deviations can be posting securities
rather than cash as collateral.
Funding Valuation Adjustment (FVA)
ING applies an additional ‘Funding Valuation Adjustment’ (FVA) to address the funding costs
associated with the
collateral funding asymmetry on uncollateralized or partially collateralized
derivatives in the portfolio. This adjustment is based on the expected exposure profiles of the
uncollateralized or partially collateralized OTC derivatives and market-based funding spreads.
d) Fair value hierarchy
ING Bank has categorised its financial instruments that are either measured in the statement of
financial position at fair value or of which the fair value is disclosed, into a three level hierarchy based
on the observability of the valuation inputs from (unadjusted) quoted prices. Highest priority is
retained to (unadjusted) quoted prices in active markets for identical assets or liabilities and the
lowest priority to valuation techniques supported by unobservable inputs.
Transfers into and transfers out of fair value hierarchy levels are made on a quarterly basis at the
end of the reporting period.
Level 1 – (Unadjusted) quoted prices in active markets
This category includes financial instruments whose fair value is determined directly by reference to
(unadjusted) quoted prices in an active market. A financial instrument is regarded as quoted in an
active market if quoted prices are readily and regularly available from an exchange, dealer markets,
brokered markets, or principal to principal markets. Those prices represent actual and regularly
occurring market transactions with sufficient frequency and volume to provide pricing information
on an ongoing basis. Transfers out of Level 1 into Level 2 or Level 3 occur when ING Bank establishes
>
36 Fair value of assets and liabilities
ING Bank Annual Report 2021
247
that markets are no longer active and therefore (unadjusted) quoted prices no longer provide reliable
pricing information.
Level 2 – Valuation technique supported by observable inputs
This category includes financial instruments whose fair value is based on market observables other
than (unadjusted) quoted prices. The fair value for financial instruments in this category can be
determined by reference to quoted prices for similar instruments in active markets, but for which the
prices are modified based on other market observable external data or reference to quoted prices for
identical or similar instruments in markets that are not active. These prices can be obtained from a
third party pricing service. ING analyses how the prices are derived and determines whether the
prices are liquid tradable prices or model based consensus prices taking various data as inputs.
For financial instruments that do not have a reference price available, fair value is determined using
a valuation technique (e.g. a model), where inputs in the model are taken from an active market or
are observable, such as interest rates and yield curves observable at commonly quoted intervals,
implied volatilities, and credit spreads.
Instruments, where inputs are unobservable are classified in this category, provided that the impact
of those unobservable inputs on the overall valuation is insignificant. The notion of significant is
particularly relevant for the distinction between Level 2 and Level 3 assets and liabilities. If the
combined change in asset value resulting from the shift of the unobservable parameters and the
model uncertainty exceeds the threshold, the asset is classified as Level 3. A value change below the
threshold results in a Level 2 classification.
Level 3 – Valuation technique supported by unobservable inputs
This category includes financial instruments whose fair value is determined using a valuation
technique (e.g. a model), for a significant part of the overall valuation the valuation input is
unobservable, or is determined by reference to price quotes where the market is considered inactive.
Unobservable inputs are inputs which are based on the Group’s own assumptions about the factors
that market participants would use in pricing an asset or liability, developed based on the best
information available in the market. Unobservable inputs may include volatility, correlation, spreads
to discount rates, default rates and recovery rates, prepayment rates, and certain credit spreads.
Financial instruments at fair value
The fair values of the financial instruments were determined as follows:
Methods applied in determining fair values of financial assets and liabilities (carried at fair value)
Level 1
Level 2
Level 3
Total
2021
2020
2021
2020
2021
2020
2021
2020
Financial Assets
Financial assets at fair value
through profit or loss
17,599
7,902
2
2
134
138
17,735
8,041
2,317
3,379
7,016
4,867
2,643
1,269
11,976
9,514
6
2
21,154
30,623
140
197
21,299
30,821
1
48,706
53,733
2,248
1,265
50,954
54,998
19,922
11,284
76,877
89,225
5,165
2,870
101,964
103,374
Financial assets at fair value
through other comprehensive
income
2,232
1,688
225
176
2,457
1,862
21,753
31,593
5,587
1,385
27,340
32,977
1
838
1,056
838
1,056
23,984
33,282
5,587
1,385
1,063
1,231
30,635
35,895
Financial liabilities
Financial liabilities at fair value
through profit or loss
– Debt securities
377
697
5,227
5,211
135
180
5,739
6,087
– Deposits
2
43,582
48,558
2
43,582
48,561
– Trading securities
955
700
120
70
0
0
1,075
768
– Derivatives
63
56
20,388
27,094
195
217
20,646
27,365
1,395
1,455
69,317
80,933
330
398
71,041
82,782
>
36 Fair value of assets and liabilities
ING Bank Annual Report 2021
248
The following methods and assumptions were used by ING Bank to estimate the fair value of the
financial instruments:
Equity securities
Instrument description:
private equity investments.
Valuation:
are based on quoted market prices. In absence of active markets, fair values are estimated by
analysing the investee’s financial position, result, risk profile, prospect, price, earnings comparisons
and revenue multiples. Additionally, reference is made to valuations of peer entities where quoted
prices in active markets are available. For equity securities best market practice will be applied using
the most relevant valuation method. All non-listed equity investments, including investments in
private equity funds, are subject to a standard review framework which ensures that valuations
reflect the fair values.
Fair value hierarchy:
readily and regularly available. Hence, these securities are classified as Level 1. Equity securities
which are not traded in active markets mainly include corporate investments, fund investments and
other equity securities and are classified as Level 3.
Debt securities
Instrument description:
Asset-backed securities (ABS).
Valuation:
prices. Quoted market prices are obtained from an exchange market, dealer, broker, industry group,
pricing service, or regulatory service. The quoted prices from non-exchange sources are reviewed on
their tradability of market prices. If quoted prices in an active market are not available, fair value is
based on an analysis of available market inputs, which includes consensus prices obtained from one
or more pricing services. Furthermore, fair values are determined by valuation techniques
discounting expected future cash flows using a market interest rate curves, referenced credit
spreads, maturity of the investment, and estimated prepayment rates where applicable.
Fair value hierarchy:
active markets, where quoted prices are readily and regularly available and are hence, classified as
Level 1. The remaining positions are classified as Level 2 or Level 3. Asset backed securities for which
no active market is available and a wide discrepancy in quoted prices exists, are classified as Level 3.
Derivatives
Instrument description:
(OTC). Derivatives include interest rate derivatives, FX derivatives, Credit derivatives, Equity
derivatives and commodity derivatives.
Valuation:
an active market and are classified as Level 1 of the fair value hierarchy. For instruments that are not
actively traded, fair values are estimated based on valuation techniques. OTC derivatives and
derivatives trading in an inactive market are valued using valuation techniques. The valuation
techniques and inputs depend on the type of derivatives and the nature of the underlying
instruments. The principal techniques used to value these instruments are based on (amongst
others) discounted cash flows option pricing models and Monte Carlo simulations. These valuation
models calculate the present value of expected future cash flows, based on ‘no-arbitrage’ principles.
The models are commonly used in the financial industry and inputs to the validation models are
determined from observable market data where possible. Certain inputs may not be observable in
the market, but can be determined from observable prices via valuation model calibration
procedures. These inputs include prices available from exchanges, dealers, brokers or providers of
pricing, yield curves, credit spreads, default rates, recovery rates, dividend rates, volatility of
underlying interest rates, equity prices, and foreign currency exchange rates and reference is made
to quoted prices, recently executed trades, independent market quotes and consensus data, where
available.
For uncollateralised OTC derivatives, ING applies Credit Valuation Adjustment to correctly reflect the
counterparty credit risk in the valuation and Debit Valuation Adjustments to reflect the credit risk of
ING for its counterparty. See sections CVA/DVA in section c) Valuation Adjustments for more details
regarding the calculation.
Fair value hierarchy:
classified as Level 2. Derivatives for which the input cannot be implied from observable market data
are classified as Level 3.
>
36 Fair value of assets and liabilities
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249
Loans and receivables
Instrument description:
determinable payments that are not quoted in an active market. Loans and receivables carried at
fair value includes trading loans, being securities lending and similar agreement comparable to
collateralised lending, syndicated loans, loans expected to be sold and receivables with regards to
reverse repurchase transactions.
Valuation:
fair value of other loans is estimated by discounting expected future cash flows using a discount rate
that reflects credit risk, liquidity, and other current market conditions. The fair value of mortgage
loans is estimated by taking into account prepayment behaviour.
Fair value hierarchy:
receivables for which current market information about similar assets to use as observable,
corroborated data for all significant inputs into a valuation model is not available are classified as
Level 3.
Financial liabilities at fair value through profit and loss
Instrument description:
securities, debt instruments, primarily comprised of structured notes, which are held at fair value
under the fair value option. Besides that, it includes derivative contracts and repurchase agreements.
Valuation:
through profit or loss are based on quoted market prices, where available. For those securities not
actively traded, fair values are estimated based on internal discounted cash flow valuation
techniques using interest rates and credit spreads that apply to similar instruments.
Fair value hierarchy:
the input cannot be derived from observable market data are classified as Level 3.
e) Transfers between Level 1 and 2
As a consequence of a change in the levelling methodology of INGs bond portfolio in 2021, ING
recorded an EUR 2.6 billion and EUR 0.8 billion transfer from Level 1 to Level 2 respectively in debt
securities measured at fair value through other comprehensive income and debt securities measured
at fair value through profit or loss. No significant transfers from Level 2 to Level 1 were recorded in
the reporting period 2021.
f) Level 3: Valuation techniques and inputs used
Financial assets and liabilities in Level 3 include both assets and liabilities for which the fair value was
determined using (i) valuation techniques that incorporate unobservable inputs as well as (ii) quoted
prices which have been adjusted to reflect that the market was not actively trading at or around the
balance sheet date. Unobservable inputs are inputs which are based on ING’s own assumptions
about the factors that market participants would use in pricing an asset or liability, developed based
on the best information available in the circumstances. Unobservable inputs may include volatility,
correlation, spreads to discount rates, default rates and recovery rates, prepayment rates, and
certain credit spreads. Valuation techniques that incorporate unobservable inputs are sensitive to the
inputs used.
Of the total amount of financial assets classified as Level 3 as at 31 December 2021 of EUR 6.2 billion
(31 December 2020: EUR 4.1 billion), an amount of EUR 2.0 billion ( 32.5%) (31 December 2020: EUR
2.1 billion, being 52.3%) is based on unadjusted quoted prices in inactive markets. As ING does not
generally adjust quoted prices using its own inputs, there is no significant sensitivity to ING’s own
unobservable inputs.
Furthermore, Level 3 financial assets includes approximately EUR 2.9 billion (31 December 2020: EUR
0.9 billion) which relates to financial assets that are part of structures that are designed to be fully
neutral in terms of market risk. Such structures include various financial assets and liabilities for
which the overall sensitivity to market risk is insignificant. Whereas the fair value of individual
components of these structures may be determined using different techniques and the fair value of
each of the components of these structures may be sensitive to unobservable inputs, the overall
sensitivity is by design not significant.
The remaining EUR 1.3 billion (31 December 2020: EUR 1.1 billion) of the fair value classified in Level 3
financial assets is established using valuation techniques that incorporates certain inputs that are
unobservable.
Of the total amount of financial liabilities classified as Level 3 as at 31 December 2021 of EUR 0.3
billion (31 December 2020: EUR 0.4 billion), an amount of EUR 0.1 billion (42.0%) (31 December 2020:
EUR 0.1 billion, being 34.6%) is based on unadjusted quoted prices in inactive markets. As ING does
>
36 Fair value of assets and liabilities
ING Bank Annual Report 2021
250
not generally adjust quoted prices using its own inputs, there is no significant sensitivity to ING’s own
unobservable inputs.
Furthermore, Level 3 financial liabilities includes approximately EUR 0.1 billion (31 December 2020:
EUR 0.1 billion) which relates to financial liabilities that are part of structures that are designed to be
fully neutral in terms of market risk. As explained above, the fair value of each of the components of
these structures may be sensitive to unobservable inputs, but the overall sensitivity is by design not
significant.
The remaining EUR 0.1 billion (31 December 2020: EUR 0.2 billion) of the fair value classified in Level 3
financial liabilities is established using valuation techniques that incorporates certain inputs that are
unobservable.
The table below provides a summary of the valuation techniques, key unobservable inputs and the
lower and upper range of such unobservable inputs, by type of Level 3 asset/liability. The lower and
upper range mentioned in the overview represent the lowest and highest variance of the respective
valuation input as actually used in the valuation of the different financial instruments. Amounts and
percentages stated are unweighted. The range can vary from period to period subject to market
movements and change in Level 3 position. Lower and upper bounds reflect the variability of Level 3
positions and their underlying valuation inputs in the portfolio, but do not adequately reflect their
level of valuation uncertainty. For valuation uncertainty assessment, reference is made to section
Sensitivity analysis of unobservable inputs (Level 3).
>
36 Fair value of assets and liabilities
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251
Valuation techniques and range of unobservable inputs (Level 3)
Assets
Liabilities
Valuation techniques
Significant unobservable inputs
Lower range
Upper range
In EUR million
2021
2020
2021
2020
2021
2020
2021
2020
At fair value through profit or loss
Debt securities
2,643
1,269
Price based
Price (%)
0%
0%
121%
107%
Equity securities
134
137
1
Price based
Price (price per share)
0
0
5,475
5,475
Loans and advances
1,598
1,090
2
Price based
Price (%)
0%
0%
100%
101%
Present value techniques
Credit spread (bps)
0
0
250
250
(Reverse) repo's
650
176
Present value techniques
Interest rate (%)
0%
3%
1%
4%
Structured notes
135
180
Price based
Price (%)
84%
74%
125%
109%
Option pricing model
Equity volatility (%)
13%
14%
30%
25%
Equity/Equity correlation
n.a.
0.6
n.a.
0.9
Equity/FX correlation
0
-0.7
0
0.3
Dividend yield (%)
3%
0%
4%
5%
Derivatives
– Rates
5
2
35
38
Option pricing model
Interest rate volatility (bps)
43
12
82
70
Present value techniques
Reset spread (%)
2%
2%
2%
2%
– FX
27
30
Present value techniques
FX volatility (%)
1%
n.a.
16%
n.a.
Option pricing model
FX volatility (bps)
n.a.
6
n.a.
10
Implied volatility (%)
1%
n.a.
22%
n.a.
– Credit
75
168
94
154
Present value techniques
Credit spread (bps)
1
2
359
1,403
Jump rate (%)
n.a.
n.a.
n.a.
n.a.
Price based
Price (%)
0%
99%
100%
107%
– Equity
30
24
27
20
Option pricing model
Equity volatility (%)
11%
5%
119%
64%
Equity/Equity correlation
0.5
0.5
0.8
0.9
Equity/FX correlation
-0.7
-0.6
0.1
0.1
Dividend yield (%)
0%
0%
18%
34%
Price based
Price (%)
0%
3%
0%
3%
– Other
3
3
9
3
Option pricing model
Commodity volatility (%)
20%
18%
89%
55%
Com/Com correlation
n.a.
n.a.
n.a.
n.a.
Com/FX correlation
n.a.
-0.5
n.a.
-0.3
At fair value through other comprehensive income
– Loans and advances
838
1,056
Present value techniques
Prepayment rate (%)
9%
9%
9%
9%
Price based
Price (%)
99%
99%
100%
99%
– Equity
225
176
Present value techniques
Credit spread (bps)
2
2
2
2
Interest rate (%)
3%
3%
3%
3%
Price based
Price (%)
1%
n/a
1%
n/a
Price based
Other (EUR)
63
63
80
80
Total
6,228
4,101
330
398
>
36 Fair value of assets and liabilities
ING Bank Annual Report 2021
252
Price
For securities where market prices are not available fair value is measured by comparison with
observable pricing data from similar instruments. Prices of 0% are distressed to the point that no
recovery is expected, while prices significantly in excess of 100% or par are expected to pay a yield
above current market rates.
Credit spreads
Credit spread is the premium above a benchmark interest rate required by the market participant to
accept a lower credit quality. Higher credit spreads indicate lower credit quality and a lower value of an
asset.
Volatility
Volatility is a measure for variation of the price of a financial instrument or other valuation input over
time. Volatility is one of the key inputs in option pricing models. Typically, the higher the volatility, the
higher value of the option. Volatility varies by the underlying reference (equity, commodity, foreign
currency and interest rates), by strike, and maturity of the option. The minimum level of volatility is 0%
and there is no theoretical maximum.
Correlation
Correlation is a measure of dependence between two underlying references which is relevant for
valuing derivatives and other instruments having more than one underlying reference. High positive
correlation (close to 1) indicates strong positive (statistical) relationship, where underliers move,
everything else equal, into the same direction. The same holds for a high negative correlation.
Reset spread
Reset spreads are key inputs to mortgage linked prepayment swaps valuation. Reset spread is the
future spread at which mortgages will re-price at interest rate reset dates.
Inflation rate
Inflation rate is a key input to inflation linked instruments. Inflation linked instruments protect against
price inflation and are denominated and indexed to investment units. Interest payments would be
based on the inflation index and nominal rate in order to receive/pay the real rate of return. A rise in
nominal coupon payments is a result of an increase in inflation expectations, real rates, or both.
Dividend yield
Dividend yield is an important input for equity option pricing models showing how much dividends a
company is expected to pay out each year relative to its share price. Dividend yields are generally
expressed as an annualised percentage of share price.
Jump rate
Jump rates simulate abrupt changes in valuation models. The rate is an added component to the
discount rate in the model to include default risks.
Prepayment rate
Prepayment rate is a key input to mortgage and loan valuation. Prepayment rate is the estimated rate
at which mortgage borrowers will repay their mortgages early, e.g. 5% per year. Prepayment rate and
reset spread are key inputs to mortgage linked prepayment swaps valuation
>
36 Fair value of assets and liabilities
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253
Level 3: Changes during the period
Changes in Level 3 Financial assets
Trading assets
Non-trading
derivatives
Financial assets
mandatorily at FVPL
Financial assets
designated at FVPL
Financial assets
at FVOCI
Total
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Opening balance
882
174
1
8
1,191
1,381
796
1,244
1,231
1,961
4,101
4,768
Realised gain/loss recognised in the statement of profit or loss during the period
22
–61
0
–1
32
–104
–80
–198
–12
–19
–37
–383
Revaluation recognised in other comprehensive income during the period
22
–46
22
–46
Purchase of assets
453
453
3
3
1,496
1,180
1,919
212
165
39
4,036
1,887
Sale of assets
–48
–73
–3
–8
–612
–973
–141
–270
–234
–419
–1,037
–1,743
Maturity/settlement
–14
–39
–1
–163
–83
–13
–57
–109
–175
–299
–354
Reclassifications
–5
330
–6
–105
–11
224
Transfers into Level 3
43
517
–1
6
1
–1
–1
42
523
Transfers out of Level 3
–517
–90
–1
0
–98
–528
–138
–615
–755
Exchange rate differences
0
20
–24
9
–4
29
–27
Changes in the composition of the group and other changes
0
5
–2
1
–2
6
Closing balance
822
882
1
1
1,862
1,191
2,480
796
1,063
1,231
6,228
4,101
1 Net gains/losses were recorded as ‘Valuation results and net trading income’ in the statement of profit or loss. The total
amounts includes EUR 50 million (2020: EUR 312 million) of unrealised gains and losses recognised in the statement of profit or
loss.
2 Revaluation recognised in other comprehensive income is included on the line ‘Net change in fair value of debt instruments
at fair value through other comprehensive income’.
In 2020, the transfer into Level 3 assets is mainly driven by debt securities that are part of a structure
transferred into level 3 due to market illiquidity which decreased observability for an input. In 2021,
these instruments transferred out of Level 3 due to the valuation not being significantly impacted by
unobservable inputs.
In 2021, transfers out of Level 3 of financial assets designated at fair value mainly relate to (long term)
reverse repurchase transactions that were transferred out of Level 3 due to the valuation not being
significantly impacted by unobservable inputs.
In 2020, transfers out of Level 3 is mainly related to debt obligations due to the valuation no longer
being significantly impacted by unobservable inputs.
In 2020, reclassification relate to a re-review of the general terms of a portfolio of securitization loans,
the underlying pools of assets are exposed to residual value risk. Consequently, the portfolio of EUR 0.3
billion, which is classified at Level 3, was incorrectly measured at amortised cost and therefore
reclassified to mandatorily fair value through profit or loss. Furthermore, it relates to ING’s investment
in Visa preference series C shares, reference is made to Note 5 ‘Financial assets at fair value through
other comprehensive income’.
>
36 Fair value of assets and liabilities
ING Bank Annual Report 2021
254
Changes in Level 3 Financial liabilities
Financial liabilities
designated as at fair
value through profit
or loss
Trading liabilities
Non-trading
derivatives
Total
2021
2020
2021
2020
2021
2020
2021
2020
Opening balance
180
195
39
110
180
184
398
490
Realised gain/loss recognised
in the statement of profit or
loss
during the period
1
101
-2
-0
20
13
-22
113
-4
Additions
58
55
3
19
52
662
113
736
Redemptions
-10
-116
-3
-45
-140
-90
-153
-250
Maturity/settlement
-44
-11
-52
-1
-83
-45
-146
Transfers into Level 3
48
170
8
233
267
282
445
Transfers out of Level 3
-173
-111
-3
-23
-203
-738
-378
-873
Closing balance
160
180
35
39
135
180
330
398
1 Net gains/losses were recorded as ‘Valuation results and net trading income’ in the statement of profit or loss. The total
amount includes EUR 113 million (2020: EUR -4 million) of unrealised gains and losses recognised in the statement of profit or
loss.
In 2020 and 2021, financial liabilities transfers into and out of Level 3 mainly consist of structures
notes, measured as designated at fair value through profit or loss. The structured notes are transferred
out of Level 3 as the valuation is no longer impacted by significantly unobservable inputs.
In 2020, financial liabilities mainly (long term) repurchase transactions were transferred out of Level 3
mainly due to the valuation not being significantly impacted by unobservable inputs.
g) Recognition of unrealised gains and losses in Level 3
Amounts recognised in the statement of profit or loss relating to unrealised gains and losses during the
year that relates to Level 3 assets and liabilities are included in the line item ‘Valuation results and net
trading income’ in the statement of profit or loss.
In 2020 and 2021, unrealised gains and losses that relate to ‘Financial assets at fair value through
other comprehensive income’ are included in the Revaluation reserve – Equity securities at fair value
through other comprehensive income or Debt Instruments at fair value through other comprehensive
income.
h) Level 3: Sensitivity analysis of unobservable inputs
Where the fair value of a financial instrument is determined using inputs which are unobservable and
which have a more than insignificant impact on the fair value of the instrument, the actual value of
those inputs at the balance date may be drawn from a range of reasonably possible alternatives. In
line with market practice the upper and lower bounds of the range of alternative input values reflect a
90% level of valuation certainty. The actual levels chosen for the unobservable inputs in preparing the
financial statements are consistent with the valuation methodology used for fair valued financial
instruments.
In practice valuation uncertainty is measured and managed per exposure to individual valuation inputs
(i.e. risk factors) at portfolio level across different product categories. Where the disclosure looks at
individual Level 3 inputs the actual valuation adjustments may also reflect the benefits of portfolio
offsets.
This disclosure does not attempt to indicate or predict future fair value movement. The numbers in
isolation give limited information as in most cases these Level 3 assets and liabilities should be seen in
combination with other instruments (for example as a hedge) that are classified as Level 2.
The valuation uncertainty in the table below is broken down by related risk class rather than by
product. The possible impact of a change of unobservable inputs in the fair value o of financial
instruments where unobservable inputs are significant to the valuation is as follows:
>
36 Fair value of assets and liabilities
ING Bank Annual Report 2021
255
Sensitivity analysis of Level 3 instruments
Positive fair value
movements from
using reasonable
possible alternatives
Negative fair value
movements from
using reasonable
possible alternatives
2021
2020
2021
2020
Equity (equity derivatives, structured notes)
3
33
-27
-14
Interest rates (Rates derivatives, FX derivatives)
15
20
-1
-1
Credit (Debt securities, Loans, structured notes, credit derivatives)
27
43
-2
-27
45
96
-30
–42
i) Financial instruments not measured at fair value
The following table presents the estimated fair values of the financial instruments not measured at fair
value in the statement of financial position. The aggregation of the fair values presented below does
not represent, and should not be construed as representing, the underlying value of ING Bank.
Methods applied in determining fair values of financial assets and liabilities (carried at amortised cost)
Carrying Amount
Carrying amount
approximates fair value
Level 1
Level 2
Level 3
Total fair value
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Financial Assets
Loans and advances to banks
23,591
25,363
1,674
2,164
1
0
6,610
7,763
15,349
15,611
23,634
25,538
Loans and advances to customers
1, 2
627,550
598,306
16,943
17,491
0
0
18,465
14,679
600,253
577,526
635,661
609,697
Securities at amortised cost
1
48,319
50,587
–0
–0
40,314
49,109
7,327
2,550
681
622
48,323
52,281
699,459
674,257
18,617
19,655
40,316
49,109
32,403
24,992
616,282
593,759
707,618
687,515
Financial liabilities
Deposits from banks
85,092
78,098
4,298
3,918
0
75,847
68,473
5,890
6,014
86,035
78,405
Customer deposits
657,831
643,138
586,151
580,525
61,158
48,206
11,861
15,704
659,171
644,435
Debt securities in issue
1
57,443
55,573
–0
15,320
28,213
27,718
20,382
14,756
6,449
57,794
55,044
Subordinated loans
1
16,719
15,897
0
–0
1,508
17,203
14,742
17,203
16,250
817,085
792,705
590,449
584,443
15,321
29,721
181,926
151,802
32,507
28,167
820,203
794,134
1 As a consequence of a change in the levelling methodology of INGs bond portfolio ING recorded transfers from Level 1 to Level 2 in 2021.
2 The prior period has been updated to improve consistency and comparability of the fair values of loans and advances to customers.
The following methods and assumptions were used by ING Bank to estimate the fair value of the
financial instruments not measured at fair value .
>
37 Derivatives and hedge accounting
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256
Loans and advances to banks
For short term receivables from banks carrying amounts represent a reasonable estimate of the fair
value. The fair value of long term receivables from banks is estimated by discounting expected future
cash flows using a discount rate based on available market interest rates and appropriate spreads that
reflects current credit risk.
Loans and advances to customers
For short term loans carrying amounts represent a reasonable estimate of the fair value. The fair value
of long term loans is estimated by discounting expected future cash flows using a discount rate that
reflects current credit risk, current interest rates, and other current market conditions where
applicable. The fair value of mortgage loans is estimated by taking into account prepayment
behaviour. Loans with similar characteristics are aggregated for calculation purposes.
Deposits from banks
For short term payables to banks carrying amounts represent a reasonable estimate of the fair value.
The fair value of long term payables to banks is estimated by discounting expected future cash flows
using a discount rate based on available market interest rates and appropriate spreads that reflects
ING’s own credit risk.
Customer deposits
The carrying values of customer deposits with an immediate on demand features approximate their
fair values. The fair values of deposits with fixed contractual terms have been estimated based on
discounting future cash flows using the interest rates currently applicable to deposits of similar
maturities.
Debt securities in issue
The fair value of debt securities in issue is generally based on quoted market prices, or if not available,
on estimated prices by discounting expected future cash flows using a current market interest rate and
credit spreads applicable to the yield, credit quality and maturity.
Subordinated loans
The fair value of publicly traded subordinated loans are based on quoted market prices when available.
Where no quoted market prices are available, fair value of the subordinated loans is estimated using
discounted cash flows based on interest rates and credit spreads that apply to similar instruments.
37 Derivatives and hedge accounting
Use of derivatives
ING Bank uses derivatives for economic hedging purposes to manage its asset and liability portfolios
and structural risk positions. The primary objective of ING Bank’s hedging activities is to manage the
risks which arises from structural imbalances in the duration and other profiles of its assets and
liabilities. The objective of economic hedging is to enter into positions with an opposite risk profile to an
identified risk exposure to reduce that exposure. The main risks which are being hedged are interest
rate risk and foreign currency exchange rate risk. These risks are primarily hedged with interest rate
swaps, cross currency swaps and foreign exchange forwards/swaps.
ING Bank uses credit derivatives to manage its economic exposure to credit risk, including total return
swaps and credit default swaps, to sell or buy protection for credit risk exposures in the loan,
investment, and trading portfolios. Hedge accounting is not applied in relation to these credit
derivatives.
Hedge accounting
Derivatives that qualify for hedge accounting under IFRS are classified and accounted for in accordance
with the nature of the instrument hedged and the type of IFRS hedge accounting model that is
applicable. The three models applicable under IFRS are: fair value hedge accounting, cash flow hedge
accounting, and hedge accounting of a net investment in a foreign operation. How and to what extent
these models are applied are described under the relevant headings below. The company’s detailed
accounting policies for these three hedge models are set out in paragraph 1.6 ‘Financial instruments’ of
Note 1 ‘Basis of preparation and accounting policies’.
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Impact of Covid-19
The impact of Covid-19 on timing or amount of cash flows of our products that are designated as
hedged items in hedge accounting programs did not result in significant hedge ineffectiveness during
the reporting period.
IBOR transition
Reference is made to the note Risk management/ IBOR Transition for information on how ING is
managing the transition to alternative benchmark rates and INGs progress in completing the
transition.
At the reporting date, ING Bank assessed the extent to which hedge relationships are subject to
uncertainties driven by IBOR reform.
Except for EONIA and EUR LIBOR all IBOR’s in scope of ING’s IBOR Transition program are a component
of either the hedging instrument and/or the hedged item where the interest rate and/or foreign
currency risk are the designated hedged risk. The hedged exposures are mainly loan portfolios, issued
debt securities and purchased debt instruments.
ING Bank early adopted the amendments to IAS 39 issued in September 2019 to these hedging
relationships directly affected by IBOR reform (Phase 1). This excludes EURIBOR hedges as EURIBOR is
Benchmarks Regulation compliant. Refer to section 1.6.4 of Note 1 ‘Basis of preparation and significant
accounting policies’ for more information on the Phase 1 amendments.
In 2021 the amendments to IAS 39 issued in August 2020 became effective for ING Bank (Phase 2).
Refer to sections 1.4.1 and 1.6.4 of Note 1 ‘Basis of preparation and significant accounting policies’ for
more information on the Phase 2 amendments.
Phase 1 amendments to IFRS allow ING Bank to apply a set of temporary exceptions to continue hedge
accounting even when there is uncertainty about contractual cash flows arising from IBOR reform.
Phase 1 reliefs cease to apply when uncertainty arising from IBOR Reform is no longer present with
respect to the timing and amount of the IBOR-based cash flows of the relevant instruments.
ING Bank hedges are being amended, where necessary, to incorporate the new benchmark rates.
During 2021 ING transitioned significant portions of its financial instruments (designated in hedge
accounting relationships) linked to benchmarks ceasing in 2021. As a result, for these hedge
accounting relationships the applicable Phase 1 reliefs ceased to apply and Phase 2 became applicable.
In the coming year, ING will shift the focus to USD LIBOR contracts (USD LIBOR tenors will continue to be
published until the end of June 2023).
As at 31 December 2021, USD LIBOR indexed fair value and cash flow hedges are still directly affected
by the uncertainties arising from the IBOR reform. In particular, uncertainties over the timing and
amount of the replacement rate may impact the effectiveness and highly probable assessment.
For these affected fair value and cash flow hedge relationships ING Bank assumes that the USD LIBOR
based cash flows from the hedging instrument and hedged item will remain unaffected.
The same assumption is used to assess the likelihood of occurrence of the forecast transactions that
are subject to cash flow hedges. The hedged cash flows in cash flow hedges directly impacted by the
IBOR reform still meet the highly probable requirement, assuming the USD LIBOR benchmark on which
the hedged cash flows are based is not altered as a result of the reform.
The following table contains details of the gross notional amounts of hedging instruments as at 31
December that are used in the ING Bank's hedge accounting relationships for which the Phase 1
amendments to IAS39 were applied:
Notional amounts of Hedging instruments in EUR mln as at 31 December
Benchmark
2021
2020
USD LIBOR
41,473
41,020
GBP LIBOR
1,500
JPY LIBOR
410
CHF LIBOR
315
Approximately 72% (31 December 2020: 60%) of the above notional amounts for USD LIBOR have a
maturity date beyond June 2023.
The notional amounts of the derivative hedging instruments (in above table) provide a close
approximation of the extent of the risk exposure ING manages through these hedging relationships.
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Fair value hedge accounting
ING Bank’s fair value hedges principally consist of interest rate swaps that are used to protect against
changes in the fair value of fixed-rate instruments due to movements in market interest rates. ING
Bank’s approach to manage market risk, including interest rate risk, is discussed in ‘Risk management –
Market risk’. ING Bank’s exposure to interest rate risk is disclosed in paragraph ‘Interest rate risk in
banking book’.
ING Bank designates specific non-contractual risk components of hedged items. This is usually
determined by designating benchmark interest rates such as EURIBOR. As a result of the IBOR reform
ING designated new benchmark rates in 2021 such as SOFR, SONIA and TONAR. Note that ING applies
the IBOR phase 2 amendments (refer to section 1.6.4 of Note 1 ‘Basis of preparation and accounting
policies’ for more information on the Phase 2 amendments) for new benchmarks for which the
separately identifiable requirement cannot (yet) be met.
By using derivative financial instruments to hedge exposures to changes in interest rates, ING Bank
also exposes itself to credit risk of the derivative counterparty, which is not offset by the hedged item.
ING Bank minimises counterparty credit risk in derivative instruments by clearing most of the
derivatives through Central Clearing Counterparties. In addition ING Bank only enters into transactions
with high-quality counterparties and requires posting collateral.
ING Bank applies fair value hedge accounting on micro level in which one hedged item is hedged with
one or multiple hedging instruments as well as on macro level whereby a portfolio of items is hedged
with multiple hedging instruments. For these macro hedges of interest rate risk ING Bank applies the
EU carve-out. The EU ‘carve-out’ for macro hedging enables a group of derivatives (or proportions) to
be viewed in combination and jointly designated as the hedging instrument and removes some of the
limitations in fair value hedge accounting relating to hedging core deposits and under-hedging
strategies. In retail operations, exposure on retail funding (savings and current accounts) and retail
lending (mortgages) is initially offset. The remaining exposure is hedged in a portfolio hedge, using the
EU carve-out, in which a portion of the retail lending portfolio and core deposits are designated as a
hedged item for hedge accounting purposes.
For portfolio hedges the fair value is projected based on contractual terms and other variables
including prepayment expectations. These projected fair value of the portfolios form the basis for
identifying the notional amount subject to interest rate risk that is designated under fair value hedge
accounting.
Micro fair value hedge accounting is mainly applied on issued debt securities and purchased debt
instruments for hedging interest rate risk.
Before fair value hedge accounting is applied by ING Bank, ING Bank determines whether an economic
relationship between the hedged item and the hedging instrument exists based on an evaluation of
the quantitative characteristics of these items and the hedged risk that is supported by quantitative
analysis. ING Bank considers whether the critical terms of the hedged item and hedging instrument
closely align when assessing the presence of an economic relationship. ING Bank evaluates whether
the fair value of the hedged item and the hedging instrument respond similarly to similar risks. In
addition ING is mainly using regression analysis to assess whether the hedging instrument is expected
to be and has been highly effective in offsetting changes in the fair value of the hedged item.
For the macro hedge on the mortgage portfolio ING Bank follows a dynamic hedging strategy. This
means that on monthly basis, based on the new portfolio projection, the hedging relationship is
renewed. From an operational point of view, the existing hedging relationship is adjusted based on the
new portfolio projection and additional hedging instruments are added to the hedging relationship.
ING Bank uses the following derivative financial instruments in a fair value hedge accounting
relationship:
Gross carrying value of derivatives designated under fair value hedge accounting
Assets
2021
Liabilities
2021
Assets
2020
Liabilities
2020
As at 31 December
Hedging instrument on interest rate risk
– Interest rate swaps
6,629
5,940
7,349
5,417
– Other interest derivatives
87
83
50
110
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The derivatives used for fair value hedge accounting are included in the statement of financial position
line-item ‘Financial assets at fair value through profit or loss – Non-trading derivatives’ for EUR 365
million (2020: EUR 486 million) respectively ‘Financial liabilities at fair value through profit or loss – Non-
trading derivatives’ EUR 270 million (2020: EUR 444 million). The difference between the gross carrying
value as presented in the table and the net carrying value as presented in the statement of financial
position is due to offsetting with other derivatives and collaterals paid or received.
For our main currencies the average fixed rate for interest rate swaps used in fair value hedge
accounting are 0.20% (2020: 0.57%) for EUR and 3.83% (2020: 3.76%) for USD.
The following table shows the net notional amount of derivatives designated in fair value hedging, split
into the maturity of the instruments. The net notional amounts presented in the table are a
combination of payer (-) and receiver (+) swaps.
Maturity derivatives designated in fair value hedging
As at 31 December 2021
Less
than 1
month
1 to 3
months
3 to 12
months
1 to 2
year
2 to 3
years
3 to 4
years
4 to 5
years
>5 years
Total
Hedging instrument on
interest rate risk
– Interest rate swaps
-242
2,807
-3,150
-6,593
-4,428
-4,347
2,310
2,278
-11,363
– Other interest derivatives
-0
-102
-237
-286
153
119
243
1,026
917
As at 31 December 2020
Hedging instrument on
interest rate risk
- Interest rate swaps
-785
213
-652
5,771
5,207
5,269
2,720
2,915
20,658
– Other interest derivatives
-1
-68
-128
-364
-370
138
28
1,112
346
Gains and losses on derivatives designated under fair value hedge accounting are recognised in the
statement of profit or loss. The effective portion of the fair value change on the hedged item is also
recognised in the statement of profit or loss. As a result, only the net accounting ineffectiveness has an
impact on the net result.
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Hedged items included in a fair value hedging relationship
Carrying amount of the hedged items
Accumulated amount of fair value hedge
adjustment on the hedged item included in
the carrying amount of the hedged item
Change in fair value
used for measuring
ineffectiveness for the
period
Change in fair value
hedge instruments
Hedge ineffectiveness
recognised in the
statement of profit or
loss gain (+) / loss (-)
Assets
Liabilities
Assets
Liabilities
As at 31 December 2021
Interest rate risk
– Amounts due from banks
-0
– Debt securities at fair value through other comprehensive income
17,307
n/a
-798
– Loans at FVOCI
105
n/a
-2
– Loans and advances to customers
68,704
-923
-1,451
– Debt instruments at amortised cost
3,458
301
-165
– Debt securities in issue
22,553
945
962
– Subordinated loans
16,559
115
414
– Amounts due to banks
-0
– Customer deposits and other funds on deposit
40,924
385
1,152
– Discontinued hedges
3,774
73
Total
89,574
80,037
3,153
1,518
112
-86
26
As at 31 December 2020
Interest rate risk
– Amounts due from banks
– Debt securities at fair value through other comprehensive income
20,164
n/a
552
– Loans at FVOCI
335
n/a
2
– Loans and advances to customers
23,323
647
456
– Debt instruments at amortised cost
4,222
501
170
– Debt securities in issue
30,136
1,980
-196
– Subordinated loans
13,314
510
-397
– Amounts due to banks
-5
– Customer deposits and other funds on deposit
26,120
1,494
-766
– Discontinued hedges
4,241
99
Total
48,044
69,571
5,390
4,083
-183
246
62
The increase in the carrying amount of hedged items in loans & advances to customers is mainly
driven by volume growth and in customer deposits by a new fair value hedge programme on customer
deposits. Discontinued hedges mainly relate to the transfer of derivatives from UK based clearing
houses to EU based clearing houses related to Brexit in 2020.
The main sources of ineffectiveness are:
◾
differences in maturities of the hedged item(s) and hedging instrument(s);
◾
different interest rate curves applied to discount the hedged item(s) and hedging instrument(s);
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◾
differences in timing of cash flows of the hedged item(s) and hedging instrument(s).
Additionally, for portfolio (macro) fair value hedges of ING Bank’s fixed rate mortgage portfolio,
ineffectiveness also arises from the disparity between expected and actual prepayments (prepayment
risk).
There were no other sources of significant ineffectiveness in these hedging relationships.
Cash flow hedge accounting
ING Bank’s cash flow hedges mainly consist of interest rate swaps and cross-currency swaps that are
used to protect against the exposure to variability in future cash flows on non-trading assets and
liabilities that bear interest at variable rates or are expected to be refunded or reinvested in the future.
The amounts and timing of future cash flows, representing both principal and interest flows, are
projected for each portfolio of financial assets and liabilities, based on contractual terms and other
variables including estimates of prepayments. These projected cash flows form the basis for identifying
the notional amount subject to interest rate risk or foreign currency exchange rate risk that is
designated under cash flow hedge accounting.
ING Bank’s approach to manage market risk, including interest rate risk and foreign currency exchange
rate risk, is discussed in ‘Risk management – Credit risk and Market risk’. ING Bank determines the
amount of the exposures to which it applies hedge accounting by assessing the potential impact of
changes in interest rates and foreign currency exchange rates on the future cash flows from its
floating-rate assets and liabilities. This assessment is performed using analytical techniques.
As noted above for fair value hedges, by using derivative financial instruments to hedge exposures to
changes in interest rates and foreign currency exchange rates, ING Bank exposes itself to credit risk of
the derivative counterparty, which is not offset by the hedged items. This exposure is managed
similarly to that for fair value hedges.
Gains and losses on the effective portions of derivatives designated under cash flow hedge accounting
are recognised in Other Comprehensive Income. Interest cash flows on these derivatives are
recognised in the statement of profit or loss in ‘Net interest income’ consistent with the manner in
which the forecasted cash flows affect net result. The gains and losses on ineffective portions of such
derivatives are recognised immediately in the statement of profit or loss in ‘Valuation results and net
trading income’.
ING Bank determines an economic relationship between the cash flows of the hedged item and the
hedging instrument based on an evaluation of the quantitative characteristics of these items and the
hedged risk that is supported by quantitative analysis. ING Bank considers whether the critical terms of
the hedged item and hedging instrument closely align when assessing the presence of an economic
relationship. ING Bank evaluates whether the cash flows of the hedged item and the hedging
instrument respond similarly to the hedged risk, such as the benchmark interest rate of foreign
currency. In addition (for macro FX hedging relationships) a regression analysis is performed to assess
whether the hedging instrument is expected to be and has been highly effective in offsetting changes
in the fair value of the hedged item.
ING Bank uses the following derivative financial instruments in a cash flow hedge accounting
relationship:
Gross carrying value of derivatives used for cash flow hedge accounting
Assets
Liabilities
Assets
Liabilities
2021
2021
2020
2020
As at 31 December
Hedging instrument on interest rate risk
– Interest rate swaps
-437
781
2,271
545
Hedging instrument on combined interest and FX rate risk
– Cross currency interest rate derivatives
73
285
774
21
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The derivatives used for cash flow hedge accounting are included in the statement of financial position
line-item ‘Financial assets at fair value through profit or loss – Non-trading derivatives’ EUR 300 million
(2020: EUR 1,376 million) respectively ‘Financial liabilities at fair value through profit or loss – Non-
trading derivatives’ EUR 485 million (2020: EUR 230 million). The difference between the gross
carrying value as presented in the table and the net carrying value as presented in the statement of
financial position is due to offsetting with other derivatives and collaterals paid or received.
For the main currencies the average fixed rate for interest rate swaps used in cash flow hedge
accounting are -0.16% (2020: -0.15%) for EUR, 1.73% (2020: 1.74%) for PLN, 2.09% (2020: 2.31%) for
USD and 0.55% (2020: 0.82%) for AUD. The average currency exchange rates for cross currency swaps
used in cash flow hedge accounting is for EUR/USD 1.01 (2020: 0.95) and for EUR/AUD 1.61 (2020: 1.6).
The following table shows the net notional amount of derivatives designated in cash flow hedging split
into the maturity of the instruments. The net notional amounts presented in the table are a
combination of payer (+) and receiver (-) swaps.
Maturity derivatives designated in cash flow hedging
As at 31 December
2021
Less than
1
month
1 to 3
months
3 to 12
months
1 to 2 year
2 to 3
years
3 to 4
years
4 to 5
years
>5 years
Total
Hedging
instrument on
interest rate risk
– Interest rate
swaps
418
-1,075
-6,939
-5,470
-6,711
-5,825
-5,272
-18,107
-48,982
Hedging
instrument on
combined interest
and FX rate risk
– Cross currency
interest rate
derivatives
-256
-1,048
-1,760
-3,831
-2,528
-2,580
181
-56
-11,878
As at 31 December
2020
Hedging
instrument on
interest rate risk
– Interest rate
swaps
-248
-92
-2,061
-4,896
-1,832
-5,772
-3,466
-19,537
-37,904
Hedging
instrument on
combined interest
and FX rate risk
– Cross currency
interest rate
derivatives
-160
-1,666
-2,828
-2,446
-3,493
-1,324
194
-210
-11,934
The following table shows the cash flow hedge accounting impact on profit or loss and comprehensive
income:
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Cash flow hedging – impact of hedging instruments on the statement of profit or loss and other comprehensive income
Change in value used
for calculating hedge
ineffectiveness for the
period
Carrying amount
cash flow hedge
reserve at the end of
the reporting period
1
Amount reclassified
from CFH reserve to
profit or loss
Cash flow is no
longer expected
to occur
Change in value of
hedging instrument
recognised in OCI
Hedge ineffectiveness
recognised in the
statement of profit or
loss, gain (+) / loss (-)
As at 31 December 2021
Interest rate risk on;
– Floating rate lending
2,937
-1,132
-454
– Floating rate borrowing
-915
366
143
– Other
165
-122
15
– Discontinued hedges
674
-306
Total interest rate risk
2,188
-214
-603
-1,825
-2
Combined interest and FX rate risk on;
– Floating rate lending
-90
-19
-153
– Floating rate borrowing
-2
-16
9
– Other
-0
-1
-1
– Discontinued hedges
-13
-90
Total combined interest and Fx
-92
-49
-235
250
3
Total cash flow hedge
2,096
-262
-838
-1,574
1
As at 31 December 2020
Interest rate risk on;
– Floating rate lending
-784
1,310
-97
– Floating rate borrowing
136
-306
33
– Other
-107
36
19
– Discontinued hedges
1,037
-236
Total interest rate risk
-755
2,077
-281
830
-6
Combined interest and FX rate risk on;
– Floating rate lending
-26
-35
-256
– Floating rate borrowing
29
-42
-10
– Other
-0
-0
-3
– Discontinued hedges
-26
Total combined interest and Fx
3
-78
-295
263
1
Total cash flow hedge
-753
1,999
-576
1,093
-5
1 The carrying amount is the gross amount, excluding tax adjustments.
The decrease in the carrying amount of the cash flow hedge reserve is driven by increased interest
rates.
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The main sources of ineffectiveness for cash flow hedges are:
differences in timing of cash flows of the hedged item(s) and hedging instrument(s);
mismatches in reset frequency between hedged item and hedging instrument.
Hedges of net investments in foreign operations
A foreign currency exposure arises from a net investment in subsidiaries that have a different
functional currency from the presentation currency of ING Bank. The risk arises from the fluctuation in
spot exchange rates between the functional currency of the subsidiaries and ING Bank’s presentation
currency, which causes the amount of the net investment to vary in the consolidated financial
statements of ING Bank. This risk may have a significant impact on ING Bank’s financial statements.
ING Bank’s policy is to hedge these exposures only when not doing so it is expected to have a
significant impact on the regulatory capital ratios of ING Bank and its subsidiaries.
ING Bank’s net investment hedges principally consist of derivatives (including currency forwards and
swaps) and non-derivative financial instruments such as foreign currency denominated funding. When
the hedging instrument is foreign currency denominated debt, ING Bank assesses effectiveness by
comparing past changes in the carrying amount of the debt that are attributable to a change in the
spot rate with past changes in the investment in the foreign operation due to movement in the spot
rate (the offset method).
Gains and losses on the effective portions of derivatives designated under net investment hedge
accounting are recognised in Other Comprehensive Income. The balance in equity is recognised in the
statement of profit or loss when the related foreign subsidiary is disposed. The gains and losses on
ineffective portions are recognised immediately in the statement of profit or loss.
ING Bank has the following derivative financial instruments used for net investment hedging;
Gross carrying value of derivatives used for net investment hedging
Assets
Liabilities
Assets
Liabilities
2021
2021
2020
2020
As at 31 December
– FX forwards and Cross currency swaps
18
88
69
98
The derivatives used for net investment hedge accounting are included in the statement of financial
position line-item ‘Financial assets at fair value through profit or loss – Non-trading derivatives’ EUR 18
million (2020: EUR 69 million) respectively ‘Financial liabilities at fair value through profit or loss – Non
trading derivatives’ EUR 88 million (2020: EUR 98 million).
For ING Bank’s main currencies the average exchange rates used in net investment hedge accounting
for 2021 are EUR/USD 1.18 (2020: 1.14), EUR/PLN 4.58 (2020: 4.45), EUR/AUD 1.58 (2020: 1.65) and
EUR/THB 37.84 (2020: 35.71).
The following table shows the notional amount of derivatives designated in net investment hedging
split into the maturity of the instruments:
Maturity derivatives designated in net investment hedging
As at 31
December 2021
Less than
1 month
1 to 3
months
3 to 12
months
1 to 2
year
2 to 3
years
3 to 4
years
4 to 5
years
>5 years
Total
– FX forwards and
cross currency
swaps
-4,462
-461
-590
-5,514
– Other FX
derivatives
As at 31
December 2020
– FX forwards and
Cross currency
swaps
-3,825
-375
-580
-4,780
– Other FX
derivatives
-8
-8
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265
The effect of the net investment hedge accounting in the statement of profit or loss and other
comprehensive income is as follows:
Net investment hedge accounting – Impact on statement of profit or loss and other comprehensive income
As at 31 December 2021
Change in
value used for
calculating
hedge
ineffectiveness
for the period
Carrying
amount net
investment
hedge reserve
at the end of
the reporting
period
1
Hedged item
affected
statement of
profit or loss
Change in
value of
hedging
instrument
recognised in
OCI
Hedge
ineffectiveness
recognised in
the statement
of profit or loss,
gain(+) / Loss(-)
Investment in foreign operations
72
330
-72
-1
Discontinued hedges
-59
As at 31 December 2020
Investment in foreign operations
-122
553
-11
121
1
Discontinued hedges
-210
1 The carrying amount is the gross amount, excluding tax adjustments.
38 Assets by contractual maturity
Amounts presented in these tables by contractual maturity are the amounts as presented in the
statement of financial position and are discounted cash flows. Reference is made to ‘Risk Management
– Funding and liquidity risk’.
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266
Assets by contractual maturity
2021
Less than 1 month
1-3 months
3-12 months
1-5 years
Over 5 years
Maturity not
applicable
Total
Cash and balances with central banks
106,520
106,520
Loans and advances to banks
15,162
2,204
3,921
1,937
367
23,591
Financial assets at fair value through profit or loss
– Trading assets
21,055
3,859
8,735
7,922
9,818
51,389
– Non-trading derivatives
240
171
217
421
488
1,536
– Mandatorily at fair value through profit or loss
20,462
12,063
7,487
1,741
770
161
42,684
– Designated as at fair value through profit or loss
96
120
520
2,510
3,109
6,355
Financial assets at fair value through other comprehensive income
– Equity securities
2,457
2,457
– Debt securities
593
518
1,926
11,182
13,121
27,340
– Loans and advances
14
11
173
214
427
838
Securities at amortised cost
1,108
1,217
4,509
24,413
17,072
48,319
Loans and advances to customers
52,311
26,414
53,616
188,222
306,988
627,550
Other assets
2
3,823
362
1,505
841
1,482
4,725
12,738
Total assets
221,382
46,940
82,608
239,401
353,642
7,343
951,317
2020
Cash and balances with central banks
111,087
111,087
Loans and advances to banks
15,785
2,796
3,419
3,093
270
25,363
Financial assets at fair value through profit or loss
– Trading assets
12,100
6,567
9,206
10,206
13,281
51,361
– Non-trading derivatives
495
446
644
1,252
746
3,583
– Mandatorily at fair value through profit or loss
26,854
11,376
3,472
1,153
1,222
228
44,305
– Designated as at fair value through profit or loss
248
26
631
657
2,564
4,126
Financial assets at fair value through other comprehensive income
– Equity securities
1,862
1,862
– Debt securities
841
985
5,175
11,576
14,400
32,977
– Loans and advances
32
34
73
407
509
1,056
Securities at amortised cost
2,104
2,444
3,943
24,298
17,798
50,587
Loans and advances to customers
50,340
19,788
48,263
180,335
299,581
598,306
Other assets
2
3,791
312
1,124
1,113
1,283
5,142
12,766
Total assets
223,677
44,775
75,950
234,092
351,653
7,232
937,379
1 Includes assets on demand.
2 Includes other financial assets such as assets held for sale, current and deferred tax assets as presented in the consolidated statement of the financial position. Additionally, non-financial assets are included in that position where maturities are not applicable as
property and equipment and investments in associates and joint ventures. Due to their nature non-financial assets consist mainly of assets expected to be recovered after more than 12 months.
>
39 Liabilities and off-balance sheet commitments by maturity
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267
39 Liabilities and off-balance sheet commitments by maturity
The tables below include all liabilities and off-balance sheet commitments by maturity based on
contractual, undiscounted cash flows. These balances are included in the maturity analysis as follows:
Perpetual liabilities are included in the column ‘Maturity not applicable’.
Derivative liabilities are included on a net basis if cash flows are settled net. For other derivative
liabilities the contractual gross cash flow payable is included.
Undiscounted future coupon interest on financial liabilities payable is included in a separate
line and in the relevant maturity bucket.
Non-financial liabilities are included based on a breakdown of the amounts per statement of
financial position, per expected maturity.
Loans and other credit-related commitments are classified on the basis of the earliest date
they can be drawn down.
ING Bank’s expected cash flows on some financial liabilities vary significantly from contractual cash
flows. Principal differences are in demand deposits from customers that are expected to remain stable
or increase and in unrecognised loan commitments that are not all expected to be drawn down
immediately. Reference is made to the liquidity risk paragraph in ‘Risk Management – Funding and
liquidity risk’ for a description on how liquidity risk is managed.
>
39 Liabilities and off-balance sheet commitments by maturity
ING Bank Annual Report 2021
268
Liabilities and off-balance sheet commitments by maturity
2021
Less than 1 month
1–3 months
3–12 months
1–5 years
Over 5 years
Maturity not
applicable
Adjustment
Total
Deposits from banks
10,477
1,062
1,387
71,413
1,719
-967
85,092
Customer deposits
597,906
14,989
6,849
17,814
19,718
557
657,831
Financial liabilities at fair value through profit or loss
– Other trading liabilities
6,965
397
322
462
438
4
8,588
– Trading derivatives
1,689
1,608
3,674
8,295
5,731
-2,472
18,525
– Non-trading derivatives
546
245
422
900
571
-564
2,120
– Designated at fair value through profit or loss
24,862
10,224
771
1,850
3,719
20
362
41,808
Debt securities in issue
2,766
15,826
15,459
9,667
12,581
1,145
57,443
Subordinated loans
716
8,948
6,822
233
16,719
Lease liabilities
18
40
159
571
454
-23
1,220
Financial liabilities
645,229
44,391
29,042
111,688
53,880
6,843
-1,725
889,346
Other liabilities
8,810
487
2,500
591
934
13,321
Total liabilities
654,039
44,877
31,541
112,279
54,813
6,843
-1,725
902,668
Coupon interest due on financial liabilities
195
407
1,010
2,602
2,727
387
7,328
Contingent liabilities in respect of
– Discounted bills
– Guarantees
25,911
550
26,461
– Irrevocable letters of credit
16,851
16,851
– other
1
2
5
8
Irrevocable facilities
143,891
1
13
184
78
144,167
186,653
1
15
189
628
187,486
1 Includes liabilities on demand.
2 This column reconciles the contractual undiscounted cash flows on financial liabilities to the statement of financial position values. The adjustments mainly relate to the impact of discounting and fair value hedge adjustments, and for derivatives, to the fact that
the contractual cash flows are presented on a gross basis (unless the cash flows are actually settled net).
3 Includes Other liabilities, Current and deferred tax liabilities, and Provisions as presented in the Consolidated statement of financial position.
>
39 Liabilities and off-balance sheet commitments by maturity
ING Bank Annual Report 2021
269
Liabilities and off-balance sheet commitments by maturity
2020
Less than 1 month
1–3 month
3–12 months
1–5 years
Over 5 years
Maturity not
applicable
Adjustment
Total
Deposits from banks
11,080
537
772
64,147
1,722
-161
78,098
Customer deposits
589,230
9,781
8,744
16,745
16,915
1,724
643,138
Financial liabilities at fair value through profit or loss
– Other trading liabilities
4,940
1,197
204
268
323
39
6,972
– Trading derivatives
2,179
2,297
4,250
9,589
7,794
-373
25,737
– Non-trading derivatives
283
178
204
468
454
41
1,629
– Designated at fair value through profit or loss
32,540
8,506
1,330
2,180
3,245
11
634
48,445
Debt securities in issue
5,144
8,428
13,441
14,159
12,151
2,249
55,573
Subordinated loans
661
8,815
5,751
670
15,897
Lease liabilities
17
42
166
611
520
-18
1,339
Financial liabilities
645,414
30,967
29,112
108,827
51,940
5,762
4,805
876,827
Other liabilities
6,830
568
2,650
1,006
803
11,856
Total liabilities
652,244
31,535
31,762
109,833
52,742
5,762
4,805
888,683
Coupon interest due on financial liabilities
227
493
1,168
3,776
3,216
297
9,178
Contingent liabilities in respect of
– Discounted bills
– Guarantees
22,836
550
23,386
– Irrevocable letters of credit
14,016
14,016
– other
50
47
97
Irrevocable facilities
4
124,739
37
141
74
124,991
161,642
37
188
624
162,491
1 Includes liabilities on demand.
2 This column reconciles the contractual undiscounted cash flows on financial liabilities to the statement of financial position values. The adjustments mainly relate to the impact of discounting and fair value hedge adjustments, and for derivatives, to the fact that
the contractual cash flows are presented on a gross basis (unless the cash flows are actually settled net).
3 Includes Other liabilities, Current and deferred tax liabilities, and Provisions as presented in the Consolidated statement of financial position.
4 The prior period has been updated to improve consistency and comparability of the amounts per maturity of irrevocable facilities.
>
40 Transfer of financial assets, assets pledged and received as collateral
ING Bank Annual Report 2021
270
40 Transfer of financial assets, assets pledged and received as collateral
Financial assets pledged as collateral
The financial assets pledged as collateral consist primarily of Loans and advances to customers
pledged to secure Debt securities in issue, deposits from the Dutch Central Bank and other banks, as
well as debt securities used in securities lending or sale and repurchase transactions. They serve to
secure margin accounts and are used for other purposes required by law. Pledges are generally
conducted under terms that are usual and customary for collateralised transactions including
standard sale and repurchase agreements, securities lending and borrowing and derivatives
margining. The financial assets pledged are as follows:
Financial assets pledged as collateral
2021
2020
Banks
– Cash and balances with central banks
465
1,377
– Loans and advances to banks
3,310
3,833
Financial assets at fair value through profit or loss
15,334
14,772
Financial assets at fair value through OCI
2,320
2,377
Securities at amortised cost
4,468
7,023
Loans and advances to customers
118,868
115,194
Other assets
796
761
145,560
145,338
In addition, in some jurisdictions ING Bank N.V. has an obligation to maintain a reserve with central
banks. As at 31 December 2021, the minimum mandatory reserve deposits with various central banks
amount to EUR 10,625 million (2020: EUR 10,573 million).
Loans and advances to customers that have been pledged as collateral for debt securities in issue and
for liquidity purposes amount to EUR 118,868 million (2020: EUR 115,194 million).
Financial assets received as collateral
The financial assets received as collateral that can be sold or repledged in absence of default by the
owner of the collateral consists of securities obtained through reverse repurchase transactions and
securities borrowing transactions.
These transactions are generally conducted under standard market terms for most repurchase
transactions and the recipient of the collateral has unrestricted right to sell or repledge it, provided that
the collateral (or equivalent collateral) is returned to the counterparty at term.
Financial assets received as collateral
2021
2020
Total received collateral available for sale or repledge at fair value
– equity securities
27,553
20,018
– debt securities
67,696
79,670
of which sold or repledged at fair value
– equity securities
23,330
16,365
– debt securities
50,366
60,384
Transfer of financial assets
The majority of ING's financial assets that have been transferred, but do not qualify for derecognition
are debt instruments used in securities lending or sale and repurchase transactions.
>
41 Offsetting financial assets and liabilities
ING Bank Annual Report 2021
271
Transfer of financial assets not qualifying for derecognition
Securities lending
Sale and repurchase
Equity
Debt
Equity
Debt
2021
2020
2021
2020
2021
2020
2021
2020
Transferred assets at carrying amount
Financial assets at fair value through profit or
loss
3,109
3,151
4,384
2,078
5,863
8,619
Financial assets at fair value through other
comprehensive income
150
56
527
2,120
Loans and advances to customers
4,386
2,381
2
Securities at amortised cost
280
470
992
6,281
Associated liabilities at carrying amount
1
Deposits from banks
n/a
n/a
n/a
n/a
Customer deposits
n/a
n/a
n/a
n/a
Financial liabilities at fair value through profit
or loss
n/a
n/a
n/a
n/a
4,130
2,018
7,538
5,994
2
1 The table includes the associated liabilities which are reported after offsetting, compared to the gross positions of the
encumbered assets.
2 The prior period has been updated to improve consistency and comparability.
The table above does not include assets transferred to consolidated securitisation entities as the
related assets remain recognised in the consolidated statement of financial position.
Transferred financial assets that are derecognised in their entirety are mentioned in note 46
‘Structured Entities’.
41 Offsetting financial assets and liabilities
The following tables include information about rights to offset and the related arrangements. The
amounts included consist of all recognised financial instruments that are presented net in the
statement of financial position under the IFRS netting criteria (legal right to offset and intention to net
settle or to realise the asset and settle the liability simultaneously) and amounts presented gross in
the statement of financial position but subject to enforceable master netting arrangements or similar
arrangements.
At ING Bank amounts that are offset mainly relate to derivatives transactions, sale and repurchase
agreements, securities lending agreements and cash pooling arrangements. A significant portion of
offsetting is applied to OTC derivatives which are cleared through central clearing parties.
Related amounts not set off in the statement of financial position include transactions where:
◾
The counterparty has an offsetting exposure and a master netting or similar arrangement is in
place with a right to set off only in the event of default, insolvency or bankruptcy, or the
offsetting criteria are otherwise not satisfied, and
◾
In the case of derivatives and securities lending or sale and repurchase agreements, cash and
non-cash collateral has been received or pledged to cover net exposure in the event of a
default or other predetermined events. The effect of over-collateralisation is excluded.
The net amounts resulting after setoff are not intended to represent ING’s actual exposure to
counterparty risk, as risk management employs a number of credit risk mitigation strategies in
addition to netting and collateral arrangements. Reference is made to the Risk Management section on
Credit risk.
>
41 Offsetting financial assets and liabilities
ING Bank Annual Report 2021
272
Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements
2021
Gross amounts of
recognised financial
assets
Gross amounts of
recognised financial
liabilities offset in
the statement of
financial position
Net amounts of
financial assets
presented in the
statement of
financial position
Related amounts not offset
in the statement of financial position
Net amount
Amounts not
subject to
enforceable
netting
arrangements
Statement of
financial position
total ¹
Financial
instruments
Cash and financial
instruments
received as
collateral
Statement of financial position
line item
Financial instrument
Loans and advances to banks
2
Reverse repurchase, securities
borrowing and similar agreements
1,930
1,930
1,923
7
1,473
3,403
Cash pools
1
–1
0
0
0
–0
1,931
–1
1,930
0
1,923
7
1,473
3,403
Financial assets at fair value through profit or
loss
Trading and Non-trading
Reverse repurchase, securities
borrowing and similar agreements
43,822
–11,564
32,258
168
31,848
243
15,590
47,848
Derivatives
52,724
–38,431
14,293
9,005
3,108
2,180
7,006
21,299
96,546
–49,995
46,552
9,172
34,956
2,423
22,596
69,148
Loans and advances to customers
3
Reverse repurchase, securities
borrowing and similar agreements
71
71
71
–0
71
Cash pools
196,328
–194,522
1,806
19
1,417
369
1,806
196,400
–194,522
1,878
19
1,489
369
1,878
Other items where offsetting is applied in the
statement of financial position
4
3,692
–3,470
222
–0
222
222
Total financial assets
298,569
–247,987
50,581
9,191
38,368
3,022
24,069
74,650
1 ‘The statement of financial position total’ is the sum of ‘Net amounts of financial assets presented in the statement of financial position’ and ’Amounts not subject to enforceable master netting arrangements’.
2 At 31 December 2021, the total amount of ‘Loans and advances to banks’ excluding repurchase agreements is EUR 20,188 million which is not subject to offsetting.
3 At 31 December 2021, the total amount of ‘Loans and advances to customers’ excluding repurchase agreements is EUR 627,063 million of which EUR 1,806 million is subject to offsetting.
4 Other items mainly include amounts to be settled with Central Clearing Counterparties regarding securities and derivatives transactions and is included in ‘Other Assets – Amounts to be settled’ for EUR 2,424 million in the statement of financial position of which
EUR 222 million is subject to offsetting as at 31 December 2021.
>
41 Offsetting financial assets and liabilities
ING Bank Annual Report 2021
273
Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements
2020
Gross amounts of
recognised financial
assets
Gross amounts of
recognised financial
liabilities offset in
the statement of
financial
position
Net amounts of
financial assets
presented in the
statement of
financial
position
Related amounts not offset
in the statement of financial position
Net amount
Amounts not
subject to
enforceable
netting
arrangements
Statement of
financial position
total ¹
Financial
instruments
Cash and financial
instruments
received as
collateral
Statement of financial position line item
Financial instrument
Loans and advances to banks
2
Reverse repurchase, securities
borrowing and similar agreements
1,911
0
1,911
0
1,907
4
2,958
4,869
Cash pools
2
–2
0
0
0
–0
0
1,913
–2
1,911
0
1,907
4
2,958
4,869
Financial assets at fair value through profit or
loss
Trading and non-trading
Reverse repurchase, securities
borrowing and similar agreements
48,487
–14,823
33,664
245
33,343
77
19,018
52,682
Derivatives
73,142
–52,561
20,581
12,520
5,350
2,710
10,240
30,821
121,629
–67,384
54,245
12,765
38,693
2,787
29,258
83,503
Loans and advances to customers
3
Reverse repurchase, securities
borrowing and similar agreements
2,845
–2,359
486
486
138
624
Cash pools
168,461
–165,815
2,646
1,729
628
289
2,646
171,306
–168,174
3,132
1,729
1,113
289
138
3,270
Other items where offsetting is applied in the
statement of financial position
4
8,558
–7,752
806
10
796
806
Total financial assets
303,406
–243,312
60,095
14,505
41,714
3,876
32,354
92,449
1 ‘The statement of financial position total’ is the sum of ‘Net amounts of financial assets presented in the statement of financial position’ and ’Amounts not subject to enforceable master netting arrangements’.
2 At 31 December 2020, the total amount of ‘Loans and advances to banks’ excluding repurchase agreements is EUR 20,494 million which is not subject to offsetting.
3 At 31 December 2020, the total amount of ‘Loans and advances to customers’ excluding repurchase agreements is EUR 597,682 million of which EUR 2,646 million is subject to offsetting.
4 Other items mainly include amounts to be settled with Central Clearing Counterparties regarding securities and derivatives transactions and is included in ‘Other Assets – Amounts to be settled’ for EUR 2,215 million in the statement of financial position of which
EUR 806 million is subject to offsetting as at 31 December 2020.
>
41 Offsetting financial assets and liabilities
ING Bank Annual Report 2021
274
Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements
Related amounts not offset in the
statement of financial position
Amounts not
subject to
enforceable
netting
arrangements
Statement of
financial position
total
¹
2021
Gross amounts of
recognised financial
liabilities
Gross amounts of
recognised financial
assets offset in the
statement of
financial position
Net amounts of
financial liabilities
presented in the
statement of
financial position
Financial
instruments
Cash and financial
instruments
pledged as
collateral
Net amount
Statement of financial position line item
Financial instrument
Deposits from banks
2
Repurchase, securities lending
and similar agreements
433
0
433
0
426
7
3,705
4,138
Cash pools
3
-1
2
0
0
2
0
2
436
-1
435
0
426
9
3,705
4,140
Customer deposits
3
Repurchase, securities lending
and similar agreements
0
0
0
0
0
0
0
Cash pools
207,930
-194,522
13,408
19
0
13,389
0
13,408
207,930
-194,522
13,408
19
0
13,389
0
13,408
Financial liabilities at fair value through profit or loss
Trading and Non-trading
Repurchase, securities lending
and similar agreements
43,883
-11,564
32,319
168
32,056
96
9,416
41,735
Derivatives
53,778
-39,053
14,725
9,006
4,326
1,393
5,920
20,646
97,661
-50,617
47,044
9,173
36,382
1,489
15,337
62,381
Other items where offsetting is applied in the
statement of financial position
4
3,098
-2,848
250
-1
0
252
0
250
Total financial liabilities
309,125
-247,987
61,138
9,191
36,808
15,139
19,041
80,179
1 ‘The statement of financial position total’ is the sum of ‘Net amounts of financial liabilities presented in the statement of financial position’ and ’Amounts not subject to enforceable master netting arrangements’.
2 At 31 December 2021, the total amount of ‘Deposits from banks’ excluding repurchase agreements is EUR 80,954 million of which EUR 2 million is subject to offsetting.
3 At 31 December 2021, the total amount of ‘Customers deposits’ excluding repurchase agreements is EUR 657,831 million of which EUR 13,408 million is subject to offsetting.
4 Other items mainly include amounts to be settled with Central Clearing Counterparties regarding securities and derivatives transactions and is included in ‘Other Liabilities – Amounts to be settled’ for EUR 5,082 million in the statement of financial position of
which EUR 250 million is subject to offsetting as at 31 December 2021.
>
41 Offsetting financial assets and liabilities
ING Bank Annual Report 2021
275
Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements
Related amounts not offset in the
statement of financial position
Amounts not
subject to
enforceable
netting
arrangements
Statement of
financial
position total
¹
2020
Gross amounts of
recognised
financial liabilities
Gross amounts of
recognised financial
assets offset in the
statement of
financial position
Net amounts of
financial
in the statement of
financial position
Financial
instruments
Cash and financial
instruments
pledged as
collateral
1
Net amount
Statement of financial position line item
Financial instrument
Deposits from banks
2
Repurchase, securities lending
and similar agreements
167
167
166
1
1,804
1,971
Cash pools
3
-2
2
2
2
170
-2
169
166
3
1,804
1,973
Customer deposits
3
Repurchase, securities lending
and similar agreements
2,354
-2,354
Cash pools
184,490
-165,815
18,675
1,702
16,973
18,675
186,844
-168,169
18,675
1,702
16,973
18,675
Financial liabilities at fair value through profit or
loss
Trading and Non-trading
Repurchase, securities lending
and similar agreements
53,520
-14,827
38,693
245
38,447
8,271
46,964
Derivatives
73,215
-52,626
20,589
12,521
6,742
1,326
6,777
27,366
126,735
-67,453
59,282
12,766
45,189
1,326
15,048
74,330
Other items where offsetting is applied in the
statement of financial position
4
8,552
-7,687
865
36
829
865
Total financial liabilities
322,303
-243,312
78,991
14,505
45,356
19,131
16,852
95,843
1 ‘The statement of financial position total’ is the sum of ‘Net amounts of financial liabilities presented in the statement of financial position’ and ’Amounts not subject to enforceable master netting arrangements’.
2 At 31 December 2020, the total amount of ‘Deposits from banks’ excluding repurchase agreements is EUR 76,127 million of which EUR 2 million is subject to offsetting.
3 At 31 December 2020, the total amount of ‘Customers deposits’ excluding repurchase agreements is EUR 643,138 million of which EUR 18,675 million is subject to offsetting.
4 Other items mainly include amounts to be settled with Central Clearing Counterparties regarding securities and derivatives transactions and is included in ‘Other Liabilities – Amounts to be settled’ for EUR 4,877 million in the statement of financial position of
which EUR 865 million is subject to offsetting as at 31 December 2020.
>
42 Contingent liabilities and commitments
ING Bank Annual Report 2021
276
42 Contingent liabilities and commitments
In the normal course of business, ING Bank is party to activities where risks are not reflected in whole or
in part in the consolidated financial statements. In response to the needs of its customers, the Group
offers financial products related to loans. These products include traditional off-balance sheet credit-
related financial instruments.
Contingent liabilities and commitments
2021
2020
Contingent liabilities in respect of
– Guarantees
26,461
23,386
– Irrevocable letters of credit
16,851
14,016
– other
8
97
43,319
37,500
Irrevocable facilities
144,167
124,991
187,486
162,491
Guarantees relate both to credit and non-credit substitute guarantees. Credit substitute guarantees
are guarantees given by ING Bank in respect of credit granted to customers by a third party. Many of
them are expected to expire without being drawn on and therefore do not necessarily represent future
cash outflows.
Irrevocable letters of credit mainly secure payments to third parties for a customer’s foreign and
domestic trade transactions in order to finance a shipment of goods. ING Bank’s credit risk in these
transactions is limited since these transactions are collateralised by the commodity shipped and are of
a short duration.
Other contingent liabilities include acceptances of bills and are of a short-term nature. Other
contingent liabilities also include contingent liabilities resulting from the operations of the Real Estate
business including obligations under development and construction contracts. Furthermore other
contingent liabilities include a contingent liability in connection with a possible Dutch tax obligation
that relates to the deduction from Dutch taxable profit for losses incurred by ING Bank in the United
Kingdom in previous years. The existence of this obligation will be confirmed only by the occurrence of
future profits in the United Kingdom.
Irrevocable facilities mainly constitute unused portions of irrevocable credit facilities granted to
corporate clients. Many of these facilities are for a fixed duration and bear interest at a floating rate.
ING Bank’s credit risk and interest rate risk in these transactions is limited. The unused portion of
irrevocable credit facilities is partly secured by customers’ assets or counter-guarantees by the central
governments and other public sector entities under the regulatory requirements. Irrevocable facilities
also include commitments made to purchase securities to be issued by governments and private
issuers.
43 Legal proceedings
ING Bank and its consolidated subsidiaries are involved in governmental, regulatory, arbitration and
legal proceedings and investigations in the Netherlands and in a number of foreign jurisdictions,
including the U.S., involving claims by and against them which arise in the ordinary course of their
businesses, including in connection with their activities as lenders, broker-dealers, underwriters, issuers
of securities and investors and their position as employers and taxpayers. In certain of such
proceedings, very large or indeterminate amounts are sought, including punitive and other damages.
While it is not feasible to predict or determine the ultimate outcome of all pending or threatened
governmental, regulatory, arbitration and legal proceedings and investigations, ING is of the opinion
that some of the proceedings and investigations set out below may have or have in the recent past
had a significant effect on the financial position, profitability or reputation of ING and/or ING and its
consolidated subsidiaries.
>
43 Legal proceedings
ING Bank Annual Report 2021
277
Settlement agreement:
agreement with the Dutch Public Prosecution Service relating to previously disclosed investigations
regarding various requirements for client on-boarding and the prevention of money laundering and
corrupt practices. Following the entry into the settlement agreement, ING has experienced heightened
scrutiny from authorities in various countries. ING is also aware, including as a result of media reports,
that other parties may, among other things, seek to commence legal proceedings against ING in
connection with the subject matter of the settlement. Certain parties filed requests with the Court of
Appeal in The Netherlands to reconsider the prosecutor’s decision to enter into the settlement
agreement with ING and not to prosecute ING or (former) ING employees. In December 2020, the Court
of Appeal issued its final ruling. In this ruling the prosecutors' decision to enter into the settlement
agreement with ING was upheld, making the settlement final. However, in a separate ruling, the Court
ordered the prosecution of ING’s former CEO.
Findings regarding AML processes:
Dutch authorities concerning anti-money laundering matters, and in the context of significantly
increased attention on the prevention of financial economic crime, ING has experienced heightened
scrutiny by authorities in various countries. The interactions with such regulatory and judicial
authorities have included, and can be expected to continue to include, onsite visits, information
requests, investigations and other enquiries. Such interactions, as well as ING’s internal assessments in
connection with its global enhancement programme, have in some cases resulted in satisfactory
outcomes, and also have resulted in, and may continue to result in, findings, or other conclusions
which may require appropriate remedial actions by ING, or may have other consequences. ING intends
to continue to work in close cooperation with authorities as it seeks to improve its management of
non-financial risks in terms of policies, tooling, monitoring, governance, knowledge and behaviour.
In January 2022, a Luxembourg investigating judge informed ING Luxembourg that he intends to
instruct the relevant prosecutor to prepare a criminal indictment regarding alleged shortcomings in
AML process at ING Luxembourg. Although this matter remains at an early procedural stage and it is
currently not possible to determine how this matter will be resolved or the timing of any such
resolution, ING does not expect a financial outcome of this matter to have a material effect.
ING continues to take steps to enhance its management of compliance risks and embed stronger
awareness across the whole organisation. These steps are part of the global KYC programme and set of
initiatives, which includes enhancing KYC files and working on various structural improvements in
compliance policies, tooling, monitoring, governance, knowledge and behaviour.
Tax cases:
investigations and procedures in numerous jurisdictions at any point in time. Although the Issuer
believes that it has adequately provided for all its tax positions, the ultimate resolution of these audits,
investigations and procedures is uncertain and may result in liabilities which are materially different
from the amounts recognised.
SIBOR – SOR litigation
: In July 2016, investors in derivatives tied to the Singapore Interbank Offer Rate
(“SIBOR”) filed a U.S. class action complaint in the New York District Court alleging that several banks,
including ING, conspired to rig the prices of derivatives tied to SIBOR and the Singapore Swap Offer Rate
(“SOR”). The lawsuit refers to investigations by the Monetary Authority of Singapore (“MAS”) and other
regulators, including the U.S. Commodity Futures Trading Commission (“CFTC”), in relation to rigging
prices of SIBOR- and SOR based derivatives. In October 2018, the New York District Court issued a
decision dismissing all claims against ING Group and ING Capital Markets LLC, but leaving ING Bank,
together with several other banks, in the case, and directing plaintiffs to file an amended complaint
consistent with the Court's rulings. In October 2018, plaintiffs filed such amended complaint, which
asserts claims against a number of defendants but none against ING Bank (or any other ING entity),
effectively dismissing ING Bank from the case. In December 2018, plaintiffs sought permission from the
Court to file a further amended complaint that names ING Bank as a defendant. In July 2019, the New
York District Court granted the defendants’ motion to dismiss and denied leave to further amend the
complaint, effectively dismissing all remaining claims against ING Bank. In March 2021, the Second
Circuit court vacated the District Court’s ruling. The case was remanded to the District Court to
reconsider the amended complaint that would add ING Bank N.V. back to the case. In April 2021, the
defendants filed a petition for rehearing with the Second Circuit court. In May 2021, the Second Circuit
court denied the defendants’ petition. In August 2021, plaintiffs and ING executed a binding settlement
term sheet. Accordingly, plaintiffs and ING jointly asked the Court to stay all litigation proceedings and
deadlines applicable to plaintiffs and ING pending drafting, execution and presentment for approval of
a formal class settlement agreement. ING has taken a provision for the settlement amount.
>
43 Legal proceedings
ING Bank Annual Report 2021
278
Claims regarding accounts with predecessors of ING Bank Turkey:
numerous claims from (former) customers of legal predecessors of ING Bank Turkey. The claims are
based on offshore accounts held with these banks, which banks were seized by the Savings Deposit
Insurance Fund (“SDIF”) prior to the acquisition of ING Bank Turkey in 2007 from OYAK. SDIF has also
filed various lawsuits against ING Bank Turkey to claim compensation from ING Bank Turkey, with
respect to amounts paid out to offshore account holders so far. At this moment it is not possible to
assess the outcome of these procedures nor to provide an estimate of the (potential) financial effect of
these claims.
Interest rate derivatives claims:
respect to interest rate derivatives that were sold to clients in connection with floating interest rate
loans in order to hedge the interest rate risk of the loans. These proceedings are based on several legal
grounds, depending on the facts and circumstances of each specific case, inter alia alleged breach of
duty of care, insufficient information provided to the clients on the product and its risks and other
elements related to the interest rate derivatives that were sold to clients. In some cases, the court has
ruled in favour of the claimants and awarded damages, annulled the interest rate derivative or ordered
repayment of certain amounts to the claimants. The total amounts that need to be repaid or
compensated in some cases still need to be determined. ING may decide to appeal against adverse
rulings. Although the outcome of the pending litigation and similar cases that may be brought in the
future is uncertain, it is possible that the courts may ultimately rule in favour of the claimants in some
or all of such cases. Where appropriate a provision has been taken. The aggregate financial impact of
the current and future litigation could become material.
Interest surcharges claims:
individuals in the Netherlands regarding increases in interest surcharges with respect to several credit
products, including but not limited to commercial property. ING has reviewed the relevant product
portfolio. The provision previously taken has been reversed for certain of these complaints. All claims
are dealt with individually. Thus far, the courts have ruled in favour of ING in each case, ruling that ING
was allowed to increase the interest surcharge based upon the essential obligations in the contract. In
a relevant case the Dutch Supreme Court ruled in favor of another Dutch bank, addressing the question
whether or not a bank is allowed to increase interest surcharges unilaterally. The Supreme Court ruled
affirmative. ING will continue to deal with all claims individually.
Mortgage expenses claims:
customers regarding reimbursement of expenses associated with the formalisation of mortgages. In
most court proceedings in first instance the expense clause of the relevant mortgage contract has
been declared null and ING Spain has been ordered to reimburse all or part of the applicable expenses.
Since 2018, the Spanish Supreme Court and the European Court of Justice have issued rulings setting
out which party should bear notary, registration, agency, and stamp duty costs. In January 2021, the
Spanish Supreme Court ruled that valuation costs of mortgages, signed prior to 16 June 2019, the date
the new mortgage law entered into force, should be borne by the bank. Media attention for the statute
of limitations applicable to the right to claim reimbursement of costs resulted in an increased number
of claims at the beginning of 2021. In June 2021, the Supreme Court published a press release
informing of its decision to ask the European Court of Justice for a preliminary ruling regarding the
criteria that should be applied to determine the date from which the action for claiming the
reimbursement of mortgage expenses is considered to be expired. ING Spain has also been included,
together with other Spanish banks, in three class actions filed by customer associations. In one of the
class actions an agreement was reached with the association. In another class action ING filed an
appeal asking the Spanish Court of Appeal to determine that the ruling of the court of first instance is
only applicable to the consumers that were part of the case. A provision has been established in the
past and has been adjusted where appropriate.
Imtech claim:
Shareholders Action Group B.V. on behalf of certain (former) shareholders of Imtech N.V. (“Imtech”).
Furthermore, on 28 March 2018, ING Bank received another claim on the same subject matter from the
Dutch Association of Stockholders (Vereniging van Effectenbezitters, “VEB”). Each of the claimants
allege inter alia that shareholders were misled by the prospectus of the rights issues of Imtech in July
2013 and October 2014. ING Bank, being one of the underwriters of the rights issues, is held liable by
the claimants for the damages that investors in Imtech would have suffered. ING Bank responded to
the claimants denying any and all responsibility in relation to the allegations made in the relevant
letters. In September 2018, the trustees in the bankruptcy of Imtech claimed from various financing
parties, including ING, payment of what the security agent has collected following bankruptcy or
intends to collect, repayment of all that was repaid to the financing parties, as well as compensation
for the repayment of the bridge financing. At this moment it is not possible to assess the outcome of
these claims nor to provide an estimate of the (potential) effect of these claims.
>
44 Consolidated companies and businesses acquired and divested
ING Bank Annual Report 2021
279
Mexican Government Bond litigation
: A class action complaint was filed adding ING Bank N.V., ING
Groep N.V., ING Bank Mexico S.A. and ING Financial Markets LLC (“ING”) as defendants to a complaint
that had previously been filed against multiple other financial institutions. The complaint alleges that
the defendants conspired to fix the prices of Mexican Government Bonds. On 30 September 2019, the
relevant court dismissed the antitrust complaint, finding that the plaintiffs had failed to identify any
facts that links each defendant to the alleged conspiracy. In December 2019, the plaintiffs filed an
amended complaint removing all ING entities as defendants on the condition that the ING entities
enter into a tolling agreement for the duration of two years. ING subsequently entered into a tolling
agreement, which expired in December 2021. The defendants named in the amended complaint have
now settled that litigation.
Claims regarding mortgage loans in Swiss franc in Poland:
lawsuits with retail customers who took out mortgage loans indexed to the Swiss franc. Such
customers have alleged that the mortgage loan contract contains abusive clauses. One element that
the court is expected to consider in determining whether such contracts contain abusive clauses is
whether the rules to determine the exchange rate used for the conversion of the loan from Polish zloty
to Swiss franc are unambiguous and verifiable. In December 2020, the Polish Financial Supervision
Authority (PFSA) proposed that lenders offer borrowers voluntary out-of-court settlements on foreign-
currency mortgage disputes, with mortgages indexed to Swiss franc serving as a reference point. In
February 2021, ING Poland announced its support for this initiative and in October 2021 began offering
the settlements to the borrowers following the PFSA’s proposal. ING has recorded a portfolio provision
with respect to the claims and the PFSA proposal. The Polish Supreme Court was expected to provide
further clarity on this topic in a ruling scheduled for November 2021, however the court’s session on
this matter was postponed and the date of the next session has not yet been announced.
Certain Consumer Credit Products:
to certain of its Dutch retail customers in connection with certain revolving consumer loans with
variable interest rates that allegedly did not sufficiently follow market rates. This announcement was
made in response to a number of rulings by the Dutch Institute for Financial Disputes (Kifid) regarding
similar products at other banks. ING currently expects that any such compensation will be paid before
the end of 2022. ING has recognized a provision of €180 million in 2021 for compensation and costs in
connection with this matter. On 22 December 2021 ING announced that it has reached an agreement
with the Dutch Consumers’ Association (Consumentenbond) on the compensation methodology for
revolving credits.
44 Consolidated companies and businesses acquired and divested
Acquisitions
There were no significant acquisitions in 2021 or 2020.
In May 2019 ING acquired 80% of the shares of Intersoftware Group B.V., Findata Access B.V. and
Unitrust B.V. (ISW Group) for a total consideration of EUR 18 million. The acquisition of ISW Group
resulted in the recognition of goodwill of EUR 17 million.
Divestments
On 18 February 2021 ING announced the intention to withdraw from the retail banking market in the
Czech Republic. The decision to discontinue Czech Retail Banking entails the closure of retail customer
accounts /mutual funds and the sale of assets comprising the related government bond portfolio. ING’s
retail customers in the Czech Republic have received a welcome offer from Raiffeisenbank Czech
Republic. ING’s departure from the Czech Retail banking market resulted in EUR 2.5 billion saving
accounts being transferred to Raiffeisenbank and the government bond portfolio with a carrying
amount of EUR 0.5 billion being sold in the second quarter of 2021.
>
44 Consolidated companies and businesses acquired and divested
ING Bank Annual Report 2021
280
At 12 July 2021, ING announced that it has reached an agreement to transfer ING’s Retail Banking
operations in Austria to bank99. Under the terms of the agreement, approximately EUR 1.7 billion of
savings deposits and approximately EUR 1.0 billion of mortgages, approximately EUR 0.4 billion other
personal lending and approximately EUR 0.4 billion loans to banks of ING Austria have been transferred
to Bank99. Per 1 December 2021 completed the transaction and realized a loss on disposal of EUR 26
million. ING Austria was included in the segment Retail Challengers & Growth Markets.
In 2021, ING and the board of Makelaarsland agreed to continue Makelaarsland independently. The
new board will take over all clients and employees, and services to clients will continue unchanged. The
negative result on disposal of group companies from this management buyout amounted to
approximately EUR 3 million.
On 28 October 2021 ING announced that its subsidiary Payvision will start phasing out its services as a
payment service provider and acquirer. After a thorough evaluation of all options in the context of the
rapidly evolving and increasingly competitive and capital intensive e-commerce merchant market, ING
has concluded that it is not feasible to achieve its ambitions with Payvision. The aim is to complete the
phase-out process by the second quarter of 2022.
In 2021, Payvision recognised an impairment loss of intangible assets of EUR 44 million, mainly with
respect to Brand, IT and Customer relationships and an impairment loss of the deferred tax asset of
EUR 14 million.
In December 2021 ING announced that it will leave the retail banking market in France. Reference is
made to Note 49 'Subsequent events' for further details of the events after 31 December 2021 but
before these financial statements were authorised for issue.
In 2020 there were no significant divestments.
In July 2019 ING completed the sale of part of the ING Lease Italy business. The settlement price
amounted to EUR 1,162 million, consisted of a EUR 368 million cash settlement, a EUR 20 million
Deferred Purchase Price and a EUR 774 million Senior Loan facility for the portfolio of lease receivables.
The deferred purchase price is linked to the performance of the sold portfolio and is reported under the
financial assets mandatorily measured at fair value through profit and loss. The additional loss in 2019
amounted EUR -2 million (2018: EUR -123 million). The Italian lease business was reported as Assets
Held for Sale as at 31 December 2018 and previously included in the business line segment Wholesale
Banking and geographical segment Other Challengers.
Reference is made to Note 24 ‘Result on the disposal of group companies’.
>
45 Principal subsidiaries, investments in associates and joint ventures
ING Bank Annual Report 2021
281
Most significant companies disposed in 2021
in EUR million
Makelaarsland
BV & Above BV
ING Austria
Retail Banking
Total divested
Sales Proceeds
Sales proceeds
29
29
Non-cash proceeds
Cash proceeds
29
29
Cash outflow / inflow on disposal
29
29
Assets
Cash assets
3
3
Loans and advances to customers
0
1,404
1,404
Amounts due from banks
378
378
Miscalleneous other assets
0
8
8
Liabilities
Customer deposits and other funds on deposit
1,725
1,725
Miscallaneous other liabilities
1
8
9
Net assets
3
56
58
% disposed
100%
100%
Net assets disposed
3
56
58
Result on disposal
-3
-26
-29
45 Principal subsidiaries, investments in associates and joint ventures
For the majority of ING’s principal subsidiaries, ING Bank N.V. has control because it either directly or
indirectly owns more than half of the voting power. For subsidiaries in which the interest held is below
50%, control exists based on the combination of ING’s financial interest and its rights from other
contractual arrangements which result in control over the operating and financial policies of the entity.
For each of the subsidiaries listed, the voting rights held equal the proportion of ownership interest and
consolidation by ING is based on the majority of ownership.
For the principal investments in associates and joint ventures ING Bank has significant influence but not
control. Significant influence generally results from a shareholding of between 20% and 50% of the
voting rights, but also the ability to participate in the financial and operating policies through situations
including, but not limited to one or more of the following:
◾
Representation on the board of directors;
◾
Participation in the policymaking process; and
◾
Interchange of managerial personnel.
The principal subsidiaries, investments in associates and joint ventures of ING Bank N.V. and their
statutory place of incorporation or primary place of business are as follows:
Principal subsidiaries, investments in associates and joint ventures
Proportion of
ownership and
interest held
by the group
2021
2020
Subsidiary
Statutory place of
Incorporation
Country of operation
Bank Mendes Gans N.V.
Amsterdam
the Netherlands
100%
100%
ING Belgium S.A./N.V.
Brussels
Belgium
100%
100%
ING Luxembourg S.A.
Luxembourg City
Luxembourg
100%
100%
ING-DiBa AG
Frankfurt am Main
Germany
100%
100%
ING Bank Slaski S.A.
1
Katowice
Poland
75%
75%
ING Financial Holdings Corporation
Delaware
United States of America
100%
100%
ING Bank A.S.
Istanbul
Turkey
100%
100%
ING Bank (Australia) Ltd
Sydney
Australia
100%
100%
ING Commercial Finance B.V.
Amsterdam
the Netherlands
100%
100%
ING Groenbank N.V.
Amsterdam
the Netherlands
100%
100%
Investments in associates and joint
ventures
TMBThanachart Bank Public Company Ltd
2
Bangkok
Thailand
23%
23%
1 The shares of the non-controlling interest stake of 25% are listed on the Warsaw Stock Exchange, for summarised financial
information we refer to ‘Note 33 ‘Information on geographical areas.
2 Reference is made to Note 8 Investments in Associates and Joint Ventures.
>
46 Structured entities
ING Bank Annual Report 2021
282
46 Structured entities
ING Bank’s activities involve transactions with various structured entities (SE) in the normal course of its
business. A structured entity is an entity that has been designed so that voting or similar rights are not
the dominant factor in deciding who controls the entity, such as when any voting rights relate to
administrative tasks only and the relevant activities are directed by means of contractual
arrangements. ING Bank’s involvement in these entities varies and includes both debt financing and
equity financing of these entities as well as other relationships. Based on its accounting policies, as
disclosed in the section Principles of valuation and determination of results of these financial
statements, ING establishes whether these involvements result in no significant influence, significant
influence, joint control or control over the structured entity.
The structured entities over which ING can exercise control are consolidated. ING may provide support
to these consolidated structured entities as and when appropriate. However, this is fully reflected in
the consolidated financial statements of ING Bank as all assets and liabilities of these entities are
included and off-balance sheet commitments are disclosed.
ING’s activities involving structured entities are explained below in the following categories:
1.
Consolidated ING originated securitisation programmes;
2.
Consolidated ING originated Covered bond programme (CBC);
3.
Consolidated ING sponsored Securitisation programme (Mont Blanc);
4.
Unconsolidated Securitisation programme; and
5.
Other structured entities.
1. Consolidated ING originated securitisation programmes
ING Bank enters into liquidity management securitisation programmes in order to obtain funding and
improve liquidity. Within the programme ING Bank sells ING originated assets to a structured entity.
The underlying exposures include residential mortgages and SME loans in the Netherlands, Belgium,
Spain, Italy, Australia and Germany.
The structured entity issues securitised notes (traditional securitisations) which are eligible collateral
for central bank liquidity purposes. In most programmes ING Bank acts as investor of the securitised
notes. ING Bank continues to consolidate these structured entities if it is deemed to control the entities.
The structured entity issues securitisation notes in two or more tranches, of which the senior tranche
obtains a high rating (AAA or AA) by a rating agency. The tranche can subsequently be used by ING
Bank as collateral in the money market for secured borrowings.
ING Bank originated various securitisations, as at 31 December 2021, these consisted of approximately
EUR 74 billion (2020: EUR 66 billion) of senior and subordinated notes, of which approximately EUR 1
billion (2020: EUR 2 billion) were issued externally. The underlying exposures are residential mortgages
and SME loans. Apart from the third party funding, these securitisations did not impact ING Bank’s
Consolidated statement of financial position and profit or loss.
In 2021, there are no non-controlling interests as part of the securitisation structured entities that are
significant to ING Bank. ING Bank for the majority of the securitisation vehicles provides the funding for
the entity except for EUR 1 billion (2020: EUR 2 billion).
In addition ING Bank originated various securitisations for liquidity management optimisation
purposes. As at 31 December 2021, these consisted of approximately EUR 1 billion (2020: EUR 2 billion)
of senior secured portfolio loans, which have been issued to ING subsidiaries in Germany. The
underlying exposures are senior loans to large corporations and financial institutions, and real estate
finance loans, mainly in the Netherlands. These securitisations did not impact ING Bank’s consolidated
statement of financial position and profit or loss.
2. Consolidated ING originated Covered bond programme (CBC)
ING Bank has entered into a covered bond programme. Under the covered bond programme ING issues
bonds. The payment of interest and principal is guaranteed by the ING administered structured
entities, ING Covered Bond Company B.V., and ING SB Covered Bond Company B.V. In order for these
entities to fulfil their guarantee, ING legally transfers mainly Dutch mortgage loans originated by ING.
Furthermore ING offers protection against deterioration of the mortgage loans. The entities are
consolidated by ING Bank.
>
46 Structured entities
ING Bank Annual Report 2021
283
Covered bond programme
Fair value pledged
mortgage loans
2021
2020
Dutch Covered Bond Companies
16,586
20,157
16,586
20,157
In addition, subsidiaries of ING in Germany, Belgium and Australia also issued covered bonds with
pledged mortgages loans of approximately EUR 23 billion (2020: EUR 21 billion) in total.
For the covered bond programme, third-party investors in securities issued by the structured entity
have recourse to the assets of the entity and to the assets of ING Bank.
3. Consolidated ING sponsored Securitisation programme (Mont Blanc)
In the normal course of business, ING Bank structures financing transactions for its clients by assisting
them in obtaining sources of liquidity by selling the clients’ receivables or other financial assets to a
Special Purpose Vehicle (SPV). The senior positions in these transactions may be funded by the ING
administered multi seller Asset Backed Commercial Paper (ABCP) conduit Mont Blanc Capital Corp.
(rated A-1/P-1). Mont Blanc Capital Corp. funds itself externally in the ABCP markets.
In its role as administrative agent, ING Bank facilitates these transactions by acting as administrative
agent, swap counterparty and liquidity provider to Mont Blanc Capital Corp. ING Bank also provides
support facilities (i.e. liquidity) backing the transactions funded by the conduit. The types of asset
currently in the Mont Blanc conduit include trade receivables, consumer finance receivables, car leases
and residential mortgages.
ING Bank supports the commercial paper programmes by providing Mont Blanc Capital Corp. with
short-term liquidity facilities. Once drawn these facilities bear normal credit risk.
The liquidity facilities, provided to Mont Blanc are EUR 2,581 million (2020: EUR 2,793 million). The
drawn liquidity amount is nil as at 31 December 2021 (2020: nil).
The standby liquidity facilities are reported under irrevocable facilities. All facilities, which vary in risk
profile, are granted to the Mont Blanc Capital Corp. subject to normal ING Bank credit and liquidity risk
analysis procedures. The fees received for services provided and for facilities are charged subject to
market conditions.
4. Unconsolidated Securitisation programme
In 2013 ING transferred financial assets (mortgage loans) for an amount of approximately EUR 2 billion
to a special purpose vehicle (SPV). The transaction resulted in full derecognition of the financial assets
from ING’s statement of financial position. Following this transfer ING continues to have two types of
on-going involvement in the transferred assets: as counterparty to the SPE of a non-standard interest
rate swap and as servicer of the transferred assets. ING has an option to unwind the transaction by
redeeming all notes at their principal outstanding amount, in the unlikely event of changes in
accounting and/or regulatory requirements that significantly impact the transaction. The fair value of
the swap held by ING at 31 December 2021 amounted to EUR -34 million (2020: EUR -34 million); fair
value changes on this swap recognised in the statement of profit or loss in 2021 were EUR 0 million
(2020: EUR 11 million). Service fee income recognised, for the role as administrative agent, in the
statement of profit or loss in 2021 amounted to EUR 1 million (2020: EUR 1 million). The cumulative
income recognised in profit or loss since derecognition amounts to EUR 17 million (2020: EUR 16
million).
5. Other structured entities
In the normal course of business, ING Bank enters into transactions with structured entities as
counterparty. Predominantly in its structured finance operations, ING can be instrumental in
facilitating the creation of these structured entity counterparties. These entities are generally not
included in the consolidated financial statements of ING Bank, as ING facilitates these transactions as
administrative agent by providing structuring, accounting, funding, lending, and operation services.
ING Bank offers various investment fund products to its clients. ING Bank does not invest in these
investment funds for its own account nor acts as the fund manager.
>
47 Related parties
ING Bank Annual Report 2021
284
47 Related parties
In the normal course of business, ING Bank enters into various transactions with related parties. Parties
are considered to be related if one party has the ability to control or exercise significant influence over
the other party in making financial or operating decisions. Related parties of ING Bank include, among
others, its subsidiaries, associates, joint ventures, key management personnel, and various defined
benefit and contribution plans. For post-employment benefit plans, reference is made to Note 34
‘Pension and other postemployment benefits’. Transactions between related parties include rendering
or receiving of services, leases, transfers under finance arrangements and provisions of guarantees or
collateral. All transactions with related parties took place at conditions customary in the market. There
are no significant provisions for doubtful debts or individually significant bad debt expenses recognised
on outstanding balances with related parties.
ING Bank forms part of ING Group and also enters into transactions with ING Group. These transactions
vary from financing activities to regular purchase and sales transactions. Disclosed in the table below,
are the transactions with ING Groep N.V.
Parent Company
Transactions with ING Groep N.V.
2021
2020
Assets
55
134
Liabilities
56,349
45,625
Income received
15
9
Expenses paid
1,158
1,122
Liabilities to ING Groep N.V. mainly comprise long-term funding.
Associates and joint ventures
Transactions with ING Bank’s main associates and joint ventures
Associates
Joint ventures
2021
2020
2021
2020
Assets
115
100
0
Liabilities
417
239
3
1
Off-balance sheet commitments
24
10
–
Income received
42
14
Assets, liabilities, commitments, and income related to Associates and joint ventures result from
transactions which are executed as part of the normal Banking business.
Key management personnel compensation
The Executive Board of ING Groep N.V., the Management Board Banking and the Supervisory Board are
considered Key Management personnel of ING Group. In 2021 and 2020, the three members of the
Executive Board of ING Groep N.V. were also members of the Management Board Banking.
Transactions with key management personnel, including their compensation are included in the tables
below.
>
47 Related parties
ING Bank Annual Report 2021
285
Key management personnel compensation (Executive Board and Management Board Banking)
2021
in EUR thousands
Executive Board
of ING Groep
N.V.
3
Management
Board Banking
1
Total
Fixed Compensation
– Base salary
3,836
5,024
8,860
– Collective fixed allowances
954
1,214
2,168
– Pension costs
64
116
180
– Severance benefits
4
1,075
1,075
Variable compensation
– Upfront cash
664
664
– Upfront shares
265
691
956
– Deferred cash
997
997
– Deferred shares
398
1,036
1,434
– Other emoluments
5
274
959
1,233
Total compensation
5,791
11,776
17,567
1 Excluding members that are also members of the Executive Board of ING Groep N.V.
2 The collective fixed allowances consist of two savings allowances applicable to employees in the Netherlands; an individual
savings allowance of 3.5% and a collective savings allowance to compensate for loss of pension benefits with respect to salary
in excess of EUR 110,111.
3 In 2020 one member of the Executive Board left ING during the year. The table includes compensation earned in the capacity
as board member.
4 One member of the Management Board Banking left ING at the end of the year. In line with applicable regulation a severance
payment was granted.
5 Other emoluments include reimbursement of costs related to home/work commute, costs relating to tax and financial
planning services, costs associated with a company car and for expats, the costs associated with housing and schooling and
costs related to reimbursement of Directors and Officers indemnity.
Key management personnel compensation (Executive Board and Management Board Banking)
Executive
Board of ING
Groep N.V.
Management
Board
Banking
1,4
Total
2020
in EUR thousands
Fixed Compensation
– Base salary
3,609
4,170
7,779
– Collective fixed allowances
898
1,009
1,907
– Pension costs
58
93
151
– Severance benefits
667
667
Variable compensation
– Upfront cash
305
305
– Upfront shares
305
305
– Deferred cash
457
457
– Deferred shares
457
457
– Other emoluments
5,6
298
814
1,112
Total compensation
4,863
8,277
13,140
1 Excluding members of the Management Board Banking that are also members of the Executive Board of ING Groep N.V.
2 The collective fixed allowances consist of two savings allowances applicable to employees in the Netherlands; an individual
savings allowance of 3.5% and a collective savings allowance to compensate for loss of pension benefits with respect to salary
in excess of EUR 110,111.
3 In 2020 one member of the Executive Board left ING during the year. The table includes compensation earned in the capacity
as Executive Board member.
4 One member of the Management Board Banking left ING at the end of the year. In line with applicable regulation a severance
payment was granted.
5 Other emoluments include reimbursement of costs related to home/work commute, costs relating to tax and financial
planning services, costs associated with a company car and for expats and the costs associated with housing and schooling
6 Prior year numbers have been updated by excluding costs related to reimbursement of Directors and Officers indemnity to
improve consistency and comparability.
Key management personnel compensation is generally included in Staff expenses in the statement of
profit or loss. The total remuneration of the Executive Board and Management Board Banking is
disclosed in the table above. Under IFRS, certain components of variable remuneration are not
recognised in the statement of profit or loss directly, but are allocated over the vesting period of the
award. The comparable amount recognised in Staff expenses in 2021 relating to the fixed expenses of
2021 and the vesting of variable remuneration of earlier performance years, is EUR 13 million in 2021
(2020: EUR 12 million).
>
48 Capital management
ING Bank Annual Report 2021
286
The table below shows the total of fixed remuneration, expense allowances and attendance fees for
the Supervisory Board in 2021 and 2020.
Key management personnel compensation (Supervisory Board)
in EUR thousands
2021
2020
Total compensation
994
1,042
Balances outstanding with key management personnel were as follows:
Loans and advances to key management personnel
Amount outstanding
31 December
Weighted average
interest rate
Repayments
in EUR thousands
2021
2020
2021
2020
2021
2020
Executive Board members
Management Board Banking
2,392
350
1.7%
2.6%
40
Supervisory Board members
Total
2,392
350
40
The loans and advances mentioned in the table above (1) were made in the ordinary course of
business, (2) were granted on conditions that are comparable to those of loans and advances granted
to all employees and (3) did not involve more than the normal risk of collectability or present other
unfavourable features. Loans and advances to members of the Executive Board and Management
Board Banking are compliant with the standards set out in the DNB guidelines for loans to officers and
directors of a regulated entity, such as ING.
As at 31 December 2021 Deposits outstanding from key management personnel amounted to EUR 6.1
million (31 December 2020: EUR 12.5 million). Total interest paid in 2021 on these deposits amounted
to EUR nil (2020: EUR 14 thousand).
Number of ING Groep N.V. shares and stock options to key management personnel
ING Groep N.V. shares
in numbers
2021
2020
Executive Board members
91,853
88,741
Management Board Banking
237,525
254,052
Supervisory Board members
5,295
5,295
Total number of shares and stock options
334,673
348,088
48 Capital management
Objectives
Group Treasury (“GT”) Balance Sheet & Capital Management, is responsible for maintaining the
adequate capitalisation of ING Group and ING Bank entities, to manage the risk associated with ING’s
business activities. This involves not only managing, planning and allocating capital within ING Group,
ING Bank and its various entities, but also helping to execute necessary capital market transactions,
term (capital) funding and risk management transactions. ING takes an integrated approach to assess
the adequacy of its capital position in relation to its risk profile and operating environment. This means
GT Balance Sheet & Capital Management takes into account both regulatory and internal, economic
based metrics and requirements as well as the interests of key stakeholders such as shareholders and
rating agencies.
ING Bank applies the following main capital definitions:
◾
Common Equity Tier 1 capital (CET1) - is defined as shareholders’ equity less regulatory
adjustments. CET1 capital divided by risk-weighted assets equals the CET1 ratio.
◾
Tier 1 capital – is defined as CET1 capital plus Additional Tier 1 (hybrid) securities and other
regulatory adjustments. Tier 1 capital divided by risk-weighted assets equals the Tier 1 capital
ratio.
◾
Total capital – is Tier 1 capital plus subordinated Tier 2 liabilities and regulatory adjustments.
Total capital divided by risk-weighted assets equals the Total capital ratio.
◾
Leverage ratio – is defined as Tier 1 capital divided by the leverage exposure.
>
48 Capital management
ING Bank Annual Report 2021
287
Capital developments
ING Bank’s capital ratios at the end of the year improved compared to 2020 primarily due to the partial
addition of the 2021 net profit to CET1 capital and lower regulatory adjustments. This was only partly
offset by higher risk-weighted assets that were mainly driven by model impacts, reflecting the ongoing
redevelopment of internal models and EBA guidelines. ING Bank continues to maintain a strong and
high quality capital level.
ING Bank N.V. has a CET1 ratio of 14.3% at 31 December 2021, versus an overall CET1 requirement
(including buffer requirements) of 7.03%. The Tier 1 ratio (including grandfathered securities) increased
from 15.9% to 16.5% compared to last year. The Banks’s total capital ratio (including grandfathered
securities) increased to 19.5%.
ING Bank has paid EUR 3,125 million of dividend to ING Group in relation to the 2021 profit.
ING Bank capital position according to CRR II / CRD V
in EUR million
2021
2020
Shareholders’ equity
1
47,914
47,675
- Interim profits not included in CET1 capital
-934
-1,207
- Other adjustments
-2,130
-3,534
Regulatory adjustments
-3,064
-4,741
Available common equity Tier 1 capital
44,850
42,934
Additional Tier 1 securities
6,792
5,648
Regulatory adjustments additional Tier 1
78
68
Available Tier 1 capital
51,720
48,650
Supplementary capital Tier 2 bonds
9,341
9,359
Regulatory adjustments Tier 2
21
23
Available Total capital
61,081
58,032
Risk weighted assets
312,616
306,016
Common equity Tier 1 ratio
14.35%
14.03%
Tier 1 ratio
16.54%
15.90%
Total capital ratio
19.54%
18.96%
1) Shareholders' equity is determined in accordance with IFRS-EU.
2) The interim profits not included in CET1 capital as per 31 December 2021 were EUR 934 million and fully relate to the result
of the fourth quarter of 2021.
3) All AT1 securities outstanding at 31 December 2021 are CRR-compliant (2020: EUR 994 million was subject to CRR/CRD IV
grandfathering rules).
4) Including EUR 9,188 million which is CRR-compliant (2020: EUR 9,206 million), and EUR 153 million to be replaced as capital
recognition is subject to CRR grandfathering rules (2020: EUR 153 million).
In accordance with the applicable regulation, credit and operational risk models used in the capital
ratios calculations are not audited.
Processes for managing capital
GT Balance Sheet & Capital Management ensures adherence to ING’s solvency risk appetite statements
by planning and executing capital management transactions. The ongoing assessment and monitoring
of capital adequacy is embedded in the capital planning process as part of the ICAAP framework. As
part of the dynamic business planning process, ING prepares a capital and funding plan on a regular
basis for all its material businesses and assesses continuously the timing, need and feasibility for
capital management actions in scope of its execution strategy. Sufficient financial flexibility should be
preserved to meet important financial objectives. Risk appetite statements are at the foundation of the
capital plan and are cascaded to the different businesses in line with ING’s risk management
framework. Contingency capital measures and early warning indicators are in place in conjunction with
ING’s contingency and recovery plan to support the strategy in times of stress.
Adverse planning and stress testing, which reflect the outcome of the annual risk assessment, are
integral components of ING’s risk and capital management framework. It allows to (i) identify and
assess potential vulnerabilities in ING’s businesses, business model, portfolios or operating
environment; (ii) understand the sensitivities of the core assumptions used in ING’s strategic and
capital plan; and (iii) improve decision-making and business steering through balancing risk and return
following a forward looking and prudent management approach.
>
49 Subsequent events
ING Bank Annual Report 2021
288
Regulatory requirements
Capital adequacy and the use of required regulatory capital are based on the guidelines developed by
the Basel Committee on Banking Supervision (The Basel Committee) and the European Union
Directives, as implemented by the Dutch Central Bank and the ECB for supervisory purposes. In 2010,
the Basel Committee issued new solvency and liquidity requirements that superseded Basel II,
implemented in the EU via CRR / CRD. In accordance with the CRR the minimum Pillar 1 capital
requirements applicable to ING Bank are: a CET1 ratio of 4.5%, a Tier 1 ratio of 6% and a Total capital
ratio of 8% of risk-weighted assets.
The overall CET1 requirement (including buffer requirements) for ING Bank N.V. at a consolidated level
was 7.03% in 2021. This requirement is the sum of a 4.5% Pillar I requirement, a 2.5% Capital
Conservation Buffer (CCB) and a 0.03% Countercyclical Buffer (CCyB) (based on December 2021
positions).
Ratings
ING Bank’s key credit ratings and outlook are shown in the table below. Each of these ratings reflects
only the view of the applicable rating agency at the time the rating was issued, and any explanation of
the significance of a rating may be obtained only from the rating agency.
Main credit ratings of ING Bank N.V. at 31 December 2021
S&P
Moody’s
Fitch
GBB-Rating
ING Bank N.V.
Issuer rating
Long-term
A+
A1
AA-
A+
Short-term
A-1
P-1
F1+
n/a
Outlook
Stable
Stable
Stable
Indeterminate
Senior unsecured rating
A+
A1
AA-
A security rating is not a recommendation to buy, sell or hold securities and each rating should be
evaluated independently of other ratings. There is no assurance that any credit rating will remain in
effect for any given period of time or that a rating will not be lowered, suspended or withdrawn
entirely by the rating agency if, in the rating agency’s judgment, circumstances so warrant. ING
accepts no responsibility for the accuracy or reliability of the ratings.
49 Subsequent events
ING has been active in the French retail banking market since 2000 as an online bank. In December
2021 ING announced that it will leave the retail banking market in France in order to sharpen the focus
of its business portfolio. At February 1, 2022 ING and Societe Generale announced that a Memorandum
of Understanding was signed on 31 January between ING and Boursorama (subsidiary of Societe
Generale) to offer banking solutions to ING’s retail customers in France. The intention of both parties is
to reach a definitive agreement in April 2022 at the latest.
The exact scope of the definitive agreement remains to be specified and would concern daily banking
(current accounts and cards), savings and investment products (assurance vie & brokerage). The ING
France retail lending portfolio (mortgages and consumer loans) will not be part of the agreement.
Mortgages will continue to be managed by ING. Maintaining consumer loans at ING is under
consideration.
ING continues its Wholesale Banking activities in France, with a focus on strengthening our position and
the ambition to be the go-to-bank for sustainable finance.
The Russian invasion of Ukraine and rapidly escalating events in late February and early March 2022 is
a significant tragedy for the people and is causing disruption to business and economic activity in the
region and worldwide. This qualifies as a non-adjusting subsequent event. At this moment it is not
possible to provide an estimate of the financial impact of this crisis on ING (including direct impact on
ING exposures to Russian and Ukrainian markets as well as wider impacts for ING). For further details
on Russian and Ukrainian exposures of ING Group reference is made to ‘Risk Management – Top and
emerging risks’.
Strategy and performance
ING Bank Annual Report 2021
289
Authorisation of Consolidated Financial Statements
Amsterdam, 7 March 2022
The Supervisory Board
G.J. (Hans) Wijers, chairman
A.M.G. (Mike) Rees, vice-chairman
J. (Juan) Colomb
á
s
M. (Mariana) Gheorghe
M. (Margarete) Haase
L.J. (Lodewijk) Hijmans van den Bergh
H.A.H. (Herman) Hulst
H.H.J.G. (Harold) Naus
H.W.P.M.A. (Herna) Verhagen
The Management Board Banking
S.J.A. (Steven) van Rijswijk, CEO and chairman
T. (Tanate) Phutrakul, CFO
L. (Ljiljana)
Č
ortan, CRO
P. (Pinar) Abay, head of Market Leaders
A.J.M. (Andrew) Bester, head of Wholesale Banking
A. (Aris) Bogdaneris, head of Challengers & Growth Markets and head of Retail Banking
R.H.E. (Ron) van Kemenade, chief technology officer
M.A. (Marnix) van Stiphout, chief operations officer and chief transformation officer
Report of Management Board
ING Bank Annual Report 2021
290
Parent company statement of financial position
as at 31 December before appropriation of result
in EUR million
2021
2020
in EUR million
2021
2020
Assets
Liabilities
Cash and balances with central banks
57,958
57,668
Deposits from banks
91,247
99,926
Short-dated government paper
205
2,990
Customer deposits
363,162
327,665
Loans and advances to banks
74,040
74,109
Debt securities in issue
49,117
55,421
Loans and advances to customers
350,202
326,656
Other liabilities
39,161
49,546
Debt securities
43,315
41,456
General provisions
1,246
876
Equity securities
10,079
6,142
Subordinated loans
16,949
16,155
Investments in group companies
31,342
32,056
Total liabilities
560,882
549,589
Investments in associates and joint ventures
1,354
1,332
Intangible assets
632
755
Equity
Equipment
901
1,062
Share capital
525
525
Other assets
38,769
53,037
Share premium
16,542
16,542
Revaluation reserves
1,617
2,150
Legal and statutory reserves
-548
185
Other reserves
25,199
25,953
Unappropriated result
4,579
2,321
Total equity
47,914
47,675
Total assets
608,796
597,263
Total liabilities and equity
608,796
597,263
References relate to the accompanying notes. These form an integral part of the Parent company financial statements.
Report of Management Board
ING Bank Annual Report 2021
291
Parent company statement of profit or loss
for the years ended 31 December
in EUR million
2021
2020
Interest income
11,930
12,704
Interest expense
–5,585
–6,453
Net interest income
6,345
6,251
Investment income and results from participating interests
3,239
1,649
Commission income
2,248
1,984
Commission expense
–502
–523
Net commission income
1,746
1,461
Results from financial transactions
472
857
Other income
85
–102
Total income
11,887
10,116
Staff expenses
3,224
3,230
Depreciation, amortisation and impairments
408
817
Other expenses
2,523
2,012
Addition to loan loss provisions
261
1,050
Total expenses
6,416
7,108
Result before tax
5,471
3,008
Taxation
701
593
Result after tax
4,770
2,415
References relate to the accompanying notes. These form an integral part of the Parent company
financial statements.
Report of Management Board
ING Bank Annual Report 2021
292
Parent company statement of changes in equity
in EUR million
Share
capital
Share
premium
Revaluation
reserves
Legal and
statutory
reserves
Other reserves
Unappropriated
results
Total
Balance as at 31 December 2020
525
16,542
2,150
185
25,953
2,321
47,675
Realised and unrealised revaluations equity and debt instruments and other revaluations
–7
–61
–6
–74
Realised gains/losses transferred to the statement of profit or loss
–22
–14
–36
Changes in cash flow hedge reserve
–538
–1,065
–1,603
Unrealised revaluations property in own use
1
–14
11
–2
Remeasurement of the net defined benefit asset/liability
–4
99
95
Exchange rate differences and other
37
153
190
Total amount recognised directly in equity
–532
–903
5
–1,430
Net result
191
4,579
4,770
–532
–712
5
4,579
3,339
Transfer from unappropriated results
2,321
–2,321
Dividends
–1,207
–1,918
–3,125
Employee stock options and share plans
28
28
Changes in the composition of the group and other changes
–21
18
–3
Balance as at 31 December 2021
525
16,542
1,617
–548
27,117
2,661
47,914
Changes in individual components are presented in Note 18 ‘Equity’.
Report of Management Board
ING Bank Annual Report 2021
293
Parent company statement of changes in equity - continued
in EUR million
Share
capital
Share
premium
Revaluation
reserves
Legal and
statutory
reserves
Other reserves
Unappropriated
results
Total
Balance as at 31 December 2019
525
16,542
2,467
1,532
21,194
4,663
46,924
Realised and unrealised revaluations equity and debt instruments and other revaluations
-337
-32
62
-306
Realised gains/losses transferred to the statement of profit or loss
-16
-17
-33
Changes in cash flow hedge reserve
32
210
242
Unrealised revaluations property in own use
-3
-30
26
-7
Remeasurement of the net defined benefit asset/liability
9
19
28
Exchange rate differences and other
-3
-1,557
-16
-1,576
Total amount recognised directly in equity
-318
-1,405
71
-1,651
Net result
94
2,321
2,415
-318
-1,311
71
2,321
764
Transfer from unappropriated results
4,663
-4,663
Dividends
-43
-43
Employee stock options and share plans
23
23
Changes in the composition of the group and other changes
-37
44
7
Balance as at 31 December 2020
525
16,542
2,150
185
25,953
2,321
47,675
Changes in individual components are presented in Note 18 ‘Equity’.
Strategy and performance
>
1 Basis of presentation
ING Bank Annual Report 2021
294
Notes to the parent company financial statements
1 Basis of presentation
ING Bank N.V. is registered at
Register of Amsterdam under number 33031431).
The Parent company financial statements of ING Bank N.V. are prepared in accordance with the
financial reporting requirements included in Part 9 of Book 2, of the Dutch Civil Code. In accordance
with subsection 8 of section 362, Book 2 of the Dutch Civil Code, the recognition and measurement
principles applied in these Parent company financial statements are the same as those applied in the
ING Bank Consolidated financial statements, reference is made to Note 1 ‘Accounting policies’ of the
Consolidated financial statements. Investments in group companies are accounted in the Parent
company accounts according to the equity method. In addition to the notes to these financial
statements, further information is included in the notes to the consolidated financial statements.
A list containing the information referred to in Section 379 (1), Book 2, of the Dutch Civil Code has
been filed with the office of the Commercial Register of Amsterdam, in accordance with Section 379
(5), Book 2 of the Dutch Civil Code.
The parent company financial statements are presented in euros, rounded to the nearest million,
unless stated otherwise. Amounts may not add up due to rounding.
Parent company equity and related reserves
The total amount of equity in the Parent company financial statements equals
Shareholders’ equity (parent) in the Consolidated financial statements. Certain components
within equity are different, as a result of the following presentation differences between the
parent company accounts and consolidated accounts:
●
Unrealised revaluations including those related to cash flow hedges within consolidated group
companies, presented in Other reserves - Revaluation reserve in the consolidated accounts, are
presented in the Share of associates and joint ventures reserve in the parent company accounts;
●
Foreign currency translation on consolidated group companies, presented in Other reserves -
Currency translation reserve in the consolidated accounts, is presented in the Share of associates
and joint ventures reserve in the parent company accounts;
●
Revaluations on investment property and certain participations recognised in income and
consequently presented in Retained earnings in the consolidated
Share of associates and joint ventures reserve in the parent company accounts.
A legal reserve is carried at an amount equal to the share in the results of associates and joint
ventures since their first inclusion at net asset value less the amount of profit distributions to which
rights have accrued in the interim. Profit distributions which can be repatriated to the Netherlands
without restriction are likewise deducted from the Share of associates and joint ventures reserve.
Presentation parent company assets and liabilities
The presentation of assets and liabilities in the parent company financial statements differs from the
presentation in the consolidated financial statements. In below tables a reconciliation is included
between the presentation in the parent company versus consolidated financial statements.
Strategy and performance
>
1 Basis of presentation
ING Bank Annual Report 2021
295
Presentation Parent company financial statements versus Consolidated financial statements, Assets
Parent company financial statements
Assets as at 31 December 2021
Cash and
balances with
central banks
Short-dated
government
paper
Loans and
advances to
banks
Loans and
advances to
customers
Debt securities
Equity
securities
Investments in
associates and
joint ventures
Intangible
assets
Equipment
Other assets
Total
Included in Consolidated statement of financial position:
Cash and balances with central banks
57,958
57,958
Loans and advances to banks
54,315
54,315
Financial assets at fair value through profit or loss
– Trading assets
22
612
8,009
5,092
7,678
29,580
50,993
– Non-trading derivatives
4,458
4,458
– Designated as at fair value through profit or loss
313
129
2,758
3,201
– Mandatorily at fair value through profit or loss
18,800
12,694
772
31
32,297
Financial assets at fair value through other comprehensive income
6
12,307
2,369
14,682
Securities at amortised cost
178
22,385
22,563
Loans and advances to customers
329,370
329,370
Investments in associates and joint ventures
1,354
1,354
Property and equipment
879
879
Intangible assets
632
632
Current tax assets
234
234
Deferred tax assets
364
364
Other assets
21
4,133
4,155
Total assets
57,958
205
74,040
350,202
43,315
10,079
1,354
632
901
38,769
577,454
Strategy and performance
>
1 Basis of presentation
ING Bank Annual Report 2021
296
Presentation Parent company financial statements versus Consolidated financial statements, Liabilities
Parent company financial statements
Liabilities as at 31 December 2021
Deposits from
banks
Customer
deposits
Debt securities in
issue
Other liabilities
General
provisions
Subordinated
loans
Total
Included in Consolidated statement of financial position:
Deposits from banks
82,469
82,469
Customer deposits
342,965
342,965
Financial liabilities at fair value through profit or loss
– Trading liabilities
1,406
6,031
27,470
34,908
– Non-trading derivatives
5,323
5,323
– Designated as at fair value through profit or loss
7,372
14,166
5,381
230
27,149
Current tax liabilities
112
112
Deferred tax liabilities
553
553
Provisions
685
685
Other liabilities
6,255
8
6,263
Debt securities in issue
43,736
43,736
Subordinated loans
16,719
16,719
Total liabilities
91,247
363,162
49,117
39,161
1,246
16,949
560,882
Strategy and performance
>
2 Cash and balances with central banks
ING Bank Annual Report 2021
297
Notes to the Parent company statement of financial position
2 Cash and balances with central banks
Amounts held at central banks amount to EUR 57,143 million (2020: EUR 56,809 million). In 2021, the
movement in Cash and balances with central banks reflects ING’s active liquidity management.
3 Short-dated government paper
Short-dated government paper includes Dutch and international government paper amounting to
EUR 205 million (2020: EUR 2,990 million) for the company.
4 Loans and advances to banks
2021
2020
Non-subordinated receivables from:
Group companies
33,583
32,087
Third parties
38,280
39,777
71,864
71,864
Subordinated receivables from:
Group companies
2,176
2,245
74,040
74,109
As at 31 December 2021, Loans and advances to banks includes receivables with regard to securities,
which have been acquired in reverse repurchase transactions amounting to EUR 33,057 million
(2020: EUR 34,131 million).
5 Loans and advances to customers
Loans and advances to customers
2021
2020
Non-subordinated receivables from:
ING Groep N.V.
42
130
Group companies
43,904
37,080
Third parties
304,856
288,046
348,802
325,256
Subordinated receivables from:
Group companies
1,400
1,400
350,202
326,656
As at 31 December 2021, receivables included in Loans and advances to customers that are part of
the trading portfolio amount to EUR 8,009 million (2020: EUR 8,392 million).
Loans and advances to customers includes receivables with regard to securities which have been
acquired in reverse repurchase transactions amounting to EUR 19,645 million (2020: EUR 18,343
million) for the company.
6 Debt securities
Debt securities by issuer
2021
2020
Public sector
31,395
29,440
Other
11,920
12,016
43,315
41,456
Strategy and performance
>
7 Equity securities
ING Bank Annual Report 2021
298
Debt securities analysed by listing
2021
2020
Listed
30,593
35,506
Unlisted
12,721
5,950
43,315
41,456
The above table includes the following non subordinated debt securities:
2021
2020
Non-subordinated debt securities issued by:
Third parties
42,594
40,699
42,594
40,699
Changes in debt securities
1
2021
2020
Opening balance
34,672
32,405
Additions
14,907
17,565
Amortisation
–142
–126
Changes in unrealised revaluations
–497
586
Disposals and redemptions
–15,046
–14,674
Exchange rate differences
781
–675
Other changes
18
–408
Closing balance
34,693
34,672
1 Excluding fair value through profit or loss portfolio.
7 Equity securities
Equity securities analysed by listing
2021
2020
Listed
9,910
6,042
Unlisted
169
100
10,079
6,142
Changes in equity securities
1
2021
2020
Opening balance
1,782
2,215
Additions
513
9
Changes in unrealised revaluations
–98
–288
Disposals
–12
–10
Exchange rate differences
192
–51
Other changes
–8
–93
Closing balance
2,369
1,782
1 Excluding fair value through profit or loss portfolio.
The cost or purchase price of the shares in the trading portfolio approximates their fair value. As at
31 December 2021 the cost or purchase price of shares excluding trading portfolio is EUR 1,260
million lower (2020: EUR 1,168 million lower) than the carrying amount.
8 Investments in group companies
Investments in group companies
2021
2020
Interest
held (%)
Statement of financial
position value
Interest
Statement of financial
position value
ING Belgi
ë
100
10,001
100
10,263
ING Holding Deutschland GMBH
100
9,274
100
9,247
ING Bank (Australia) Limited
100
3,730
100
3,243
ING Financial Holdings Corporation
100
2,634
100
1,880
ING Bank Slaski S.A.
75
2,188
75
3,045
ING Bank A.S.
100
726
100
1,066
Bank Mendes Gans N.V.
100
737
100
630
ING Real Estate B.V.
100
227
100
441
ING Australia Holdings Limited
100
10
100
212
ING Corporate Investments B.V.
100
252
100
198
Other (including financing companies)
1,562
1,832
31,342
32,056
Strategy and performance
>
9 Investments in associates and joint ventures
ING Bank Annual Report 2021
299
As at 31 December 2021, Investments in group companies includes credit institutions of EUR 17,829
million (2020: EUR 18,766 million).
As at 31 December 2021 listed investments in group companies amount to EUR 2,188 million (2020:
EUR 3,045 million).
Changes in investments in group companies
2021
2020
Opening balance
32,056
33,310
Repayment of capital injection
–155
–
Revaluations
–1,038
194
Results from group companies
3,029
1,710
Dividends received
–2,232
–1,417
Capital contribution
–137
45
Mergers and liquidations
–7
–904
Exchange rate differences
–191
–876
Other changes
15
–5
Closing balance
31,342
32,056
In 2020 ING Bank N.V. merged with ING International (Belgium) B.V.
9 Investments in associates and joint ventures
Investments in associates and joint ventures
2021
2020
Interest
held (%)
Statement of financial
position value
Interest
Statement of financial
position value
TMBThanachart Bank Public Company
23
1,208
23
1,202
Other
147
130
1,354
1,332
Changes in investments in associates and joint ventures
2021
2020
Opening balance
1,332
1,646
Additions
30
15
Share of results
70
61
Dividends received
–28
–8
Disposals
–10
–0
Impairments
–3
–237
Revaluations
1
1
Exchange rate differences
–31
–142
Other changes
–7
–4
Closing balance
1,354
1,332
10 Intangible assets
Changes in intangible assets
Goodwill
Software
Other
Total
2021
2020
2021
2020
2021
2020
2021
2020
Opening balance
184
513
569
660
2
2
755
1,175
Additions
122
218
122
218
Amortisation
-166
-155
-166
-156
Impairments
-266
-16
-145
-16
-411
Exchange rate differences
-61
-63
-1
-62
-64
Other changes
-2
-8
-2
-8
Closing balance
122
184
508
569
2
2
632
755
Goodwill is tested for impairment annually, in 2021 no impairments were recognised. Goodwill
impairment tests performed in the second quarter of 2020 resulted in the recognition of goodwill
impairments mainly in relation to the cash-generating unit (CGU) Wholesale Banking of EUR 260
million.
Strategy and performance
>
11 Equipment
ING Bank Annual Report 2021
300
11 Equipment
Changes in equipment
2021
2020
Opening balance
1,062
1,130
Additions
89
165
Depreciation
–213
–222
Disposals
–4
–13
Impairments
–15
–29
Reversal of impairments
2
2
Exchange rate differences
9
–14
Other changes
–28
45
Closing balance
901
1,062
Gross carrying amount as at 31 December
2,220
2,363
Accumulated depreciation as at 31 December
–1,319
–1,300
Net carrying value
901
1,062
12 Other assets
Other assets
2021
2020
Derivatives
34,038
47,790
Deferred tax assets
364
247
Income tax receivables
234
416
Accrued interests and rents
41
39
Other accrued assets
420
420
Pension asset
717
682
Other receivables
2,957
3,444
38,769
53,037
Derivatives includes transactions with group companies of EUR 16,954 million (2020: EUR 22,577
million).
Other receivables includes EUR 1,479 million (2020: EUR 1,806 million) related to transactions still to
be settled at balance sheet date. As at 31 December 2021, an amount of EUR 844 million (2020: EUR
813 million) is expected to be settled after more than one year from the balance sheet date.
13 Deposits from banks
Deposits from banks
2021
2020
Group companies
26,227
32,443
Third parties
65,021
67,483
91,247
99,926
14 Customer deposits
Customer deposits by group companies and third parties
2021
2020
ING Groep N.V.
40,467
32,421
Group companies
18,666
12,373
Third parties
304,029
282,871
363,162
327,665
Customer deposits from ING Groep N.V. includes EUR 34,303 million (2020: EUR 25,376 million) Senior
non-preferred debt.
Customer deposits by type
2021
2020
Savings accounts
124,901
129,920
Credit balances on customer accounts
144,018
127,260
Corporate deposits
45,379
30,063
Other
48,864
40,422
363,162
327,665
Strategy and performance
>
15 Other liabilities
ING Bank Annual Report 2021
301
15 Other liabilities
Other liabilities
2021
2020
Derivatives
31,948
42,454
Trading liabilities
845
625
Accrued interest
7
5
Costs payable
1,274
1,079
Income tax payable
112
65
Other taxation and social security contribution
64
56
Other amounts payable
4,910
5,261
39,161
49,546
Derivatives includes transactions with group companies of EUR 14,499 million (2020: EUR 19,236
million).
Other amounts payable includes EUR 2,940 million (2020: EUR 3,218 million) related to transactions
still to be settled at balance sheet date. As at 31 December 2021, an amount of EUR 530 million
(2020: EUR 601 million) is expected to be settled after more than one year from the balance sheet
date.
16 General provisions
General provisions
2021
2020
Deferred tax liabilities
553
532
Pension liabilities and other staff-related liabilities
8
19
Reorganisations and relocations
308
173
Other
377
153
1,246
876
As at 31 December 2021, an amount of EUR 616 million (2020: EUR 587 million) is expected to be
settled after more than one year from the balance sheet date.
17 Subordinated loans
Subordinated loans by group companies and third parties
2021
2020
Group companies
15,955
13,273
Third parties
993
2,882
16,949
16,155
Subordinated loans by type
2021
2020
Capital debentures
1,935
3,459
Private loans
15,014
12,696
16,949
16,155
The subordinated loans rank subordinated to the other liabilities in a winding-up of ING Bank
.
18 Equity
Equity
2021
2020
Share capital
525
525
Share premium
16,542
16,542
Revaluation reserves
1,617
2,150
Legal and statutory reserves
–548
185
Other reserves
27,117
25,953
Unappropriated result
2,661
2,321
Total equity
47,914
47,675
Share capital
Ordinary shares (par value EUR 1.13)
Number x 1,000
Amount
2021
2020
2021
2020
Authorised share capital
1,600,000
1,600,000
1,808
1,808
Unissued share capital
1,134,965
1,134,965
1,283
1,283
Issued share capital
465,035
465,035
525
525
No changes occurred in the issued share capital and share premium in 2021 and 2020.
Strategy and performance
>
18 Equity
ING Bank Annual Report 2021
302
Changes in revaluation reserves
2021
Property in own use
reserve
Equity securities at
fair value through
other comprehensive
income
Debt instruments at
fair value through
other comprehensive
income
Cash flow hedge
reserve
Net defined benefit
assets/- liability
remeasurement
reserve
Credit liability
Total
Opening balance
21
1,168
58
830
189
–117
2,150
Unrealised revaluations
1
95
–99
37
34
Realised gains/losses transferred to the statement of profit or loss
–23
–23
Realised revaluations reclassified to retained earnings
–3
–3
Changes in cash flow hedge reserve
–538
–538
Change in net defined benefit assets/liability
–4
–4
Closing balance
22
1,260
–63
292
186
–80
1,617
2020
Opening balance
24
1,560
19
798
180
–114
2,467
Unrealised revaluations
–3
–390
56
–19
–357
Realised gains/losses transferred to the statement of profit or loss
–16
–16
Realised revaluations reclassified to retained earnings
–2
16
15
Changes in cash flow hedge reserve
32
32
Change in net defined benefit assets/liability
9
9
Closing balance
21
1,168
58
830
189
–117
2,150
Strategy and performance
>
18 Equity
ING Bank Annual Report 2021
303
Changes in legal and statutory reserves
2021
Share of associates
and joint ventures
reserves
Currency translation
reserve
Statutory reserves
Capitalised software
Total
Opening balance
1,398
–3,631
1,912
505
185
Result for the year
191
191
Unrealised revaluations available-for-sale investments and other
–57
–57
Realised gains/losses transferred to the statement of profit or loss
–18
–18
Changes in cash flow hedge reserve
–1,065
–1,065
Unrealised revaluation property in own use
–14
–14
Changes in net defined benefit asset/liability remeasurement reserve
99
99
Exchange rate differences and other
10
143
153
Changes in composition of the group and other changes
32
–53
–21
Closing balance
385
–3,488
2,103
452
–548
2020
Opening balance
1,220
–2,085
1,818
579
1,532
Result for the year
94
94
Unrealised revaluations available-for-sale investments and other
–29
–29
Realised gains/losses transferred to the statement of profit or loss
–17
–17
Changes in cash flow hedge reserve
210
210
Unrealised revaluation property in own use
–4
–4
Changes in net defined benefit asset/liability remeasurement reserve
19
19
Exchange rate differences and other
–11
–1,546
–1,557
Changes in composition of the group and other changes
8
–74
–65
Closing balance
1,398
–3,631
1,912
505
185
Strategy and performance
>
18 Equity
ING Bank Annual Report 2021
304
The Share of associates and joint ventures reserve includes the following components: Reserve for non-
distributable retained earnings of associates of EUR 862 million (2020: EUR 829 million), Revaluation
reserve of associates and joint ventures EUR -83 million (2020: EUR 1,071 million), Currency translation
reserve of EUR 5 million (2020: EUR -5 million) and Net defined benefit asset/liability remeasurement
reserve of EUR -398 million (2020: EUR -497 million).
The Statutory reserves include non-distributable reserves of EUR 2,103 million (2020: EUR 1,912 million)
related to the former Stichting Regio Bank and the former Stichting Vakbondspaarbank SPN that
cannot be freely distributed in accordance with the article 23.1 of the articles of association.
Changes in the value of hedging instruments that are designated as net investment hedges, are
included in the line Exchange rate differences and other.
Changes in other reserves, retained earnings
2021
2020
Opening balance
25,953
21,194
Transfer from unappropriated result
2,321
4,663
Dividends
–1,207
–43
Employee stock options and share plans
28
23
Changes in the composition of the group and other changes
23
115
Closing balance
27,117
25,953
The reserve for cash flow hedges is included in the Share of associates and joint ventures reserve on a
net basis. The Revaluation reserve, Share of associates and joint ventures reserve and Currency
translation reserve cannot be freely distributed. Retained earnings can be freely distributed, except for
an amount equal to the negative balance in each of the components of the Revaluation reserve , Share
of associates and joint ventures reserve and the Currency translation reserve. Unrealised gains and
losses on derivatives, other than those used in cash flow hedges, are presented in the statement of
profit or loss and are therefore part of Retained earnings and are not included in Share of associates
and joint ventures reserve.
The total amount of non-distributable reserves, in accordance with the financial reporting
requirements per Part 9 of Book 2 of the Dutch Civil Code, is EUR 8,205 million (2020: EUR 9,829 million).
Reference is made to Note 19 ‘Equity’ and Note 48 ‘Capital management’ in the ING Bank Consolidated
financial statements for additional information, including restrictions with respect to dividend and
repayment of capital.
Strategy and performance
>
19 Net interest income
ING Bank Annual Report 2021
305
Notes to the Parent company statement of profit or loss
19 Net interest income
Net interest income
2021
2020
2021
2020
Interest income on loans
6,865
7,976
Interest expense on deposits from banks
50
93
Interest income on impaired loans
59
65
Interest expense on customer deposits
1,300
1,193
Negative interest on liabilities
1,211
582
Interest expense on debt securities
489
878
Total interest income on loans
8,135
8,623
Interest expense on subordinated loans
573
613
Interest expense on securities at fair value through profit or loss
274
377
Interest income on financial assets at fair value through OCI
101
159
Interest expense on non-trading derivatives (no hedge accounting)
1,846
1,099
Interest income on financial assets at amortised cost
210
234
Interest expense on non-trading derivatives (hedge accounting)
453
1,814
Interest income on securities at fair value through profit or loss
299
433
Other interest expense
37
75
Interest income on non-trading derivatives (no hedge accounting)
2,037
1,074
Negative interest on assets
563
312
Interest income on non-trading derivatives (hedge accounting)
1,129
2,139
Interest expense
5,585
6,453
Other interest income
19
43
Interest income
11,930
12,704
Net interest income
6,345
6,251
Strategy and performance
>
20 Investment income and results from participating interests
ING Bank Annual Report 2021
306
20 Investment income and results from participating interests
Investment income and results from participating interests
2021
2020
Results from shares and other non-fixed income securities
142
115
Results from group companies
3,029
1,710
Results from associates, joint ventures and other participations
70
61
Impairment of associates and joint ventures
–3
–237
3,239
1,649
21 Net commissionincome
Fee and commission income
2021
2020
Payment services
928
749
Securities business
284
298
Insurance and other broking
120
305
Portfolio Management fees
259
128
Lending business
279
26
Financial guarantees and other commitments
284
113
Other
93
365
2,248
1,984
Fee and commission expenses
2021
2020
Payment services
252
266
Securities business
99
63
Distribution of products (Externally)
76
52
Other
75
142
502
523
ING Bank changed the presentation of net fee and commission income as of 2021 to better align with
internal management and monitoring. Comparative figures for 2020 have been updated accordingly.
The reclassifications do not affect the total amount of Net Fee and Commission Income.
22 Results from financial transactions
Results from financial transactions
2021
2020
Results from securities trading portfolio
787
–515
Results from currency trading portfolio
101
101
Results from non-trading derivatives
68
264
Other
–484
820
473
671
In 2021, Other includes EUR –419 million (2020: EUR 290 million) related to fair value changes on
trading derivatives.
23
Staffexpenses
Staff expenses
2021
2020
Salaries
2,124
1,978
Social security costs
243
235
Pension costs and other staff related benefit costs
305
292
Other management fees
552
725
3,224
3,230
Remuneration of Senior management, Management board and Supervisory board
Reference is made to Note 47 ‘Related parties’ in the ING Bank Consolidated financial
statements.
Strategy and performance
>
24 Depreciation, amortisation and impairments
ING Bank Annual Report 2021
307
24 Depreciation, amortisation and impairments
Depreciation and amortization
2021
2020
Depreciation of equipment
213
222
Amortisation of software and other intangible assets
166
156
Impairments and reversal of impairments
29
439
408
817
2020 Impairments includes impairment of goodwill (EUR 266 million), software (EUR 145 million) and
equipment (EUR 28 million).
25 Otherexpenses
Other expenses
2021
2020
Computer costs
481
527
Office expenses
104
130
Travel and accommodation expenses
9
22
Advertising and public relations
134
152
External advisory fees
244
307
Regulatory costs
707
591
Addition/(releases) of provision for reorganisations and relocations
220
86
Other
623
196
2,523
2,012
26 Taxation
2021
2020
Current taxation
682
501
Deferred taxation
20
92
701
593
Reconciliation of the weighted average statutory income tax rate to ING Bank’s effective income tax rate
2021
2020
Result before tax from continuing operations
5,471
3,008
Weighted average statutory tax rate
23.7%
23.8%
Weighted average statutory tax amount
1,296
716
Permanent differences affecting current tax
Participation exemption
-809
-470
Other income not subject to tax
0
17
Expenses not deductible for tax purposes
135
232
Current tax from previously unrecognised amounts
61
17
State and local taxes
32
17
Adjustments to prior periods
-17
37
Differences affecting deferred tax
Impact on deferred tax from change in tax rates
10
10
Deferred tax from previously unrecognised amounts
-18
-6
Write-off/reversal of deferred tax assets
11
24
Effective tax amount
701
593
Effective tax rate
12.8%
19.7%
For more information on the reconciliation of the weighted average statutory income tax rate to ING
Bank’s effective income tax rate reference is made to
Note 35 ‘Taxation’ in the ING Bank
C
onsolidated financial statements.
Strategy and performance
>
27 Maturity of certain assets and liabilities
ING Bank Annual Report 2021
308
27 Maturity of certain assets and liabilities
Analysis of certain assets and liabilities by maturity
2021
Less than
1–3
months
3–12
months
1–5
years
Over 5
Maturity
not
applicable
Total
Assets
Loans and advances to banks
14,514
2,733
7,823
21,412
7,668
19,890
74,040
Loans and advances to customers
38,244
18,995
29,066
85,614
155,917
22,367
350,202
Liabilities
Deposits from banks
24,817
1,088
3,012
52,539
929
8,862
91,247
Customer deposits
279,257
15,129
8,342
18,808
20,483
21,142
363,162
Debt securities in issue
2,490
8,200
9,518
3,769
8,026
17,116
49,117
Subordinated loans
716
15,770
463
16,949
Analysis of certain assets and liabilities by maturity
2020
Less than
1–3
months
3–12
months
1–5
years
Over 5
Maturity
not
applicable
Total
Assets
Loans and advances to banks
15,545
3,708
6,677
21,124
6,464
20,591
74,109
Loans and advances to customers
35,161
12,787
24,272
79,858
155,679
18,898
326,656
Liabilities
Deposits from banks
30,190
457
1,997
50,112
1,303
15,868
99,926
Customer deposits
264,391
5,535
5,143
16,521
17,513
18,561
327,665
Debt securities in issue
4,948
7,075
8,836
9,036
7,440
18,085
55,421
Subordinated loans
661
14,567
927
16,155
28 Assets not freelydisposable
Assets not freely disposable
2021
2020
Equity and debt instruments
14,026
19,054
Lending
81,926
78,218
Banks
9,236
9,691
Other assets
733
700
105,921
107,663
The table includes assets relating to securities lending as well as sale and repurchase
transactions
29 Contingent liabilities and other commitments
Contingent liabilities by type
2021
2020
Guarantees
40,221
28,635
Irrevocable letters of credit
14,295
12,139
Other
–
15
Contingent debts
54,517
40,788
Irrevocable facilities
75,606
62,482
130,123
103,270
Contingent debts
2021
2020
Group companies
23,260
14,282
Third parties
31,257
26,506
54,517
40,788
Irrevocable facilities
2021
2020
Group companies
3
3
Third parties
75,603
62,479
75,606
62,482
Strategy and performance
>
30 Other
ING Bank Annual Report 2021
309
30 Other
Guarantees
ING Bank has issued guarantees as participant in collective arrangements of national banking funds
and as a participant in required collective guarantee schemes. For example, ING Bank N.V. provided a
guarantee to the German Deposit Guarantee Fund (‘Einlagensicherundsfonds’ or ESF) under section 5
(10) of the by-laws of this fund, where ING Bank N.V. indemnifies the Association of German Banks
Berlin against any losses it might incur as result of actions taken with respect to ING Germany. The ESF
is a voluntary collective guarantee scheme for retail savings and deposits in excess of EUR 100,000.
ING Bank N.V. has issued statements of liabilities in connection with Section 403 Book 2 of the Dutch
Civil Code (‘403 statements’) and issued third party guarantees (and third party letters of
comfort/awareness) in a limited number of cases. Third party guarantees are used when ING Bank N.V.
is requested to issue a guarantee to a third party creditor of one of its subsidiaries in order to
guarantee the (financial) performance of this subsidiary. 403 statements have been issued for the
following Dutch subsidiaries:
◾
B.V. Deelnemings- en Financieringsmaatschappij 'Nova Zembla'
◾
B.V. Maatschappij van Onroerende Goederen 'Het Middenstandshuis'
◾
Bank Mendes Gans N.V.
◾
BMG monumenten B.V.
◾
Cofiton B.V.
◾
Entero B.V.
◾
ING Bank Personeel B.V.
◾
ING Business Shared Services B.V.
◾
ING Commercial Finance B.V.
◾
ING Corporate Investments B.V.
◾
ING Corporate Investments Mezzanine Fonds B.V.
◾
ING Corporate Investments Participaties B.V.
◾
ING Corporate Investments Structured Finance B.V.
◾
ING Groenbank N.V.
◾
ING Lease (Nederland) B.V.
◾
ING Sustainable Investments B.V.
◾
ING Vastgoed Ontwikkeling B.V.
◾
Nationale-Nederlanden Hypotheekbedrijf N.V.
◾
Nationale-Nederlanden Intervest II B.V.
◾
WestlandUtrecht Verzekeringen B.V.
Claim agreements
In the ordinary course of business we have entered into a number of agreements whereby we are
provided indemnifications related to sale of our past businesses and agreements whereby we made
detailed arrangements regarding allocation and handling of claims.
Fiscal unity
ING Bank N.V. forms a fiscal unity with
corporation tax purposes. ING Bank N.V. and ING Groep N.V. and its banking subsidiaries that form part
of the fiscal unity are jointly and severally liable for taxation payable by the fiscal unity. Settlements of
corporate income tax paid or received are executed by ING Bank N.V.
31 Proposed appropriation of results
For 2021, it is proposed that the result, insofar at the disposal of the General Meeting, will be
appropriated as follows. The total dividend of EUR 2,852 million was paid in May 2021 (EUR 502 million),
August 2021 (EUR 731 million), November 2021 (EUR 685 million) and in February 2022 (EUR 934
million) as an interim dividend.
Proposed appropriation of result
2021
Net result
4,770
- Addition to reserves pursuant to Article 24 of the Articles of Association
191
- Proposed to be added to the Other Reserves pursuant to Article 24 of the Articles of Association
1,727
- Available for dividend distribution
2,852
Strategy and performance
>
32 Subsequent events
ING Bank Annual Report 2021
310
32 Subsequent events
ING has been active in the French retail banking market since 2000 as an online bank. In December
2021 ING announced that it will leave the retail banking market in France in order to sharpen the focus
of its business portfolio. At February 1, 2022 ING and Societe Generale announced that a Memorandum
of Understanding was signed on 31 January between ING and Boursorama (subsidiary of Societe
Generale) to offer banking solutions to ING’s retail customers in France. The intention of both parties is
to reach a definitive agreement in April 2022 at the latest.
The exact scope of the definitive agreement remains to be specified and would concern daily banking
(current accounts and cards), savings and investment products (assurance vie & brokerage). The ING
France retail lending portfolio (mortgages and consumer loans) will not be part of the agreement.
Mortgages will continue to be managed by ING. Maintaining consumer loans at ING is under
consideration.
ING continues its Wholesale Banking activities in France, with a focus on strengthening our position and
the ambition to be the go-to-bank for sustainable finance.
The Russian invasion of Ukraine and rapidly escalating events in late February and early March 2022 is
a significant tragedy for the people and is causing disruption to business and economic activity in the
region and worldwide. This qualifies as a non-adjusting subsequent event. At this moment it is not
possible to provide an estimate of the financial impact of this crisis on ING (including direct impact on
ING exposures to Russian and Ukrainian markets as well as wider impacts for ING). For further details
on Russian and Ukrainian exposures of ING Group reference is made to ‘Risk Management – Top and
emerging risks’.
Strategy and performance
>
Authorisation of Parent company financial statements
ING Bank Annual Report 2021
311
Authorisation of Parent company financial statements
Amsterdam, 7 March 2022
The Supervisory Board
G.J. (Hans) Wijers, chairman
A.M.G. (Mike) Rees, vice-chairman
J. (Juan) Colomb
á
s
M. (Mariana) Gheorghe
M. (Margarete) Haase
L.J. (Lodewijk) Hijmans van den Bergh
H.A.H. (Herman) Hulst
H.H.J.G. (Harold) Naus
H.W.P.M.A. (Herna) Verhagen
The Management Board Banking
S.J.A. (Steven) van Rijswijk, CEO and chairman
T. (Tanate) Phutrakul, CFO
L. (Ljiljana)
Č
ortan, CRO
P. (Pinar) Abay, head of Market Leaders
A.J.M. (Andrew) Bester, head of Wholesale Banking
A. (Aris) Bogdaneris, head of Challengers & Growth Markets and head of Retail Banking
R.H.E. (Ron) van Kemenade, chief technology officer
M.A. (Marnix) van Stiphout, chief operations officer and chief transformation officer
Report of Management Board
>
Independent auditor’s report
KPMG Accountants N.V., a Dutch limited liability company registered with the trade register in the Netherlands under number 33263683, is a member firm of the global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
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To: the General Meeting of Shareholders and the Supervisory Board of ING Bank N.V.
Report on the audit of the financial statements 2021 included in the annual report
Our opinion
In our opinion:
—
the accompanying consolidated financial statements give a true and fair view of the financial position of ING Bank
N.V. as at 31 December 2021 and of its result and its cash flows for the year then ended, in accordance with
International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2
of the Dutch Civil Code;
—
the accompanying parent company financial statements give a true and fair view of the financial position of ING Bank
N.V. as at 31 December 2021 and of its result for the year then ended in accordance with Part 9 of Book 2 of the
Dutch Civil Code.
What we have audited
We have audited the financial statements 2021 of ING Bank N.V. (the ‘Company’ or ‘ING Bank’) based in Amsterdam.
The financial statements include the consolidated financial statements and the parent company financial statements.
The consolidated financial statements comprise:
1 the consolidated statement of financial position as at 31 December 2021;
2 the following consolidated statements for 2021: the statement of profit or loss, the statements of comprehensive
income, changes in equity and cash flows; and
3 the notes comprising a summary of the significant accounting policies and other explanatory information.
The parent company financial statements comprise:
1 the parent company statement of financial position as at 31 December 2021;
2 the parent company statement of profit or loss and statement of changes in equity for 2021; and
3 the notes comprising a summary of the significant accounting policies and other explanatory information.
Basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities
under those standards are further described in the ‘Our responsibilities for the audit of the financial statements’ section of
our report.
We are independent of ING Bank in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij
assurance-opdrachten’ (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence)
and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the ‘Verordening
gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics).
Our audit procedures were determined in the context of our audit of the financial statements as a whole. Our observations
in respect of going concern, fraud and non-compliance with laws and regulations, climate and the key audit matters
should be viewed in that context and not as separate opinions or conclusions
.
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion
.
Audit approach
Summary
Materiality
—
Group materiality of EUR 250 million (2020: EUR 250 million).
—
3.7% of profit before taxation from continuing operations (2020: 5.7% of normalised profit before taxation from
continuing operations).
Group audit
—
81% of profit before taxation from continuing operations covered by audit procedures performed by component
auditors (2020: 83%).
—
93% of total assets covered by audit procedures performed by component auditors (2020: 92%).
Going concern, Fraud & Non-compliance with laws and regulations and Climate risk
—
Going concern: no significant going concern risks identified.
—
Fraud & Non-compliance with laws and regulations: in our audit we incorporate the risk of management override of
controls, the risk of management override over the collective loan loss provisioning and the assessment of the risk
of material misstatements of the financial statements due to non-compliance with laws and regulations.
—
Climate change risk: management’s response to possible future effects of climate change and their anticipated
outcomes have been disclosed in the Report of the Management Board and the Risk Disclosures in the annual
report. We have considered the impact of climate change risks on our identification and assessment of risks of
material misstatement in the financial statements.
Key audit matters
—
Assessment of Expected Credit Losses on loans and advances to customers and loans and advances to banks.
—
Risk of inappropriate access or changes to IT systems.
Opinion
Unqualified
Report of Management Board
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Independent auditor’s report
KPMG Accountants N.V., a Dutch limited liability company registered with the trade register in the Netherlands under number 33263683, is a member firm of the global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
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Materiality
Based on our professional judgement we determined the materiality for the financial statements as a whole at EUR 250
million (2020: EUR 250 million) which represents 3.7% of profit before taxation from continuing operations (2020: 5.7% of
normalised profit before tax from continuing operations). The prior year materiality was determined with reference to
normalised profit before tax from continuing operations and excluded the goodwill impairment and impairment of
associates and joint ventures. These items did not occur in 2021 and thus no normalisation of profit before tax was
necessary.
We consider profit before tax from continuing operations as the most appropriate benchmark based on our assessment of
the general information needs of the users of the financial statements and given the fact that ING Bank is a profit-oriented
entity. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for
the users of the financial statements for qualitative reasons.
We agreed with the Audit Committee of the Supervisory Board that misstatements identified during our audit in excess of
EUR 12.5 million (2020: EUR 12.5 million), would be reported to them, as well as smaller misstatements that in our view
must be reported on qualitative grounds
.
Scope of the group audit
ING Bank is at the head of a group of components. The financial information of this group is included in the consolidated
financial statements of ING Bank.
ING Bank is structured along 6 segments: Retail Netherlands, Retail Belgium, Retail Germany, Retail Other, Wholesale
Banking and Corporate Line Banking, each comprising of multiple legal entities and/or covering different countries.
Because we are ultimately responsible for the audit opinion, we are responsible for directing, supervising and performing
the group audit. In this respect, we have determined the nature and extent of audit procedures to be carried out for group
entities or so-called components.
Our group audit is mainly focused on significant components. These components are either individually financially
significant due to their relative size in the group or because we identified a significant risk of material misstatement for
one or more account balances of these entities. In addition, we included certain other non-significant components in the
scope of our group audit in order to arrive at a sufficient coverage over all significant account balances.
This resulted in a full or specific scope audit for 43 components globally, in total covering 17 countries, and in a coverage
of 81% of profit before tax from continuing operations and 93% of total assets. For the remaining 19% of profit before tax
from continuing operations and the remaining 7% of total assets audit procedures were performed at the group level
including analytical procedures in order to corroborate that our scoping remained appropriate throughout the audit. This
coverage is in line with our 2020 audit.
The consolidation of components in the group, the disclosures in the financial statements and certain accounting topics
that are performed at a group level were further covered by the group audit team. Procedures performed by the group
audit team included, but were not limited to, substantive procedures with respect to equity, certain elements of the
expected credit loss provisioning process and goodwill.
All components in scope for group reporting are audited by KPMG member firms. We sent detailed audit instructions to all
component auditors, covering significant areas such as the relevant identified risks of material misstatement at a group
level and further set out the information that is required to be reported to the group audit team.
In view of Covid-19 related restrictions on the movement of people across borders, and also within significantly affected
countries, we have considered the impact on the audit approach to evaluate the component auditor’s communications
and the adequacy of the work performed by them. Due to the aforementioned restrictions, visiting components was not
practicable in the current environment. As a result, we have requested those component auditors to provide us with
access to audit workpapers in order to perform these evaluations, subject to local laws and regulations. In addition, due to
the inability to arrange in-person meetings with such component auditors, we have continued to use alternative methods
of communication, including written instructions, the exchange of emails and virtual meetings.
We performed file reviews for The Netherlands, Belgium, Germany, Romania, Spain, Turkey, Switzerland, Poland,
France and South Korea. The Covid-19 travel restrictions required us to perform the file reviews remotely. For all
components in scope of the group audit, we held conference calls and/or had remote meetings with the audit teams of
these components. During these meetings and calls, the planning, risk assessment, procedures performed, findings and
observations reported to the group auditor were discussed in detail and any further work deemed necessary by the group
audit team was then performed.
The group audit team set component materiality levels which ranged from EUR 20 million to EUR 95 million, based on the
mix of relative size and financial statement risk profile of the components within the group in order to reduce the
aggregation risk to an acceptable level.
By combining the results of the aforementioned procedures performed by component auditors with additional procedures
performed at a group level, we have been able to obtain sufficient and appropriate audit evidence about ING Bank’s
financial information and were thus able to give an opinion on ING Bank’s financial statements.
The audit coverage as stated in the summary section can further be specified as follows:
Profit before tax from continuing operations
81%
19%
Covered by audit procedures performed
by component auditors
Covered by audit procedures performed
at group level by the group audit team
Total assets
93%
7%
Covered by audit procedures performed
by component auditors
Covered by audit procedures performed
at group level by the group audit team
Report of Management Board
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Independent auditor’s report
KPMG Accountants N.V., a Dutch limited liability company registered with the trade register in the Netherlands under number 33263683, is a member firm of the global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
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Audit response to going concern – no significant going concern risks identified
The Management board has performed its going concern assessment and has not identified any significant going concern
risks. Our main procedures to assess the Management board’s assessment were:
—
we considered whether the Management board’s assessment of the going concern risks includes all relevant
information of which we are aware as a result of our audit;
—
we analysed the company’s financial position as at year-end and compared it to the previous financial year in terms
of indicators that could identify significant going concern risks;
—
we inspected regulatory correspondence to obtain an understanding of the Company’s capital position, that
underpins management’s assessment of the going concern assumption for financial reporting.
The outcome of our risk assessment procedures did not give reason to perform additional audit procedures on the
Management board’s going concern assessment.
Audit response to the risk of fraud and non-compliance with laws and regulations
General
In chapter ‘Risk management – Compliance risk’ of the Annual Report and note 42 of the financial statements, the
Management board describes its procedures and assessment in respect of the risk of fraud and non-compliance with laws
and regulations. In the Supervisory Board report the assessment by the Risk Committee in respect of these topics is
described.
As part of our audit, we have gained insights into the Company and its business environment and assessed the Company’s
risk management in relation to fraud and non-compliance. In addition, we performed procedures to obtain an understanding
of the legal and regulatory frameworks that are applicable to the Company. The potential effect of the identified laws and
regulations on the financial statements varies considerably.
The Company is subject to many laws and regulations where the consequences of non-compliance could have an indirect
material effect on amounts recognised or disclosures provided in the financial statements, or both, for instance through the
imposition of fines or litigation. We identified the following areas as those most likely to have such an indirect effect on the
financial statements:
—
anti-money laundering and terrorist financing law;
—
data protection law;
—
fraud, corruption and anti-bribery law;
—
prudential and supervision regulations from European Central Bank and Dutch Central Bank;
—
sanctions law.
Together with our forensic specialists, we evaluated the fraud and non-compliance risk factors to consider whether those
factors indicate a risk of material misstatement in the financial statements.
As part of our audit procedures, we:
—
assessed the Company’s code of conduct, whistleblowing procedures, incidents register and its procedures to
investigate indications of possible fraud and non-compliance;
—
performed relevant inquiries with management, those charged with governance and other relevant functions, including
General Legal Counsel, the Head of Compliance and the Head of Internal Audit;
—
inspected internal reports from Compliance and Internal Audit for indications of possible fraud and non-compliance;
—
evaluated correspondence with relevant supervisory authorities and regulators as well as legal confirmation letters;
—
considered the outcome of our other audit procedures and evaluated whether any findings or misstatements were
indicative of fraud or non-compliance;
—
considered the effect of actual, suspected or identified risk of non-compliance as part of our procedures on the related
financial statement items.
With respect to the bank-wide Know Your Customer enhancement program (the ‘KYC enhancement program’) as disclosed
in the Management board report in order to improve governance, systems and tools around client due diligence and
transaction monitoring, we inquired senior management, General legal counsel, Head of Compliance and Head of Internal
Audit.
We inspected the progress reports in relation to the KYC enhancement program and we evaluated and discussed internal
audit reports in relation to compliance. We instructed local auditors of selected components to assess client due diligence
and transaction monitoring at local level.
We observe that the required KYC enhancement program receives and will need ongoing attention from management, the
Audit Committee and the Supervisory Board.
Revenue recognition (a presumed fraud risk)
We assessed the presumed fraud risk on revenue recognition to be irrelevant, because the accounting of interest income
and commission income is based on automatically generated accruals based on static data taken from the loan source
system and therefore concerns routine transactions not subject to management judgement.
Our procedures to address the identified risks of fraud or non-compliance with laws and regulations did not result in a key
audit matter.
Based on the above and in accordance with the auditing standards, we identified the following fraud risks that are relevant
to our audit and we responded as follows:
Management override of controls (a presumed fraud risk)
Risk:
Management is by definition in a unique position to perpetrate fraud because of management’s ability to manipulate
financial records and prepare fraudulent financial statements by overriding controls that otherwise appear to be operating
effectively, such as reporting fictitious journal entries. Although the level of risk of management override of controls may
vary from entity to entity, the risk nevertheless is present at all entities, including at ING Bank level. A fraud risk is by
nature considered a significant audit risk.
Response:
—
We evaluated the design and the implementation and, where considered appropriate, tested the operating effectiveness
of internal controls that mitigate fraud and non-compliance risks, such as processes related to journal entries and
estimates related to loan loss provisions.
Report of Management Board
>
Independent auditor’s report
KPMG Accountants N.V., a Dutch limited liability company registered with the trade register in the Netherlands under number 33263683, is a member firm of the global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
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—
We performed a data analysis of high-risk journal entries and evaluated key estimates and judgments for bias by the
Company’s management. Where we identified instances of unexpected journal entries or other risks through our data
analytics, we performed additional audit procedures to address each identified risk, including testing of transactions
back to source information.
—
We incorporated elements of unpredictability in our audit by including South Korea in scope of the group audit and by
adapting our audit methodology resulting for example in other sample sizes for substantive testing.
Management override of collective loan loss provisioning (ECL)
With respect to the risk of fraud in relation to management override of Expected Credit Loss provision results, we refer to
the Key Audit Matter ‘Assessment of Expected Credit Losses on loans and advances to customers and loans and advances
banks’.
We communicated our risk assessment, audit responses and results to management and the Audit Committee of the
Supervisory Board.
Other than disclosed in the annual report (‘Risk management – Compliance risk’) and note 42 of the financial statements
our audit procedures did not reveal indications and/or reasonable suspicion of fraud and non-compliance that could have
a material effect on amounts recognised or disclosures provided in the financial statements.
Audit response to climate change risk
The Management board is responsible for preparing the financial statements in accordance with the applicable financial
reporting framework, including considering whether the implications from climate change risks and commitments have been
appropriately accounted for and disclosed. In the Supervisory Board report the involvement of the Audit Committee in
overseeing the financial statement process is reflected.
The Management board is responsible for the analysis of the impact of climate change risks on the Company’s business
and operations going forward and on the financial statements. Reference is made to the Report of the Management Board
and the Risk Disclosures in the Annual Report.
The evaluation of the effectiveness of management’s strategy against internal or external goals set is not in scope of our
audit of the financial statements. As part of our audit, we consider potential effects of climate change risks on the
accounts and disclosures, including estimates and judgements in the financial statements to determine whether the
financial statements are free from material misstatement.
We performed the following procedures in this respect:
—
We assessed the minutes of the Climate Change Committee.
—
We obtained an understanding of the current governance structure and the integration of climate-related risks in
credit risk policies and procedures.
—
We obtained an understanding of the process to identify climate-related risks and the heatmap developed by ING to
assess the financial materiality of climate-related risks on ING.
—
We held inquires with staff involved with the integration of climate-related risks into credit risk policies and
procedures and the development of the climate-related heatmaps.
Our key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements. We have communicated the key audit matters to the
The
key audit matters
are not a comprehensive reflection of all matters discussed.
Compared to last year the key audit matter with respect to the assessment of goodwill impairment is not included, as this
specifically related to the financial year 2020 and the impact of the Covid-19 pandemic.
Assessment of Expected Credit Losses on loans and advances to customers and loans and advances to
banks
Description
As discussed in the Credit Risk section on pages 65-107 and in Note 3 and Note 7 in the financial statements, the loans
and advances to customers amount to EUR 628
billion and loans and advances to banks amount to EUR 24 billion as at
31 December 2021. These loans and advances are measured at amortised cost, less expected credit losses (‘ECL’) of
EUR 5.3 billion.
Management estimated ECL using three components: probability of default (‘PD’), loss given default (‘LGD’) and
exposure at default (‘EAD’). Management applied forward looking economic scenarios with associated weights.
Relevant macroeconomic factors include the gross domestic product (‘GDP’), house price index (‘HPI’) and
unemployment rate. The recent economic conditions are outside the bounds of historical experience used to develop
ECL model methodologies and result in greater uncertainties to estimate ECLs. These uncertainties are addressed by
judgemental overlays by management.
Our response
We identified the assessment of ECL on loans and advances to customers and loans and advances to banks as a key
audit matter because of the significant and complex auditor judgement and specialised skills and knowledge required to
evaluate the following elements of the overall ECL estimate:
—
the judgements used to develop PD, LGD and EAD, including model or manual determined expected future recovery
cash flow assessments of individual loan provisions for impaired loans;
—
the recalibration of existing IFRS 9 credit risk models and redevelopment of IFRS 9 credit risk models to reflect the
new definition of default applied in credit risk management of the bank and the update of data history;
—
use of forward-looking macroeconomic forecasts in the ECL, including GDP, HPI and unemployment rate;
—
the consistent identification and application of criteria for significant increase in credit risk (‘SICR’);
—
calculation of management overlays to the modelled ECL due to the increased uncertainty in the forecast of future
economic conditions. These management overlays included specific sectorial wholesale and retail lending overlays
and overlays to residential mortgages; and
—
the disclosures regarding management’s application of IFRS 9 explaining the key judgements and material inputs to
the IFRS 9 ECL results.
The following are the primary procedures we performed to address this key audit matter:
—
we evaluated the design and tested the operating effectiveness of certain internal controls related to the ECL process
for loans and advances to customers and banks. This included controls related to the assumptions (including PD,
LGD, EAD and macroeconomic forecasts), review of model outputs, the application of the new definition of default,
Report of Management Board
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Independent auditor’s report
KPMG Accountants N.V., a Dutch limited liability company registered with the trade register in the Netherlands under number 33263683, is a member firm of the global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
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the update of data history, governance and monitoring of the ECL, reconciliations, determination of credit risk ratings,
the estimated future recovery cash flows of individual loan provisions and management overlays to the modelled
ECL;
—
we involved credit risk professionals with specialised skills and knowledge who assisted in evaluating the
assumptions to determine the PD, LGD, and EAD parameters in models used by the Company to determine the
collective provisions including the evaluation of the recalibrated and redeveloped credit risk models. In addition,
assessing management overlays recorded to the ECL, including sectorial wholesale and retail lending overlays and
overlays to residential mortgages. This included reperforming back testing of certain models to evaluate current
model performance. We considered the impact these overlays have on model calculations and results when reaching
our conclusions;
—
we involved economic professionals with specialised skills and knowledge, who assisted in assessing the Company’s
methodology to determine the macroeconomic forecasts used in the ECL. We tested the reasonableness of
management’s forecasts against other external benchmarks and our own internal forecasts;
—
we involved corporate finance professionals with specialised skills and knowledge, who assisted in examining the
methodologies, cash flows and collateral values used in expected future recovery cash flow assessments of
individual loan provisions for impaired loans. We challenged management’s use of recovery scenarios and expected
cash flows considering industry trends and comparable benchmarks, recalculated recovery amounts and performed
reconciliations;
—
we evaluated the identification of SICR in loans by challenging the scope of management’s criteria used in staging
assessments, consistent application of the thresholds applied within each criterion, and the ability of staging criteria
to identify SICR prior to loans being credit impaired; and
—
we assessed whether the credit risk management disclosures appropriately disclose and address the uncertainties
which exists when determining the ECL.
Our observation
Based on our procedures performed, we found management’s overall assessment relating to the valuation of loans and
advances to customers and banks within an acceptable range and adequately disclosed in Note 3 and Note 7 of the
financial statements.
Risk of in appropriate access or changes to Information Technology (IT) systems
Description
ING Bank is highly dependent on its IT environment for the continuity of its operations. Inappropriate access or changes
to an application or supporting infrastructure could compromise the continuity of ING Bank’s operations and the reliability
of financial data. IT general controls including cybersecurity controls, are an important cornerstone of the ING Bank
internal control framework.
The IT environment of ING Bank evolves over time. One of these changes relates to the implementation of automation to
support control execution related to user access management and change management.
Our response
Our audit approach depends to a large extent on the effectiveness of automated controls and, therefore, procedures are
designed to test among others access and change management controls over IT systems. Given the complex IT technical
nature of this part of the audit, IT auditors and cyber specialists are an integral part of our audit team.
As part of our risk assessment and design of the IT audit approach we:
—
examined the framework of governance over ING Bank’s IT organisations, the IT general (including cybersecurity
controls) and applications controls;
—
assessed the reliability and continuity of the IT environment where relevant for the scope of our audit of the financial
statements;
—
took into account regulatory correspondence related to IT;
—
determined which controls are required prior to using automation for control execution, in response to the
implementation of automation to support control execution related to user access management and change
management;
—
held corroborative inquiries with the personnel at the Security Operations Center and with the Bank’s Chief
Information Security Officer (CISO).
We performed testing of operating effectiveness of user access and change management controls. We performed test
procedures to respond to specific risks such as data migrations to the ING Private Cloud and vendor management related
to outsourced IT processes.
We identified areas for improvement in the control execution relating to Information used in the control, interface testing
and the use of automation to support control execution. Management has put efforts to remediate identified control
deficiencies. For those control deficiencies that were not remediated, we tested compensating controls that addressed the
same risk or tested mitigating controls that lowered the risk of the deficiency and performed additional substantive testing.
Cyber security incidents that were reported during 2021 were handled by management in accordance with ING Bank’s
framework and resolved without significant impact to ING assets.
Our observation
The combination of the tests of controls and substantive tests performed, provided sufficient evidence to enable us to rely
on the adequate and continued operation of the IT systems for the purposes of our audit of the financial statements.
We refer to the disclosure on Risk Management on pages 137 and 138.
Report on the other information included in the Annual Report
In addition to the financial statements and our auditor’s report thereon, the Annual Report contains other information.
Based on the following procedures performed, we conclude that the other information:
—
is consistent with the financial statements and does not contain material misstatements; and
—
contains the information as required by Part 9 of Book 2 of the Dutch Civil Code for the management report and other
information.
We have read the other information. Based on our knowledge and understanding obtained through our audit of the
financial statements or otherwise, we have considered whether the other information contains material misstatements.
By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the
Dutch Standard 720. The scope of the procedures performed is less than the scope of those performed in our audit of the
financial statements.
Report of Management Board
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Independent auditor’s report
KPMG Accountants N.V., a Dutch limited liability company registered with the trade register in the Netherlands under number 33263683, is a member firm of the global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
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The Management board is responsible for the preparation of the other information, including the information as required
by Part 9 of Book 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements and ESEF
Engagement
We were engaged by General Meeting of Shareholders as auditor of ING Bank on 11 May 2015, as of the audit for the
year 2016 and have operated as statutory auditor ever since that financial year. We have been reappointed by the
General Meeting of Shareholders on 23 April 2019 to continue to serve ING Bank as its external auditor for the financial
years 2020-2023.
No prohibited non-audit services
We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on specific
requirements regarding statutory audits of public-interest entities
.
Services rendered
For the period to which our statutory audit relates, in addition to this audit, we have provided the following services to the
Company and its controlled undertakings:
—
Agreed-upon procedures and assurance engagements for the benefit of external stakeholders, largely driven by
regulatory requirements.
European Single Electronic Format (ESEF)
ING Bank has prepared its 2021 Annual Report in ESEF. The requirements for this format are set out in the Commission
Delegated Regulation (EU) 2019/815 with regard to regulatory technical standards on the specification of a single
electronic reporting format (these requirements are hereinafter referred to as: the RTS on ESEF).
In our opinion, the Annual Report prepared in the XHTML format, including the partially tagged consolidated financial
statements as included in the reporting package by ING Bank, has been prepared in all material respects in accordance
with the RTS on ESEF.
Management is responsible for preparing the Annual Report including the financial statements in accordance with the
RTS on ESEF, whereby management combines the various components into a single reporting package. Our
responsibility is to obtain reasonable assurance for our opinion whether the Annual Report in this reporting package, is in
accordance with the RTS on ESEF.
Our procedures taking into consideration Alert 43 of NBA (the Netherlands Institute of Chartered Accountants), included
amongst others:
—
obtaining an understanding of the entity's financial reporting process, including the preparation of the reporting
package;
—
obtaining the reporting package and performing validations to determine whether the reporting package containing
the Inline XBRL instance document and the XBRL extension taxonomy files have been prepared in accordance with
the technical specifications as included in the RTS on ESEF;
—
examining the information related to the consolidated financial statements in the reporting package to determine
whether all required tagging’s have been applied and whether these are in accordance with the RTS on ESEF.
Description of responsibilities regarding the financial statements
Responsibilities of the Management board and the Supervisory Board for the financial statements
The Management board is responsible for the preparation and fair presentation of the financial statements in accordance
with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, the Management board is responsible for such
internal control as the Management board determines is necessary to enable the preparation of the financial statements
that are free from material misstatement, whether due to fraud or error. In that respect the Management board, under
supervision of the Supervisory Board, is responsible for the prevention and detection of fraud and non-compliance with
laws and regulations, including determining measures to resolve the consequences of it and to prevent recurrence.
As part of the preparation of the financial statements, the Management board is responsible for assessing the Company’s
ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the Management board
should prepare the financial statements using the going concern basis of accounting unless the Management board either
intends to liquidate the Company or to cease operations or has no realistic alternative but to do so. The Management
board should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a
going concern in the financial statements.
The Supervisory Board is responsible for overseeing the Company’s financial reporting process.
Our responsibilities for the audit of the financial statements
Our objective is to plan and perform the audit engagement in a manner that allows us to obtain sufficient and appropriate
audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all
material errors and fraud during our audit.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified
misstatements on our opinion.
A further description of our responsibilities for the audit of the financial statements is included in the appendix of this
auditor's report. This description forms part of our auditor’s report.
Amstelveen, 7 March 2022
KPMG Accountants N.V.
P.A.M de Wit RA
Appendix:
Description of our responsibilities for the audit of the financial statements
Report of Management Board
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Independent auditor’s report
KPMG Accountants N.V., a Dutch limited liability company registered with the trade register in the Netherlands under number 33263683, is a member firm of the global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
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Appendix
Description of our responsibilities for the audit of the financial statements
We have exercised professional judgement and have maintained professional scepticism throughout the audit, in
accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included
among others:
—
identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error,
designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than the risk resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control;
—
obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control;
—
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the Management board;
—
concluding on the appropriateness of the Management board’s use of the going concern basis of accounting, and
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company
to cease to continue as a going concern;
—
evaluating the overall presentation, structure and content of the financial statements, including the disclosures; and
—
evaluating whether the financial statements represent the underlying transactions and events in a manner that
achieves fair presentation.
We are solely responsible for the opinion and therefore responsible to obtain sufficient and appropriate audit evidence
regarding the financial information of the entities or business activities within the bank to express an opinion on the
financial statements. In this respect we are also responsible for directing, supervising and performing the group audit.
We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant findings in internal control that we identify during our audit. In this
respect we also submit an additional report to the audit committee in accordance with Article 11 of the EU Regulation on
specific requirements regarding statutory audits of public-interest entities. The information included in this additional
report is consistent with our audit opinion in this auditor’s report.
We provide the Supervisory Board with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear
on our independence, and where applicable, related safeguards.
From the matters communicated with the Supervisory Board, we determine the key audit matters: those matters that were
of most significance in the audit of the financial statements. We describe these matters in our auditor’s report unless law
or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating
the matter is in the public interest.
Report of Management Board
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Articles of Association
ING Bank Annual Report 2021
319
Articles of Association – Appropriation of results
Appropriation of results
The result is appropriated pursuant to Article 24 of the Articles of Association of ING Bank N.V., the
relevant stipulations of which state that the result shall firstly be appropriated to the Stichting Regio
Bank Reserve, respectively the Reserve Stichting Vakbondsspaarbank SPN or charged to that reserves
in proportion to the ratio between the Stichting Regio Bank Reserve, respectively the Reserve
Stichting Vakbondsspaarbank SPN and the company's equity at the end of the relevant financial year
and that the remainder shall be at the disposal of the General Meeting.
Report of Management Board
>
Disclaimer
ING Bank Annual Report 2021
320
Disclaimer
Certain of the statements contained herein are not historical facts, including, without limitation,
certain statements made of future expectations and other forward-looking statements that are based
on management’s current views and assumptions and involve known and unknown risks and
uncertainties that could cause actual results, performance or events to differ materially from those
expressed or implied in such statements. Actual results, performance or events may differ materially
from those in such statements due to a number of factors, including, without limitation: (1) changes in
general economic conditions, in particular economic conditions in ING’s core markets, including
changes affecting currency exchange rates and the regional and global economic impact of the
invasion of Russia into Ukraine and related international response measures (2) effects of the Covid-19
pandemic and related response measures, including lockdowns and travel restrictions, on economic
conditions in countries in which ING operates, on ING’s business and operations and on ING’s
employees, customers and counterparties (3) changes affecting interest rate levels (4) any default of a
major market participant and related market disruption (5) changes in performance of financial
markets, including in Europe and developing markets (6) fiscal uncertainty in Europe and the United
States (7) discontinuation of or changes in ‘benchmark’ indices (8) inflation and deflation in our
principal markets (9) changes in conditions in the credit and capital markets generally, including
changes in borrower and counterparty creditworthiness (10) failures of banks falling under the scope of
state compensation schemes (11) non-compliance with or changes in laws and regulations, including
those financial services and tax laws, and the interpretation and application thereof (12) geopolitical
risks, political instabilities and policies and actions of governmental and regulatory authorities,
including in connection with the invasion of Russia into Ukraine and related international response
measures
(13) legal and regulatory risks in certain countries with less developed legal and regulatory
frameworks (14) prudential supervision and regulations, including in relation to stress tests and
regulatory restrictions on dividends and distributions (also among members of the group) (15)
regulatory consequences of the United Kingdom’s withdrawal from the European Union, including
authorizations and equivalence decisions (16) ING’s ability to meet minimum capital and other
prudential regulatory requirements (17) changes in regulation of US commodities and derivatives
businesses of ING and its customers (18) application of bank recovery and resolution regimes, including
write-down and conversion powers in relation to our securities (19) outcome of current and future
litigation, enforcement proceedings, investigations or other regulatory actions, including claims by
customers or stakeholders who feel misled or treated unfairly, and other conduct issues (20) changes
in tax laws and regulations and risks of non-compliance or investigation in connection with tax laws,
including FATCA (21) operational and IT risks, such as system disruptions or failures, breaches of
security, cyber-attacks, human error, changes in operational practices or inadequate controls including
in respect of third parties with which we do business (22) risks and challenges related to cybercrime
including the effects of cyberattacks and changes in legislation and regulation related to cybersecurity
and data privacy (23) changes in general competitive factors, including ability to increase or maintain
market share (24) inability to protect our intellectual property and infringement claims by third parties
(25) inability of counterparties to meet financial obligations or ability to enforce rights against such
counterparties (26) changes in credit ratings (27) business, operational, regulatory, reputation and
other risks and challenges in connection with climate change (28) inability to attract and retain key
personnel (29) future liabilities under defined benefit retirement plans (30) failure to manage business
risks, including in connection with use of models, use of derivatives, or maintaining appropriate policies
and guidelines (31) changes in capital and credit markets, including interbank funding, as well as
customer deposits, which provide the liquidity and capital required to fund our operations, and (32) the
other risks and uncertainties detailed in the most recent annual report of ING Bank N.V. (including the
Risk Factors contained therein) and ING’s more recent disclosures, including press releases, which are
available on www.ING.com. This annual report contains inactive textual addresses to internet websites
operated by us and third parties. Reference to such websites is made for information purposes only,
and information found at such websites is not incorporated by reference into this annual report. ING
does not make any representation or warranty with respect to the accuracy or completeness of, or
take any responsibility for, any information found at any websites operated by third parties. ING
specifically disclaims any liability with respect to any information found at websites operated by third
parties. ING cannot guarantee that websites operated by third parties remain available following the
filing of this annual report or that any information found at such websites will not change following the
filing of this annual report. Many of those factors are beyond ING’s control.
This document is the PDF version of the 2021 Annual Report of ING made available on ing.com. Another
version of this document has been prepared in the European single electronic reporting format (ESEF)
and such ESEF reporting package is also available on ing.com. In the event of any discrepancies
between this PDF version and the ESEF reporting package, the ESEF reporting package governs.
Any forward looking statements made by or on behalf of ING speak only as of the date they are made,
and ING assumes no obligation to publicly update or revise any forward-looking statements, whether
as a result of new information or for any other reason.
This document does not constitute an offer to sell, or a solicitation of an offer to purchase, any
securities in the United States or any other jurisdiction.