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2012

ING Group

Annual Report

Taking charge of change

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ING Group Annual Report 2012 Taking charge of change

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...liquidity positions improved > ING continued to de-risk, streamline its portfolio and strengthen its businesses > Agreement reached with European Commission on amended Restructuring Plan > Further progress made towards State repayment and reduction in double leverage 2 ING Group Annual Report 2012

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... the Boards ING share 4 6 8 9 10 2 Report of the Executive Board Financial and regulatory environment Strategy Capital management Risk management 12 17 22 24 Banking overview - Retail Banking - Commercial Banking Insurance overview - Insurance 26 30 39 44 48 3 Corporate governance Report of...

Page 6
... customers, prudent balance sheet management and the determination of our staff to provide the best possible service to our customers, ING strengthened its position. 2012 was a year marked by major change. In challenging times, ING has become a ï¬nancially stronger company. Through divestments, ING...

Page 7
...Plan gives us more time and greater ï¬,exibility to shape our future. Both the bank and the insurance businesses are on track. In January 2012, ING Bank updated its strategy and ï¬nancial ambitions around three pillars: customer centricity, operational excellence and balance sheet optimisation. ING...

Page 8
... for money and superior service. This reï¬,ects our universal customer ideal: saving and investing for the future should be easier. ING Insurance/Investment Management (IM) is preparing its businesses for standalone futures. ING Insurance/IM Europe and ING Insurance/IM US are preparing for base case...

Page 9
... Insurance US (excluding US Closed Block VA), US Closed Block VA and ING Investment Management. ING Investment Management provides a broad range of investment strategies and advisory services in Europe, the Americas and the Middle East. 3 Corporate governance 4 Consolidated annual accounts 5 Parent...

Page 10
...50 in the Annual Accounts. Capital ratios and other data 2012 2011 2010 Debt/equity ratio (1) Core Tier 1 ratio Insurance IGD Solvency I ratio Underlying return on equity based on IFRS-EU equity Employees (FTEs, year-end, excluding FTEs in discontinued operations) (2) Market capitalisation (in EUR...

Page 11
... we develop products such as savings accounts for children and insurance products for cancer patients. As a bank and asset manager, ING allocates assets to a wide range of companies, projects and funds. Increasingly, we include sustainability criteria in our capital allocation choices. For reporting...

Page 12
... of ING shares* in percentages United States United Kingdom France Netherlands Germany Switzerland Belgium Luxembourg Other Total 34 20 11 6 6 4 2 1 16 100 * Year-end 2012 ï¬gures, estimated on information provided by Thomson Reuters Advisory Services. 10 ING Group Annual Report 2012

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... development ING depositary receipts for shares 5 Parent company annual accounts 6 Other information Index 1 January 2012 = 100 140 130 120 110 100 90 80 70 01/12 ING 03/12 05/12 FTSE 300 Banks 07/12 09/12 11/12 01/13 7 Additional information FTSE 300 Life Insurance ING Group Annual Report 2012...

Page 14
... in 2012, but the economy showed signs of picking up again towards the end of the year. The uncertain economic outlook and the turbulence on ï¬nancial markets in 2012 were among the factors that made ING Bank put extra focus on funding, capital and liquidity. 12 ING Group Annual Report 2012

Page 15
... in October 2012 that the timetable for the additional buffers for Systemically Important Financial 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 13

Page 16
... of long-term customer banking relationships. Commercial banking activities within ING provide key support in terms of debt capital markets, hedging, cash management, trade ï¬nance and project ï¬nance, which helps serve the growing demand for integrated services, from large corporations and small...

Page 17
... of Dutch pension funds. â€¢ Legally capping variable remuneration, such as annual bonuses, in the ï¬nancial sector at 20% of ï¬xed remuneration. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional...

Page 18
...global consolidated balance sheet, with exemptions for equity, for deposits that are covered by a deposit guarantee scheme, and for certain liabilities that relate to insurance business. The levy on short-term funding liabilities (less than one year) is twice as high as the levy on long-term funding...

Page 19
... de-risking, negative credit and debt valuation adjustments and the Dutch bank levy. Our strong funding position enabled us to continue supporting 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional...

Page 20
...the insurance businesses in Malaysia to AIA Group. ING received approximately EUR 1.3 billion in cash in this transaction, which delivered a net transaction gain at closing of EUR 745 million. The third sale was the sale of the life insurance, general insurance, pension and ï¬nancial planning units...

Page 21
... divestments. ING continues to invest to evolve the ING Direct business model, increasing the product offering and extending distribution, while integrating the balance sheet with the rest of ING Bank. In February 2012, the sale of ING Direct USA to Capital One Financial Corporation was closed. The...

Page 22
.../income ratio of 62.5% in 2012 to 50-53% by 2015. Once the restructuring of the Group is complete and the Bank is a stand-alone business, the emphasis will be on increasing our deposit base and integrating the balance sheet by matching the deposits of ING Direct with loans from Commercial Banking...

Page 23
... in making further improvements to our businesses and in strengthening customer relationships. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 21

Page 24
...insurance activities. Capital Management is integral to the way the Group manages its businesses and legal entities. ING's Capital Management strategy is driven by the strategic aims of the Group and the risk appetite set by the Board. Following the annual budgeting process, each year a capital plan...

Page 25
... buffer to cope with ï¬nancial market challenges, new regulations and adverse economic conditions. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 23

Page 26
... Europe. Within this environment both the Bank and the Insurance units continued selectively to de-risk their balance sheet, for example by selling Spanish assets, asset-backed securities and real estate investments. The total exposure in the GIIPS (Greece, Ireland, 24 ING Group Annual Report 2012

Page 27
... in the Annual Accounts provides further insight into the risk management practice within ING Group. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 25

Page 28
... on short-term funding. It continued to de-risk and 'term out' (extend the term of longer term funding) its balance sheet. The bank strengthened its businesses in markets where it has long-term sustainable positions through solid customer-centric initiatives. The retail banking operations focused...

Page 29
... Europe Commercial Banking has an international network in 40 countries, with key positions in Structured Finance and Financial Markets 2 Report of the Executive Board Retail Banking is active in China, India and Thailand 3 Corporate governance * ING announced a sale agreement for ING Direct UK...

Page 30
...a top employer. Local Top Employer programme teams are organised in each business line and they are responsible for executing at the local level the bank-wide Top Employer action plan. Across the banking businesses, best practices in employee development are shared. 28 ING Group Annual Report 2012

Page 31
... and Financial Markets. ING is conï¬dent that this strategy will ensure that ING Bank remains proï¬table and stays competitive in the new banking environment. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information...

Page 32
...market impacts) Customer balances: net production funds entrusted (EUR billion) Customer balances: net production lending (EUR billion) Underlying risk costs in bp of average risk-weighted assets Risk-weighted assets (year-end, EUR billion, adjusted for divestments) Underlying return on equity based...

Page 33
...huge urban-art digital work by Belgian artist, Jean-Luc Moerman. One hundred multiples were auctioned 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 31

Page 34
... their personal ï¬nances (for example the risk of negative equity, that is the gap between mortgage debt and market value of the house) and the effects of several government policies on their personal budgets. Retail Netherlands (Retail NL) worked hard during 2012 to help customers manage their...

Page 35
...-interest rate term of a mortgage and improved communication on the price of business lending products. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 36
... retail bank in the Dutch market with its own funding capabilities and a broad distribution network. Some of the WUB employees will transfer to Nationale-Nederlanden Bank while others will remain at the separate WUB entity within ING Retail Banking Netherlands, managing a mortgage portfolio...

Page 37
... Bank added to its mobile product range by offering customers the opportunity to open a savings account or current account, or take out a travel insurance, using the mobile app MyING.be. In 2012 this app was downloaded 128,000 times (2011: 54,000 times). In the area of investment funds, we reported...

Page 38
... risk-weighted assets). BUSINESS DEvELOPMENTS Retail Germany consists of ING-DiBa Germany, ING-DiBa Austria and Interhyp. In Germany, one of our key markets in Europe, ING-DiBa is the third-largest bank in terms of number of customers and the country's most favoured banking brand. ING-DiBa offers...

Page 39
... a full bank also includes the selective opening of bank shops and cafÃ©s in Spain, Italy and France. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 37

Page 40
... performance in 2012. Loan growth amounted to 22% and deposit growth to 27%. ING Bank Turkey aspires to be one of the leading savings banks in Turkey. ING Direct Spain's customer base increased by 255,117 and totalled over 2.6 million at year-end. In Italy the number of current accounts increased by...

Page 41
.... The increase is mainly due to higher risk costs in Industry Lending as well as for the lease run-off business. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts Financial overview* in EUR million 2012 2011 Total underlying income Underlying operating expenses...

Page 42
...tailored solutions, including specialised and trade ï¬nance, structured ï¬nancial markets products, corporate ï¬nance, mergers and acquisitions, and debt and equity capital markets advice. In 2012, Commercial Banking remained ï¬rmly focused on servicing its clients. ING closed many high proï¬le...

Page 43
... reduced costs and operational risk, and helped the business unit meet new regulatory requirements. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 41

Page 44
...central Bank Treasury was established and became operational in June. The Treasury and ALCO (Asset and Liability Committee) departments of Financial Markets were separated from the commercial (Clients & Products) business units to form a part of the new Bank Treasury. ING's balance sheet strategy is...

Page 45
... existing operations. It will steadfastly ensure that its customers are at the core of its business, maintaining an unwavering focus on providing superior products and services. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts...

Page 46
... Revaluations Market and other impacts Underlying result before tax New sales (APE) Administrative expenses/operating income (Life & ING IM) Life general account assets (in EUR billion) Administrative expenses (total) Underlying Return on equity based on IFRS-EU Equity*** Employees (FTEs, year-end...

Page 47
... Netherlands 2 Report of the Executive Board Top 5 player in US Retirement Services * 3 Corporate governance * ING completed the divestment of Insurance Malaysia on 17 December 2012 Leading Life & Pensions provider in Central Europe 4 Consolidated annual accounts for the insurance businesses...

Page 48
...information and help. In other countries, new life insurance and investment-based insurance products were introduced to help customers more easily build their wealth and protect it. In 2012, ING Insurance/IM continued to reï¬ne its sales processes and the process for the development of new products...

Page 49
...ï¬cient operations. Plans for an IPO of ING U.S. remain on track. Depending on market conditions, ING anticipates an IPO of the business in 2013. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional...

Page 50
... (AZL) and investment management services position it well to support existing and new clients with the important transition from DB to DC plans. In the individual life insurance market in the Netherlands, consumers are switching to tax-favourable bank products for their pension savings (banksparen...

Page 51
...-Nederlanden Bank will concentrate on the retail market offering a full range of savings, investment, mortgages, long-term savings and insurance products. A new to be created Pension Solutions group will combine ING's strengths in pension administration, insurance and investment management offering...

Page 52
... insurance company in 2012 by a leading Czech ï¬nancial newspaper. Insurance Czech Republic also won two insurance awards in the Fincentrum Bank of the Year awards: one for its unit-linked life insurance Smart product for the second consecutive year, and one for its pension fund business. Insurance...

Page 53
...Life sales due to management actions to reduce sales in the current low interest rate environment. BUSINESS DEvELOPMENTS Insurance US, US Closed Block VA, ING Investment Management US and Corporate Line US are all part of ING U.S. legal entities. In 2012, ING U.S. continued to strengthen its capital...

Page 54
... from small companies to very large corporations and government entities. It ranks in the top 5 in the US deï¬ned contribution retirement plan market by number of retirement plans administered and plan participants served, and by assets under management and administration at 31 December 2012. ING...

Page 55
... in 2012 decreased, mainly reï¬,ecting a higher loss on hedges, net of reserve changes, due to the rising equity markets. The hedge programme is focused on protecting regulatory capital rather than mitigating earnings volatility. 4 Consolidated annual accounts ING INVESTMENT MANAGEMENT > Assets...

Page 56
... IM INTERNATIONAL ING IM International has been developing its reputation for spread and income investment solutions, based on its strengths in Emerging Market Debt (EMD), credit, multi-asset and equity products. ING IM received market recognition by winning major 54 ING Group Annual Report 2012

Page 57
... 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information REPORT OF THE EXECUTIvE BOARD The Corporate governance section starting on page 60 and the paragraphs of the Remuneration report 'Remuneration policy for senior management' and '2012 remuneration structure senior...

Page 58
... the year. Also in January, the Supervisory Board held its annual meeting on ING's strategy as well as the medium-term plan (MTP) 2012-2015 and related risks. The MTP addresses the plans and the ï¬nancial and non-ï¬nancial targets for the banking and the insurance businesses and for the Group as...

Page 59
...of life insurance products Insurance Europe was presented. The Supervisory Board was reported that an agreement had been reached with the labour unions on a new pension scheme for Dutch employees. The 2012 General Meeting was evaluated in June and various scenarios with regard to ING's Restructuring...

Page 60
... the Dutch Banking Code by ING Bank N.V. and the implementation of the Dutch Insurers' Code by ING Insurance Eurasia N.V. In November the Committee reviewed the charters of all boards and advised on various recommendations regarding the 2013 annual General Meeting. 58 ING Group Annual Report 2012

Page 61
...which are deemed to be incorporated by reference here. AMSTERDAM, 18 MARCH 2013 THE SUPERvISORY BOARD 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 59

Page 62
...Group's share capital; accordingly they do not carry voting rights in the General Meeting. The ï¬nancial entitlements of the Securities are described in note 34 to the consolidated annual accounts. On 26 January 2009, ING Group reached an agreement with the Dutch State regarding the Illiquid Assets...

Page 63
... and Corporate Governance Committee of ING Group are comprised of members of the Supervisory Board. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 61

Page 64
... the Corporate Governance Code, binding shareholder approval is only required for equity compensation plans (or changes thereto) for members of the Executive Board and Supervisory Board, and not for equity compensation plans for other groups of employees. CAPITAL AND SHARES CAPITAL STRUCTURE, SHARES...

Page 65
... are not announced in advance, nor can they be followed by webcast or any other means. ING Group's 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 63

Page 66
... Relations section of the Company's website. During 2012, ING Group did not provide any form of compensation to parties that are directly or indirectly involved in the production or publication of analysts' reports, with the exception of credit-rating agencies. ING Group presented at 12 industry...

Page 67
...receipts appointed by that meeting. The ï¬nal minutes are made available on the website of ING Group 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 65

Page 68
... in corporate governance of large stock-listed companies and experience in the political and social environment. REMUNERATION AND SHARE OWNERSHIP Members of the Executive Board are permitted to hold shares and depositary receipts for shares in the share capital of ING Group for long-term investment...

Page 69
...company law, the Corporate Governance Code and the Articles of Association, the Supervisory Board Charter 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 70
...balance sheet and notes thereto; e. the acquisition by ING Group or a dependent company of a participating interest in the capital of another company amounting to one-quarter or more of ING Group's issued capital and reserves as disclosed in its balance sheet and notes thereto or a material increase...

Page 71
... for shares are subject to the ING regulations regarding insiders. These regulations are available on the website of ING Group (www.ing.com). 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional...

Page 72
... (Born 1950, Dutch nationality, male; appointed in 2007, term expires in 2015 ) Former managing director of F&C and country head for F&C Netherlands (asset management ï¬rm). Other business activities: member of the Supervisory Board of NSI N.V. (real estate fund) (listed company). Member of the...

Page 73
... new members for appointment. More information can be found in the convocation for the 2013 annual General Meeting, available on the website of ING Group (www.ing.com) from 28 March 2013. FINANCIAL REPORTING A description of the main features of ING Group's internal control and risk management...

Page 74
... of ING Group. Furthermore, Ernst & Young also audited and reported on the effectiveness of internal control over ï¬nancial reporting on 31 December 2012. The external auditor attended the meetings of the Audit Committee and the 2012 annual General Meeting. New legislation on the accountancy...

Page 75
... of ING Group over the ï¬rst nine months of 2012 on the basis of the press release of 7 November 2012. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 76
... of the Board can be found on the website of ING Trust Ofï¬ce (www.ingtrustofï¬ce.com). All members of the Board stated that they meet the conditions regarding independence as referred to in the Articles of Association and in the Dutch Corporate Governance Code. 74 ING Group Annual Report 2012

Page 77
[email protected] Website: www.ingtrustofï¬ce.com AMSTERDAM, 18 MARCH 2013 BOARD OF STICHTING ING AANDELEN 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 78
..., who was reappointed as of 1 July 2012. All members of the Board stated that they meet the conditions regarding independence as referred to in the Articles of Association of ING Continuity Foundation. AMSTERDAM, 18 MARCH 2013 BOARD OF STICHTING CONTINUITEIT ING 76 ING Group Annual Report 2012

Page 79
... BOARD P.G. Flynn CFO, MEMBER OF THE EXECUTIvE BOARD W.F. Nagel CRO, MEMBER OF THE EXECUTIvE BOARD 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 80
.... ING Group has long-established Business Principles and a strong internal control culture, which all staff must adhere to. SOX 404 activities are organised along the lines of the governance structure, and involve the participation of senior management across ING. Following the SOX 404 process, ING...

Page 81
... Oversight Board (United States), the consolidated balance sheet of ING Groep N.V. as of 31 December 2012, the consolidated proï¬t and loss account, consolidated statement of comprehensive income, consolidated statement of cash ï¬,ows and consolidated statement of changes in equity for the year...

Page 82
... Board was adopted by the annual General Meeting (AGM) on 27 April 2010, adjustments to the remuneration policy in line with new regulatory developments were adopted by the AGM on 9 May 2011. In addition, the Remuneration report provides information on the remuneration paid in 2012. ING realises...

Page 83
... State 4. Improve employee engagement across the Banking and Insurance operations 5. Improve leadership development, strengthen talent pipeline, retention and diversity 6. Improve operational excellence 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent...

Page 84
... use of company cars, contributions to company savings plans and, if applicable, expatriate allowances). Executive Board members may obtain banking and insurance services from ING Group subsidiaries in the ordinary course of their business and on terms that apply to most other comparable employees...

Page 85
...May 2012. The 2012 pension costs for this member reï¬,ect the partial year as an Executive Board member. 7 Additional information Pension costs of former members of the Executive Board amounted to nil for 2012, EUR 135 thousand for 2011, and EUR 158 thousand for 2010. ING Group Annual Report 2012...

Page 86
... Board members Executive Board members are permitted to hold ING depositary receipts for shares as a long-term investment. The table below shows the holdings by members of the Executive Board. ING depositary receipts for shares held by members of the Executive Board number of shares 2012 2011...

Page 87
... in shares, as well as retention periods on all equity remuneration as soon as it becomes unconditional. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 88
...still in development. The structure as set out above is based on information currently available. Should it become clear, after everything has been clariï¬ed, that amendments are necessary, ING will amend the structure as deemed appropriate. REMUNERATION SUPERvISORY BOARD The annual remuneration of...

Page 89
... the holdings by members of the Supervisory Board. Supervisory Board members did not hold ING options at year-end 2012. ING shares and depositary receipts for shares held by members of the Supervisory Board (1) number of shares 2012 2011 2010 3 Corporate governance 4 Consolidated annual accounts...

Page 90
...the Netherlands Anna Potajallo, Mieczyslaw Bielawski, Krystov Burnat, Mariusz Cieslik, Poland Valerica Chirila, Andrei Ciuchilan, Romania Marcel Forisek, Lukas Motovsky, Slovakia Raul Lopez, Miguel Hernandez, Nadia Belaradj Moya, Spain Sam Chaudhuri, Rina Goldenberg, UK. 88 ING Group Annual Report...

Page 91
...consolidated annual accounts 118 217 Risk management Capital management 304 2 Report of the Executive Board 3 Corporate governance 5 Parent company annual accounts Parent company balance sheet Parent company proï¬t and loss account Parent company statement of changes in equity Accounting policies...

Page 92
Consolidated balance sheet of ING Group as at 31 December amounts in millions of euros 2012 2011 ASSETS Cash and balances with central banks 1 Amounts due from banks 2 Financial assets at fair value through profit and loss 3 - trading assets - investments for risk of policyholders - non-trading ...

Page 93
... 183 5,757 41,785 3,648 1,146 2,502 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 548 -394 752 906 684 414 995 1,679 414 4,003 5,853 2,916 6 Other information 7 Additional information ING Group Annual Report 2012 91

Page 94
Consolidated proï¬t and loss account of ING Group continued for the years ended 31 December amounts in millions of euros 2012 2011 2010 Net result from continuing and discontinued operations attributable to: Equityholders of the parent Minority interests 3,894 109 4,003 5,766 87 5,853 2,810...

Page 95
... income of associates. Reference is made to Note 49 'Taxation' for the disclosure on the income tax effects on each component of the other comprehensive income. 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 96
... investments Disposals and redemptions: - group companies - associates - available-for-sale investments - held-to-maturity investments - real estate investments - property and equipment - assets subject to operating leases - investments for risk of policyholders - loans - other investments Net cash...

Page 97
... to the notes starting on page 118. These form an integral part of the consolidated annual accounts. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 95

Page 98
... hedge reserve Transfer to insurance liabilities/DAC Exchange rate differences Other revaluations Total amount recognised directly in equity (other comprehensive income) Net result from continuing and discontinued operations Total comprehensive income Employee stock option and share plans Changes in...

Page 99
...,769 million (2011: EUR 24,067 million; 2010: EUR 19,120 million). Changes in individual components are presented in Note 13 'Shareholders' equity (parent) non-voting equity securities'. 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 97

Page 100
...'. In the annual accounts the term 'IFRS-EU' is used to refer to International Financial Reporting Standards as adopted by the EU, including the decisions ING Group made with regard to the options available under IFRS-EU. IFRS-EU provides a number of options in accounting policies. The key areas in...

Page 101
... of euros IAS 19 'Employee Benefits' 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts Assets held for sale Assets - other Impact on Total assets Liabilities held for sale Liabilities - other Impact on Total liabilities Shareholders' equity Impact on Total...

Page 102
... and structured entities. The implementation of IFRS 12 will not have an impact on Shareholders' equity, Net result and/or Other comprehensive income. The following new or revised standards were issued by the International Accounting Standards Board (IASB) and will become effective for ING Group in...

Page 103
...'Risk management' section for a sensitivity analysis of net result and shareholders' equity to insurance, interest rate, equity, foreign currency and real estate risks. These sensitivities are based on changes in assumptions that management considers reasonably likely at the balance sheet date. LOAN...

Page 104
... change and additional information becomes known. EMPLOYEE BENEFITS Group companies operate various deï¬ned beneï¬t retirement plans covering a signiï¬cant number of ING's employees. The liability recognised in the balance sheet in respect of the deï¬ned beneï¬t pension plans is the present...

Page 105
... vehicles, the existence of control is determined taking into account both ING Group's financial interests for own risk and its role as investment manager. The results of the operations and the net assets of subsidiaries are included in the profit and loss account and the balance sheet from the date...

Page 106
... of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Reference is made to Note 35 'Fair value of ï¬nancial assets and liabilities' for the basis of the determination of the fair value of ï¬nancial instruments. 104 ING Group Annual Report 2012

Page 107
...nancial assets'. Investments in prepayment sensitive securities such as InterestOnly and Principal-Only strips are generally classiï¬ed as available-for-sale. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information...

Page 108
...sheet classiï¬cation Investments (available-for-sale and held-to-maturity); â€¢ Money market risk arises when ING Group places short term deposits with a counterparty in order to manage excess liquidity and among others relates to the balance sheet classiï¬cations Amounts due from banks and Loans...

Page 109
...cash ï¬,ows in scheduled time buckets falls below the designated amount of that bucket. ING Group applies fair value hedge accounting for portfolio hedges of interest rate risk (macro hedging) under the EU 'carve-out' to its retail operations. The net exposures of retail funding (savings and current...

Page 110
Accounting policies for the consolidated annual accounts of ING Group continued IMPAIRMENTS OF LOANS AND ADvANCES TO CUSTOMERS (LOAN LOSS PROvISIONS) ING Group assesses periodically and at each balance sheet date whether there is objective evidence that a ï¬nancial asset or group of ï¬nancial ...

Page 111
... of income methods or discounted cash ï¬,ow calculations. The underlying assumption used in the valuation is that the 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual...

Page 112
... periods. The cash ï¬,ows are discounted using market based interest rates that reï¬,ect appropriately the risk characteristics of real estate. ING Group owns a real estate portfolio, diversiï¬ed by region, by investment segment (Ofï¬ce, Retail and Residential) and by investment type (Core, Value...

Page 113
... Accounts can be limited. The initial accounting shall be completed within a year after acquisition. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 114
... generally not exceed three years. Amortisation is included in Other operating expenses. value of business acquired (vOBA) VOBA is an asset that reï¬,ects the present value of estimated net cash ï¬,ows embedded in the insurance contracts of an acquired company, which existed at the time the company...

Page 115
... into account the conditions for current insurance contracts. Speciï¬c methodologies may differ between business units as they may reï¬,ect local regulatory requirements and local practices for speciï¬c product features in the local markets. 7 Additional information ING Group Annual Report 2012...

Page 116
... all contractual and related cash ï¬,ows, and future developments. It includes investment income on the same basis as it is included in the proï¬t and loss account. If, for any business unit, it is determined, using a best estimate (50%) conï¬dence level, that a shortfall exists, and there are no...

Page 117
... related policy coverage. Receipts under investment contracts are not recognised as gross premium income. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 118
..., because their terms and conditions (especially with regard to coupons and voting rights) are signiï¬cantly different. Therefore, the weighted average number of ordinary shares outstanding during the period is not impacted by the non-voting equity securities. 116 ING Group Annual Report 2012

Page 119
... the reconciliation of the net cash ï¬,ow and the balance sheet change in Cash and cash equivalents. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 117

Page 120
... to the consolidated annual accounts of ING Group amounts in millions of euros, unless stated otherwise ASSETS 1 CASH AND BALANCES WITH CENTRAL BANKS Cash and balances with central banks 2012 2011 Amounts held at central banks Cash and bank balances Short term deposits insurance operations 13,847...

Page 121
... netting of these positions in the balance sheet. Reference is made to Note 20 'Financial liabilities at fair value through profit and loss' for information on trading liabilities. Investments for risk of policyholders by type 2012 2011 2 Report of the Executive Board 3 Corporate governance Equity...

Page 122
... banking and insurance operations: Debt securities by type and balance sheet lines - Available-for-sale investments and Assets at amortised cost (banking operations) Available-for-sale investments 2012 2011 Held-to-maturity investments 2012 2011 2012 Loans and advances to customers 2011 2012 Amounts...

Page 123
...-for-sale investments 2012 2011 Held-to-maturity investments 2012 2011 2012 Loans and advances to customers 2011 2012 Amounts due from banks 2011 Total Banking and Insurance operations 2012 2011 4 Consolidated annual accounts Government bonds Covered bonds Corporate bonds Financial Institutions...

Page 124
Notes to the consolidated annual accounts of ING Group continued Exposures, revaluations and losses on certain ABS bonds 31 December 2012 Balance sheet value (1) Pre-tax revaluation reserve Changes through equity (pre-tax) Changes through proï¬t and loss (pre-tax) Change in 2012 Balance sheet value...

Page 125
..., Insurance: EUR 130 million). ING Group impaired all its Greek Government bonds to market value at 31 December 2011. This resulted in a re-impairment in the fourth quarter of 2011 of EUR 200 million (Bank: EUR 133 million, Insurance: 7 Additional information ING Group Annual Report 2012 123

Page 126
... in relation to available-for-sale equity securities relates mainly to the real estate funds for which significant influence ceased to exist due to the sale of ING Real Estate Investment Management. Reclassifications to Loans and advances to customers and Amounts due from banks (2009 and 2008...

Page 127
...the consolidated annual accounts of ING Group continued 1 Who we are Reclassifications to Loans and advances to customers and Amounts due from banks Q2 2009 Q1 2009 Q4 2008 As per reclassification date Fair value Range of effective interest rates (weighted average) Expected recoverable cash ï¬,ows...

Page 128
...and advances to customers by type - banking operations Netherlands 2012 2011 2012 International 2011 2012 Total 2011 Loans to, or guaranteed by, public authorities Loans secured by mortgages Loans guaranteed by credit institutions Personal lending Asset backed securities Corporate loans 35,857 160...

Page 129
... consolidated cash flows of the Group. For details on significant concentrations see 'Risk management' section. Loans and advances to customers and Amounts due from banks include finance lease receivables, are detailed as follows: Finance lease receivables 2012 2011 5 Parent company annual accounts...

Page 130
... annual accounts of ING Group continued Loan loss provisions analysed by type - banking operations Netherlands 2012 2011 2012 International 2011 2012 Total 2011 Loans to, or guaranteed by, public authorities Loans secured by mortgages Loans guaranteed by credit institutions Personal lending Asset...

Page 131
... Closing balance 1,670 60 -92 -2 -59 -290 1 1,288 1,900 32 -88 -31 -19 -118 -6 1,670 6 Other information 7 Additional information Real estate investments by banking and insurance operations 2012 2011 Banking operations Insurance operations 483 805 1,288 716 954 1,670 ING Group Annual Report...

Page 132
... 7 100 ING Group's exposure to real estate is included in the following balance sheet lines: Real estate exposure 2012 2011 Real estate investments Investments in associates Other assets - property development and obtained from foreclosures Property and equipment - property in own use Investments...

Page 133
...by banking and insurance operations 2012 2011 Banking operations Insurance operations 1,203 220 1,423 1,244 291 1,535 Changes in property in own use 3 Corporate governance 2012 2011 Opening balance Additions Changes in the composition of the group Transfers to and from Real estate investments...

Page 134
... leased-out assets 2012 2011 2012 Total 2011 Opening balance Additions Changes in the composition of the group Disposals Depreciation Exchange rate differences Transfer and other changes Closing balance Gross carrying amount as at 31 December Accumulated depreciation as at 31 December Net carrying...

Page 135
... Insurance. 2011 - Impairment In 2011, a goodwill impairment of EUR 32 million was recognised that related to the reporting unit Commercial Banking (ING Real Estate). During 2011, the ING Real Estate business changed significantly. The Real Estate Development business was reduced by selling/closing...

Page 136
... to the consolidated annual accounts of ING Group continued 2010 - Impairment Due to the unfavourable market circumstances for Insurance, including the low interest rate environment, there were indications in the third quarter of 2010 that the recoverable amount of the reporting unit Insurance US...

Page 137
... acquisition costs Life insurance 2012 2011 2012 Non-life insurance 2011 2012 Total 2011 2 Report of the Executive Board 3 Corporate governance Opening balance Capitalised Amortisation and unlocking Effect of unrealised revaluations in equity Changes in the composition of the group Exchange rate...

Page 138
... ING Life Japan nor ING Re. Assets held for sale 2012 2011 Cash and balances with central banks Amounts due from banks Financial assets at fair value through profit and loss Available-for-sale investments Held-to-maturity investments Loans and advances to customers Reinsurance contracts Investments...

Page 139
... values of financial assets and liabilities - Held for sale 2012 Level 1 Level 2 Level 3 Total 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts Assets Trading assets Investments for risk of policyholders Non-trading derivatives Financial assets designated as...

Page 140
... the consolidated annual accounts of ING Group continued 12 OTHER ASSETS Other assets by type 2012 2011 Reinsurance and insurance receivables Deferred tax assets Property development and obtained from foreclosures Income tax receivable Accrued interest and rents Other accrued assets Pension assets...

Page 141
...to the consolidated annual accounts of ING Group continued 1 Who we are EQUITY 13 SHAREHOLDERS' EQUITY (PARENT)/NON-vOTING EQUITY SECURITIES Shareholders' equity (parent) 2012 2011 2010 Share capital Share premium Revaluation reserve Currency translation reserve Other reserves Shareholders' equity...

Page 142
...406 9,515 11,891 139 57,949 68,529 40,622 27,907 2010 ING Bank ING Insurance Other Total Equity invested Regulatory capital invested Required minimum regulatory capital 34,451 49,145 29,860 19,285 20,134 20,335 8,826 11,509 9 54,594 69,480 38,686 30,794 140 ING Group Annual Report 2012

Page 143
... 5,550 5 Parent company annual accounts Property revaluation Available- for-sale reserve reserve Cash ï¬,ow hedge reserve Total Opening balance Unrealised revaluations after taxation Realised gains/losses transferred to proï¬t and loss Changes in cash ï¬,ow hedge reserve Transfer to insurance...

Page 144
... to the consolidated annual accounts of ING Group continued Changes in other reserves 2012 Retained earnings Share of associates reserve Treasury shares Other reserves Total Opening balance Result for the year Unrealised revaluations after taxation Changes in treasury shares Transfer to share of...

Page 145
... such a repayment within two months following the announcement of a resolution to that effect. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 143

Page 146
Notes to the consolidated annual accounts of ING Group continued LIABILITIES 14 SUBORDINATED LOANS Subordinated loans Notional amount in original currency Interest rate Year of issue First call date Step-up Total Lent on to ING Bank Lent on to ING Insurance Balance sheet value 2012 2011 9.000% 8....

Page 147
...Consolidated annual accounts As at 31 December 2012, ING Group has unused lines of credit available including the payment of commercial paper borrowings relating to debt securities in issue of EUR 13,129 million (2011: EUR 8,178 million). On 8 March 2012, ING launched three separate exchange offers...

Page 148
... to the consolidated annual accounts of ING Group continued 16 OTHER BORROWED FUNDS Other borrowed funds by remaining term 2012 2013 2014 2015 2016 2017 Years after 2017 Total Subordinated loans of group companies Preference shares of group companies Loans contracted Loans from credit institutions...

Page 149
...of credit risk arising from similar geographical regions, activities or economic characteristics of the reinsurer and maintains collateral. Reference is also made to the 'Risk management' section. 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report...

Page 150
...144 2 17 3,205 Exchange rate differences Other changes Closing balance -1 84 92 ING Group has an outstanding balance of EUR 36 million as at 31 December 2012 (2011: EUR 35 million) relating to environmental and asbestos claims of the insurance operations. In establishing the liability for unpaid...

Page 151
... consolidated annual accounts of ING Group continued 1 Who we are Changes in investment contracts liabilities 2012 2011 Opening balance Changes in the composition of the group 13,198 -187 13,011 8,865 11,974 11,974 2 Report of the Executive Board Current year liabilities Prior year provisions...

Page 152
... of 2012, excess cash in the banking operations was used to redeem short-term professional funding. Reference is made to Note 24 'Transfer of financial assets' for information on securities lending as well as sale and repurchase transactions. 19 CUSTOMER DEPOSITS AND OTHER FUNDS ON DEPOSIT Customer...

Page 153
Notes to the consolidated annual accounts of ING Group continued 1 Who we are Non-trading derivatives by type 2012 2011 Derivatives used in: - fair value hedges - cash ï¬,ow hedges - hedges of net investments in foreign operations Other non-trading derivatives 9,037 6,439 71 3,205 18,752 9,478 ...

Page 154
... to the consolidated annual accounts of ING Group continued Changes in deferred tax Net liability 2011 Change through equity Change through net result Changes in the composition of the group Exchange rate differences Net liability 2012 Other Investments Real estate investments Financial assets and...

Page 155
... by jurisdiction as follows: Breakdown by jurisdiction Banking operations 2012 2011 Insurance operations 2012 2011 2012 Total 2011 4 Consolidated annual accounts 5 Parent company annual accounts United States Great Britain Belgium Australia Spain Germany France Mexico Luxembourg Italy 120 17...

Page 156
.... In response to changing customer preferences and market dynamics, Insurance Eurasia is undertaking actions to increase its agility in the current operating environment by delayering the support staff structure in the Netherlands and sharpen the strategic focus of its business units, in particular...

Page 157
... pension plans. The assets of all ING Group's deï¬ned contribution plans are held in independently administered funds. Contributions are generally determined as a percentage of pay. These plans do not give rise to balance sheet provisions, other than relating to short-term timing differences...

Page 158
Notes to the consolidated annual accounts of ING Group continued Changes in defined benefit obligation Pension beneï¬ts 2012 2011 Post-employment beneï¬ts other than pensions 2012 2011 Opening balance Current service cost Interest cost Employer's contribution Participants contributions Beneï¬ts ...

Page 159
...minimum or maximum levels. Categories of plan assets in percentages Target allocation 2013 Percentage of plan assets 2012 2011 Weighted average expected long-term rate of return 2012 2011 4 Consolidated annual accounts 5 Parent company annual accounts Equity securities Debt securities Other 34 51...

Page 160
... to the consolidated annual accounts of ING Group continued Weighted averages of basic actuarial assumptions in annual % as at 31 December Pension benefits 2012 2011 Post-employment benefits other than pensions 2012 2011 Discount rates Mortality rates Expected rates of salary increases (excluding...

Page 161
... (1) 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Total 5 Parent company annual accounts Cash and balances with central banks Amounts due from banks Financial assets at fair value through profit and loss - trading assets - investments for risk of policyholders (2) - non...

Page 162
...risk is managed. Liabilities by maturity 2012 Less than 1 month (1) 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Adjustment (2) Total Subordinated loans Debt securities in issue Other borrowed funds Amounts due to banks Customer deposits and other funds on deposit Financial...

Page 163
...'. Transfer of financial assets Securities lending 2012 Equity Debt Sale and repurchase Equity Debt 5 Parent company annual accounts Transferred assets at carrying amount Amounts due from banks Financial assets at fair value through profit and loss (1) Investments Loans and advances to customers...

Page 164
...annual accounts of ING Group continued Transfer of financial assets Securities lending 2011 Equity Debt Sale and repurchase Equity Debt Transferred assets at carrying amount Amounts due from banks Financial assets at fair value through profit and loss (1) Investments Loans and advances to customers...

Page 165
... in cash flow hedges. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information Hedges of net investments in foreign operations ING Group's net investment hedges principally consist of derivatives (including currency...

Page 166
... in 2012 of EUR 1,332 million (2011: EUR 2,572 million) is presented in the consolidated statement of cash flows under 'Net cash flow from investment activities - Disposals and redemptions: group companies' and is not included in the table above. ING's Insurance and investment management businesses...

Page 167
... products include traditional off-balance sheet credit-related ï¬nancial instruments. Contingent liabilities and commitments 2012 Less than 1 month 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Total 3 Corporate governance 4 Consolidated annual accounts Banking operations...

Page 168
..., ING Group has transferred a substantial part of the credit risk related to these loan portfolios to third-party investors. In general, the third-party investors in securities issued by the SPE have recourse only to the assets of the SPE and not to ING Group. 166 ING Group Annual Report 2012

Page 169
... funds in a fiduciary capacity. These funds are therefore generally not included in the consolidated financial statements of ING Group. 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 170
... Insurance Corporation Lion Connecticut Holdings Inc. ReliaStar Life Insurance Company ReliaStar Life Insurance Company of New York Security Life of Denver Insurance Company ING USA Annuity and Life Insurance Company ING Investment Management Co Security Life of Denver International Limited ING Life...

Page 171
... 2012, ING sold all of its shares in Capital One Financial Corporation as disclosed in Note 38 'Investment income'. In connection with the divestment of ING Direct USA, ING also completed the adjustment of the agreement with the Dutch State concerning the structure of the Illiquid Assets Back...

Page 172
... companies disposed in 2012 ING Direct USA ING Direct Canada Insurance Malaysia Total General Primary line of business Sales proceeds Cash proceeds (1) Non-cash proceeds (2) Sales proceeds Assets Cash assets Investments Loans and advances to customers Amounts due from banks Financial assets...

Page 173
...EUR 347 million. ING Car Lease was previously partly included in both Commercial and Retail Banking. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 171

Page 174
... Real Estate ING REIM Asia securities and Europe ING Car Lease Paciï¬c Antai Life Insurance Company Ltd Latin American operations Total General Primary line of business Sales proceeds Cash proceeds (1) Non-cash proceeds Sales proceeds Assets Cash assets Investments Loans and advances to customers...

Page 175
...(3) ING Summit Industrial Fund LP Total 2 Report of the Executive Board General Primary line of business Sales proceeds Cash proceeds (1) Sales proceeds Assets Cash assets Investments Loans and advances to customers Amounts due from banks Financial assets at fair value through profit and loss Real...

Page 176
...high and insurers are in general being accused of being less transparent in their offering of unit-linked products. The criticism on unit-linked products led to the introduction of compensation schemes by Dutch insurance companies that have offered unit-linked products. In 2008 ING's Dutch insurance...

Page 177
... based. At this moment it is not practicable to provide an estimate of the (potential) financial effect of this proceeding. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group...

Page 178
...123 60 Assets from ING Bank N.V. and ING Verzekeringen N.V. mainly include long-term funding. Liabilities to ING Bank N.V. mainly include short-term deposits. As part of the exchange offers disclosed in Note 14 'Subordinated loans' EUR 0.9 billion intercompany debt from ING Bank N.V. to ING Groep...

Page 179
...determined based on the fair market value of the shares and the related vesting conditions if any. Key management personnel compensation (Supervisory Board) Supervisory Board amounts in thousands of euros 2012 2011 Base salary Total compensation 806 806 857 857 ING Group Annual Report 2012 177

Page 180
... annual accounts of ING Group continued Loans and advances to key management personnel Amount outstanding 31 December amounts in thousands of euros 2012 2011 Average interest rate 2012 2011 2012 Repayments 2011 Executive Board members Members of the Management Boards of ING Bank, ING Insurance...

Page 181
... Dutch State to adjust the structure of the Illiquid Assets Back-up Facility (IABF). This adjustment served to de-link the IABF from ING Direct USA by putting ING Bank in its place as counterparty for the Dutch State and became effective at the closing of the sale in February 2012. Under the terms...

Page 182
...-Nederlanden Bank. This transaction is expected to be completed in 2013. The integrated retail banking business will operate under the 'Nationale-Nederlanden' brand, with the goal of becoming a competitive retail bank in the Dutch market with its own funding 180 ING Group Annual Report 2012

Page 183
... of the Chief Executive Officer of the Executive Board requires approval of the State Nominees. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 181

Page 184
... of ING Group. Fair value of financial assets and liabilities Estimated fair value 2012 2011 2012 Balance sheet value 2011 Financial assets Cash and balances with central banks Amounts due from banks Financial assets at fair value through proï¬t and loss - trading assets - investments for risk of...

Page 185
... value. Other assets The other assets are stated at their carrying value which is not materially different from their fair value. 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 183

Page 186
... annual accounts of ING Group continued Financial liabilities Subordinated loans The fair value of the subordinated loans is estimated using discounted cash ï¬,ows based on interest rates and credit spreads that apply to similar instruments. Investment contracts For investment contracts for risk...

Page 187
... accounts of ING Group continued 1 Who we are The fair values of the ï¬nancial instruments carried at fair value were determined as follows: Methods applied in determining fair values of financial assets and liabilities 2012 Level 1 Level 2 Level 3 Total Assets Trading assets Investments for risk...

Page 188
... investments 2012 Non-trading derivatives Total Opening balance Amounts recognised in the proï¬t and loss account during the year Revaluation recognised in equity during the year Purchase of assets Sale of assets Maturity/settlement Transfers into Level 3 Transfers out of Level 3 Exchange rate...

Page 189
...year (Level 3) 2012 Held at balance sheet date Derecognised during the year 5 Parent company annual accounts Total Assets Trading assets Investments for risk of policyholders Non-trading derivatives Financial assets designated as at fair value through profit and loss Available-for-sale investments...

Page 190
Notes to the consolidated annual accounts of ING Group continued Amounts recognised in the profit and loss account during the year (Level 3) 2011 Held at balance sheet date Derecognised during the year Total Assets Trading assets Non-trading derivatives Financial assets designated as at fair value ...

Page 191
...36 242 255 2,033 632 43 59 533 125 1,190 258 12 5,140 5 Parent company annual accounts 65 12 732 278 6 Other information Classiï¬cation of bonds in Levels 2 and 3 is mainly a result of low trading liquidity in the relevant markets. 7 Additional information ING Group Annual Report 2012 189

Page 192
...the consolidated annual accounts of ING Group continued 36 INTEREST RESULT BANKING OPERATIONS Interest result banking operations 2012 2011 2010 Interest income on loans Interest income on impaired loans Total interest income on loans Interest income on available-for-sale securities Interest income...

Page 193
...1,731 24 1,755 -40 1,715 1,699 23 1,722 -39 1,683 1,718 23 1,741 -62 1,679 4 Consolidated annual accounts See Note 44 'Underwriting expenditure' for disclosure on reinsurance ceded. 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 191

Page 194
Notes to the consolidated annual accounts of ING Group continued 38 INvESTMENT INCOME Investment income by banking and insurance operations Banking operations 2012 2011 2010 2012 Insurance operations 2011 2010 2012 2011 Total 2010 Income from real estate investments Dividend income 16 64 80 24 ...

Page 195
... for more details. 40 COMMISSION INCOME Gross fee and commission income Banking operations 2012 2011 2010 2012 Insurance operations 2011 2010 2012 2011 Total 2010 5 Parent company annual accounts Funds transfer Securities business Insurance broking Asset management fees Brokerage and advisory fees...

Page 196
...ï¬t and loss'. In 2012 and 2011 market conditions includes in particular credit spread developments. 42 NET TRADING INCOME Net trading income Banking operations 2012 2011 2010 2012 Insurance operations 2011 2010 2012 2011 Total 2010 Securities trading results Foreign exchange transactions results...

Page 197
... loss' for information on trading liabilities. 43 OTHER INCOME Other income Banking operations 2012 2011 2010 2012 Insurance operations 2011 2010 2012 2011 Total 2010 3 Corporate governance 4 Consolidated annual accounts Net operating lease income Income from real estate development projects Other...

Page 198
...: EUR 156 million). In 2012, 'Change in life insurance provisions' includes an amount related to variable annuity assumption changes in the United States of approximately EUR -104 million. This charge relates to lapse-rate assumption reï¬nements following an annual review of policyholder behaviour...

Page 199
... to customers are presented under Addition to loan loss provision. Impairments on investments are presented under Investment income. Reference is made to the 'Risk management' section for further information on impairments. 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 200
... to the consolidated annual accounts of ING Group continued 46 STAFF EXPENSES Staff expenses Banking operations 2012 2011 2010 2012 Insurance operations 2011 2010 2012 2011 Total 2010 Salaries Pension and other staff-related benefit costs Social security costs Share-based compensation arrangements...

Page 201
... outstanding (in numbers) 2012 2011 2010 Weighted average exercise price (in euros) 2012 2011 2010 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts Opening balance Granted Exercised Forfeited Expired Closing balance 108,138,551...

Page 202
Notes to the consolidated annual accounts of ING Group continued Changes in option rights non-vested Options non-vested (in numbers) 2012 2011 2010 Weighted average grant date fair value (in euros) 2012 2011 2010 Opening balance Granted Vested Forfeited Closing balance 32,418,754 -15,815,049 -887,...

Page 203
...,812 million is presented in the following lines in the proï¬t and loss account. Total net interest income 2012 2011 2010 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts Interest result banking operations 36 Investment income - insurance operations 38 Other...

Page 204
... to 2010 does not differ signiï¬cantly. The effective tax rate in 2012 was lower than the weighted average statutory tax rate. This is mainly caused by non-taxable income, which is partly offset by non-deductible expenses and write-offs of deferred tax assets. 202 ING Group Annual Report 2012

Page 205
... income 2011 2010 2 Report of the Executive Board 3 Corporate governance 2012 Unrealised revaluations Realised gains/losses transferred to proï¬t and loss (reclassiï¬cations from equity to proï¬t and loss) Changes in cash ï¬,ow hedge reserve Transfer to insurance liabilities/DAC Exchange rate...

Page 206
... a. General ING Group's segments relate to the internal segmentation by business lines. As of 2012 the internal management reporting structure for the banking operations was changed in order to improve transparency and to reflect the impact of the divestments of ING Direct USA and ING Real Estate...

Page 207
... World Commercial Banking Insurance Benelux Insurance CRE Insurance US Insurance US Closed Block VA ING IM Income from retail and private banking activities in the Netherlands, including the SME and mid-corporate segments. The main products offered are current and savings accounts, business lending...

Page 208
... to the consolidated annual accounts of ING Group continued b. ING Group Segments ING Group total 2012 Total Banking Total Insurance Eliminations Total Underlying income - Gross premium income - Net interest result - banking operations - Commission income - Total investment and other income Total...

Page 209
... December 2011 as disclosed in Note 43 'Other income' and Note 14 'Subordinated loans'. Reference is made to Note 26 'Discontinued operations' for information on discontinued operations. 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 207

Page 210
... to the consolidated annual accounts of ING Group continued Segments ING Group total 2010 Total Banking Total Insurance Eliminations Total Underlying income - Gross premium income - Net interest result - banking operations - Commission income - Total investment and other income Total underlying...

Page 211
Notes to the consolidated annual accounts of ING Group continued 1 Who we are c. Banking activities Segments Banking 2012 Retail Netherlands Retail Belgium Retail Germany Retail Rest of World Commercial Banking Corporate Line Banking Total Banking Underlying income - Net interest result - ...

Page 212
... to the consolidated annual accounts of ING Group continued Segments Banking 2010 Retail Netherlands Retail Belgium Retail Germany Retail Rest of World Commercial Banking Corporate Line Banking Total Banking Underlying income - Net interest result - Commission income - Total investment and other...

Page 213
...Benelux Insurance CRE Insurance US Insurance US Closed Block vA ING IM Corporate Line Insurance Total Insurance 2 Report of the Executive Board 3 Corporate governance Investment margin Fees and premium based revenues Technical margin Income non-modelled life business Life & ING IM operating income...

Page 214
... ING Group continued Segments Insurance 2011 Insurance Benelux Insurance CRE Insurance US Insurance US Closed Block VA ING IM Corporate Line Insurance Total Insurance Investment margin Fees and premium based revenues Technical margin Income non-modelled life business Life & ING IM operating income...

Page 215
... 4 Consolidated annual accounts -2,018 -34 40 5 Parent company annual accounts Interest income and interest expenses breakdown by segments Banking 2012 Retail Netherlands Retail Belgium Retail Germany Retail Rest of World Commercial Corporate Banking Line Banking Total Banking Interest income...

Page 216
... by segment are not reported internally to, and not managed by, the chief operating decision maker. IFRS-EU balance sheet information is prepared, and disclosed below, for the Banking operations as a whole and for the Insurance operations as a whole and by segment. 214 ING Group Annual Report 2012

Page 217
... Board 3 Corporate governance Assets and liabilities from discontinued operations (2012: Asia and 2010: Latin America) are included in the segment in which it was originally included. Further balance sheet related information for the banking operations is provided by segment in the section 'Risk...

Page 218
...balance sheet: - amounts due to banks - amounts due from banks -38,704 39,053 349 -72,233 45,323 -26,910 -72,852 51,828 -21,024 Cash and cash equivalents includes amount due to/from banks with a term of less than three months from the date on which they were acquired. ING Group's risk management...

Page 219
... risk Regulatory capital Insurance investments 274 274 276 276 276 278 281 282 283 284 285 289 289 290 291 291 291 294 295 296 296 297 299 300 301 301 303 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 220
... transfer risk), market risk (including interest rate, equity, real estate and foreign exchange risks), insurance risk, liquidity & funding risk and business risk. In addition, ING Group is exposed to non-ï¬nancial risks, e.g. operational and compliance risks. The way ING Group manages these risks...

Page 221
... did not have a material impact on ING's exposure on Greece, Italy, Ireland, Portugal and Spain. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 219

Page 222
...no credit risk linked to Cyprus. (1) The exposures reported are credit, market and real estate exposures based on source systems and measurement criteria that can differ from those of similar exposures reported in Note 4 'Investments' of the annual accounts. (2) At the end of 2012 ING Bank holds CDS...

Page 223
..., net credit risk linked to Cyprus is not material for ING Bank. (1) The exposures reported are credit, market and real estate exposures based on source systems and measurement criteria that can differ from those of similar exposures reported in Note 4 'Investments' of the annual accounts. (2) Real...

Page 224
... long-term commitments to our clients, a low(er) interest rate will result in a high(er) market value of the liabilities (MVL). The risk of low interest rates combined with other risks, such as longevity, will further increase the MVL and reduce available capital. 222 ING Group Annual Report 2012

Page 225
... this can be further hampered by the on-going increasing capital requirements for banks in general. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 223

Page 226
...Capital Management section. Further, assets and liabilities per contractual maturity via predeï¬ned time-bands are displayed in speciï¬c notes of the Consolidated Annual Accounts. The additional Pillar 3 information that stems from the Basel II accords provides detailed tables on ING Bank's credit...

Page 227
... internal controls of the ï¬rst two lines, including ï¬nancial and non-ï¬nancial risk management and forms the third line of defence. 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 228
... the risks involved. As part of the process strategic limits and risk appetite levels are explicitly discussed. Based on the business plans, the Management Board Bank formulates the Strategic Plan which is submitted to the Supervisory Board for approval. 226 ING Group Annual Report 2012 Internal...

Page 229
...ING Bank risk organisation. Chief Risk Officer 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts Risk Integration and Analytics Bank Model Validation Bank 5 Parent company annual accounts Credit Risk Management Bank Market Risk Management Bank Non-Financial...

Page 230
... a number of European countries and in Asia and Australia. This business model is translated into the following speciï¬c ambitions: â€¢ ING Bank's long term ambition is to become a strong predominantly European focussed bank with a low risk balance sheet offering a competitive return on equity of...

Page 231
...a business unit, which are based on the ability to demonstrate that the required risk management processes are in place and effective within the business units. 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 232
... type including market risk, liquidity risk, structural interest rate risk, retail and wholesale credit risk. Test results are used in a variety of decision-making processes including adjustments to certain risk limits, speciï¬c portfolios, and business implementation strategies. In October 2012...

Page 233
...the model while the shaded box indicates inputs from other risk departments. Determine correlations 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts Determine stressed correlations Calculate diversiï¬cation ratio per risk type...

Page 234
... includes funding activities at ING Bank level, internal transactions between business units and the Corporate Line, and is managed by Capital Management. Differences between RC and EC are mainly due to: â€¢ The EC figures shown reflect all diversification effects within ING Bank, including risk...

Page 235
... long term debt in 2012. Growth in funds entrusted continued to develop favourably at Retail Banking, while within Commercial Banking deposits from corporate treasuries and assets managers decreased. Throughout the credit and liquidity crisis, 2 Report of the Executive Board 3 Corporate governance...

Page 236
... is good, reï¬,ecting in a slightly elevated but still low percentage of non-performing loans by the end of 2012. Given the signiï¬cant amount of mortgages in our credit portfolio, ING Bank closely follows all developments related to Dutch housing market and its mortgage portfolio. Business lending...

Page 237
... is generally based on the replacement value (mark-to-market) plus a potential future volatility concept, using a 3-7 year historical time horizon and a 97.5% conï¬dence level. â€¢ Money market risk: arises when ING Bank places short-term deposits with a counterparty in order to manage excess...

Page 238
... ING Bank's credit policy is to maintain an internationally diversiï¬ed loan and bond portfolio, while avoiding large risk concentrations. The emphasis is on managing business developments within the business lines by means of the top-down risk appetite framework, which sets concentration limits...

Page 239
... by relevant stakeholders to ensure that risks (credit, operational, legal etc.) are mitigated. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 237

Page 240
... objective is to lower the risk cost as much as possible. All Recovery status accounts are rated 20, 21 or 22. Based on expected cash ï¬,ows for loans (above a certain threshold) rated between 20 - 22 speciï¬c, provisions are taken to minimise ING Bank's exposure. 238 ING Group Annual Report 2012

Page 241
...in concentration risk management such as risk appetite statements (RAS) and the systemic risk reports (sector concentration report). 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 239

Page 242
...risk adjusted return of different products and structures within different parts of the organisation along one and the same yardstick. Next to Pillar 2 based RAROC, within commercial banking, a Pillar 1 'sanity check' is performed on transaction level. This sanity check is a 'margin over credit risk...

Page 243
... in time. Additionally, the LGD for Regulatory Capital calculations is based on a down-turn LGD. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 241

Page 244
... Regulatory Capital/RWA Loan Loss Provisioning Loan Pricing Credit risk model governance All PD, EAD and LGD models are built according to the ING Bank internal credit risk modelling methodology standards and model life cycle. After thorough review of the documentation by the Model Development...

Page 245
... highly rated debt securities with minimal credit risk thereby capitalising on its economies of scale. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 246
... with our internal and external obligations; and â€¢ To monitor the risks we undertake. The customer-centric approach ensures that ING Bank can react quickly to changing regulations, business needs and best practices in our dealings with our clients and prospects. 244 ING Group Annual Report 2012

Page 247
... Bank main credit risk systems 2 Report of the Executive Board One entry portal (vantage) Integrated credit process environment STARpro Consolidated risk data warehouse vortex Global relationship database GRID 3 Corporate governance Production/operation systems 4 Consolidated annual accounts...

Page 248
... changes. For new deals, the user (usually an account manager) inputs the entire deal structure (using local source system codes) directly into Approval Package. The tool then has a workï¬,ow function to guide the credit application through the credit approval process. The Problem Loans module...

Page 249
... (1) Commercial Banking 2012 2011 Retail Banking Benelux 2012 2011 Retail Banking International (2) 2012 2011 Corporate Line 2012 2011 Total ING Bank 2012 2011 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information...

Page 250
...AA bucket for Money Market is directly related to less deposits given to the Dutch and North American central banks. The decrease in the AAA bucket for Investment is directly related to the divestment of Direct US and Direct Canada. Risk classes ING Bank portfolio per credit risk type, as % of total...

Page 251
... mortgages are collateralised by housing. ING Bank maintains the residential mortgage collateral in its centralised data base and in most cases uses external data to index the market value. 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 252
... financial in nature) a customer may have towards ING Bank. Within ING Bank, covers are subdivided into two distinct groups, called collateral and promises. Reference is made to credit risk management classification as included in the accounting policies for the consolidated annual accounts for...

Page 253
... amount to EUR 296 billion, making up 39% of the total ING Bank credit risk outstandings. The average LTV of the total residential mortgage portfolio amounts to 79% (2011: 75%). 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 251

Page 254
... still exists after 90 days, the obligation is transferred to one of the 'problem loan' units. In order to reduce the number of arrears, ING banking units encourage their obligors to set up automatic debits from their (current) accounts to ensure timely payments. Credit quality: ING Bank portfolio...

Page 255
... types of loan assets in which a (deï¬nite, non-recoverable) ï¬nancial loss was incurred. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information â€¢ Corporate Banking: Troubled Debt Restructuring (risk rating...

Page 256
... accordance with the Retail Loan Modification policy. Under this policy, each ING bank business units should have clear criteria to determine a client's eligibility for a loan modification, procedures to verify client's presentation and specific approval mandates. Credit Risk Management monitors the...

Page 257
Risk management continued ING Bank 1 Who we are As per 2012, ING Bank Retail reported EUR 291 million (EUR 1.6 billion in 2011) of Loan Modiï¬cations: Retail Banking: Remodified Loans, outstandings and number of clients Outstanding Region Customer Segments 2012 2011 2012 Clients 2011 Belgium ...

Page 258
... (1) Commercial Banking 2012 2011 Retail Banking Benelux Retail Banking International 2012 2011 2012 2011 Total ING Bank 2012 2011 Opening Balance Changes in the composition of the group Write-offs Recoveries Increase/(decrease) in loan loss provision Exchange or other movements Closing Balance...

Page 259
... for market risk is calculated using internally developed methodologies with a 99.95% conï¬dence interval and a horizon of one year, which represents extreme events and ING's target rating. 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 260
... rates, equity prices, foreign exchange rates and credit spreads. Governance The Financial Markets Risk Committee (FMRC) is the market risk committee that, within the risk appetite set by ALCO Bank, sets market risk limits both on an aggregated level and on a desk level, and approves new products...

Page 261
...of ING Commercial Banking. ING Bank reports the results of this back testing to DNB on a quarterly basis. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 262
.... The event risk number for the ING Commercial Banking trading activity is generated on a weekly basis. Like VaR, event risk is limited by ALCO Bank. ING Bank's event risk policy is based on a large set of possible stress scenarios per risk type (ï¬xed income, equity, foreign exchange, credit and...

Page 263
... 2012. Consolidated trading vaR ING Commercial Banking 2011-2012 2 Report of the Executive Board In EUR millions 20 10 0 -10 3 Corporate governance -20 -30 Jan 11 date Apr 11 P&L Jul 11 Oct 11 Jan 12 Apr 12 Jul 12 Oct 12 Dec 12 Value at Risk 4 Consolidated annual accounts The risk ï¬gures...

Page 264
Risk management continued ING Bank Regulatory Capital 2012 SvaR vaR Total 2011 Total Interest rate / Credit spread Equity Foreign exchange Incremental Risk Charge Total Internal Model Approach Standardised model (1) Total Regulatory Capital Market Risk Weighted Assets (2) (1) 206 54 54 46 10 14...

Page 265
... process of market risks in the banking books: 4 Consolidated annual accounts ING Bank Bank Treasury Capital Management 5 Parent company annual accounts FX, Interest and Liquity Risk Equity and Structural FX Risks Retail Banking Benelux Retail Banking International Commercial Banking Model...

Page 266
... in commercial products customer behaviour risk is reported as part of business risk Economic Capital. The risk transfer process takes place on a monthly basis, but more often if deemed necessary, for instance in volatile markets. The customer behaviour in relation to mortgages, loans, savings and...

Page 267
... 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. 7 Additional information ING Group Annual Report 2012 265

Page 268
... relative terms to changing FX rates. Risk proï¬le - FX Translation result The following table presents the currency exposures in the banking books for the most important currencies: Net banking currency exposures banking books Foreign Investments In EUR million 2012 2011 2012 Hedges 2011 2012 Net...

Page 269
... exposures per continent and sector based on the risk management view is seen below. Real Estate market risk exposure in banking books (by geographic area and sector type) 2012 2011 2012 2011 4 Consolidated annual accounts 5 Parent company annual accounts Continent Europe Americas Australia Asia...

Page 270
... unsecured deposits, commercial paper, long term bonds or repurchase agreements), fund providers (e.g. professional money market players, wholesale and retail clients), geographic markets and currencies; the structural mismatch in expected liquidity tenors of ING Bank's assets and liabilities per...

Page 271
...contingency funding plan. Contingency funding plans address both temporary and long-term liquidity disruptions, triggered by either a general market event or an ING Bank specific event. 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 269

Page 272
... is in place. The functional reporting line has clear accountabilities with regard to objective setting, remuneration, performance management and appointment of new staff. Framework ING Bank has a comprehensive framework for Operational and Compliance risks. This supports and govern the process of...

Page 273
... Capital Economic capital 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts Confidence level of 99.90% No interrisk diversification applied Operational Risk scenarios used for validation Assessment of severe risks mainly driven by External Loss Data Internal...

Page 274
... business management on Compliance Risk in their business unit, region, country or entity. To facilitate this, a functional reporting line to the next higher level Compliance Ofï¬cer is in place. The functional reporting line has clear accountabilities relating to objective setting, remuneration...

Page 275
... separately, and combined to one business risk ï¬gure via the variance-covariance methodology. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 273

Page 276
... 2012 meeting. The Manual now must be adopted by 42 states prior to becoming effective. The NAIC also adopted the Risk Management and Own Risk and Solvency Assessment Model Act (the 'ORSA Model Act') in 2012. This Act requires companies to do an ORSA by 1 January 2015. 274 ING Group Annual Report...

Page 277
... increase in the provision for insurance contracts due to mortality has been offset against the longevity provision. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual...

Page 278
... risk management execution. Business units report regularly on their risk proï¬le. RISK GOvERNANCE ING Insurance EurAsia's risk framework is based on the 'three lines of defence' concept which ensures that risk is managed in line with the risk appetite as deï¬ned by the Management Board Insurance...

Page 279
...2012. A new reporting structure will become effective in 2013. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts Deputy CRO Insurance EurAsia Business Management Model Validation 6 Other information Operational Risk Management...

Page 280
... set of risk management policies in place, which are regularly updated to align with best practices, regulations and change in business proï¬le. Starting in 2011, ING Insurance EurAsia reviews all policies for compliance with emerging Solvency II and other regulations, for example Capital...

Page 281
... of the ING Insurance EurAsia risk management paragraph will exclude the discontinued operations. The 2011 comparative numbers have been restated accordingly. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information...

Page 282
... numbers are aggregated with the EC for market risk and credit default risk, taking into account diversiï¬cation. Operational risk capital is treated as an add-on and therefore not part of the diversiï¬cation between risk types. For EC calculation ING Insurance EurAsia uses a one-year time horizon...

Page 283
... Capital break-down ING Insurance EurAsia excluding discontinued operations (99.5%) by risk category 2012 2011 3 Corporate governance 4 Consolidated annual accounts Insurance risk Market risk Credit default risk Operational risk Business risk Diversiï¬cation across risk types Total insurance...

Page 284
... set by line of business for catastrophic events and individual risk; â€¢ Tolerance limits for life insurance risks are set per insured life and signiï¬cant mortality events affecting multiple lives such as pandemics; â€¢ Reinsurance is used to manage tolerance levels. Reinsurance creates credit...

Page 285
... minority holdings and direct for all real estate revalued through P&L. Other holdings will be included in case of possible impairments caused by the drop in prices. 5 Parent company annual accounts 6 Other information 7 Additional information Real Estate Price Risk ING Group Annual Report 2012...

Page 286
... and interest rates credited to insurance policyholders and annuity contract owners. An extended period of declining interest rates may cause ING Insurance EurAsia to change the long term view of the interest rates that can be earned on the investments. REAL ESTATE Real Estate price risk arises from...

Page 287
...credit risk within ING Insurance EurAsia. EC numbers are based on a 99.5% conï¬dence interval on a one-year horizon. IFRS and AFR sensitivities measurement is described in the table below. Description Key Drivers 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts...

Page 288
... equity exposure) which led to (re)investments in highly-rated sovereigns such as Germany, the Netherlands, Finland (all AAA). Risk Concentration: ING Insurance EurAsia portfolio excluding discontinued operations , by economic sector (1) 2012 2011 Central Governments Non-Bank Financial Institutions...

Page 289
... securities lending/(reverse) repo's. Covers values ING Insurance EurAsia excluding discontinued operations 9 (1) 2012 Total outstanding amount 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information Mortgages (2) Other covers Total covers Asset categories Investment...

Page 290
...: ING Insurance EurAsia portfolio excluding discontinued operations 2012 2011 Opening balance Write-offs Recoveries Increase/(decrease) in loan loss provision Exchange differences Other changes Closing balance 80.4 -24.1 0.4 12.1 68.8 71.0 -11.7 1.9 19.7 -0.3 -0.2 80.4 Retail mortgage loan...

Page 291
... each business. Policies and minimum standards governing the framework are kept in the policy house. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information Risk appetite is deï¬ned as the risk level management is...

Page 292
...to be impartial and objective when advising business management on Compliance Risk in their Business Unit and Region, a dual reporting line, directly to General Management of their business and functionally to the next higher level Compliance Ofï¬cer, is in place. 290 ING Group Annual Report 2012

Page 293
... and to enforce limits / controls. SB Level 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 2-tier board structure Supervisory Board Audit Committee Risk Committee Board of ING U.S., Inc. 5 Parent company annual accounts Executive Committee Executive...

Page 294
... of the business units and recommend changes to company policies and investment guidelines that address General Account investments, or other investments for which the company is at risk â€¢ Risk committees are established at the ING US and business unit levels. The Risk Committee has a number of...

Page 295
... 4 Consolidated annual accounts 5 Parent company annual accounts Head of Corporate Functions Business Unit CEOs ING US Chief Financial Ofï¬cer ING US Chief Operating Ofï¬cer 6 Other information ING US Chief Risk Ofï¬cer CRO Investment Management* CRO Retirement Insurance & Model Risk...

Page 296
... yields on existing assets and new money and reinvestment rates. For new money and reinvestments long-term best estimate assumptions are taken into account, although current new money rates are used for the short-term reinvestments. Policies ING has a framework of risk policies, procedures, guidance...

Page 297
... risk categories for insurance risks within ING US. IFRS Earnings sensitivities are deï¬ned on a shock scenario at the 90% conï¬dence level. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information Description Key...

Page 298
... income from variable and equity linked. and direct equity exposure. Measured by the impact of a 25% drop in equity prices. Impact that credit default risk can have on credit impairment levels in a General account business. '1 in 10' scenario (using '1 in 10' 1-year default rates by rating category...

Page 299
... of Home Office real estate and real estate from foreclosed loans. Real Estate Exposure 2012 2011 5 Parent company annual accounts Total 123 125 6 Other information CREDIT RISK ING US credit exposure arises from the investment of insurance premiums in assets subject to credit risk, largely in...

Page 300
...settlement, money market and investment activities. The ratings reï¬,ect probabilities of default and do not take collateral into consideration and are based on ultimate parent. The risk concentration per sector remains very similar to last year, with the largest change shown for Non-Bank Financial...

Page 301
...management. External market and regulatory developments and internal financial developments are closely monitored. Regular stress testing and measurement of early warning indicators are, among others, used to provide additional management information. 4 Consolidated annual accounts 5 Parent company...

Page 302
...risk function works with the ING Operational Risk Management (ORM) Scorecard process to evaluate yearly the embedding level of the Operational Risk Management Framework in each business. Policies and minimum standards governing the framework are kept in the policy house. During 2011 Operational Risk...

Page 303
... level. As of 31 December 2012, US regulatory capital was at USD 7.9 billion producing an RBC ratio of 526%. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report...

Page 304
... EC and Market Consistent scenarios; â€¢ Several business units made updates to statutory values as a result of changes in reserve valuation interest rates or changes in their cash flow testing models. The valuation interest rate updates are required by law. 302 ING Group Annual Report 2012

Page 305
... asset is the Brazilian SulAmerica joint venture with a balance sheet value of EUR 366 million (in 2011 EUR 394 million). Winding down ï¬nancing activities is delegated to ING Group Capital Management. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent...

Page 306
... (Insurance Group Directive (IGD) Solvency I, Tier 1 and BIS ratios and limits for hybrid capital), rating agencies (leverage ratios, Adjusted Equity) and internal models such as the economic capital and market value balance sheet approach for parts of ING Insurance including Available Financial...

Page 307
... be reduced to a minimum. The entities should also be able to access capital markets independently. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 305

Page 308
..., investor relations, ï¬xed income information, ING Debt securities, Debt securities ING Groep N.V. Investments in subsidiaries less equity (including core Tier 1 securities) of the Group holding company. This net debt position is provided as equity to ING Insurance and ING Bank. According to the...

Page 309
....69% 14.26% 31,107 12.12% 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts (5) (6) According to the regulatory deï¬nition. Subordinated loans qualifying as Tier 1 capital have been placed by ING Groep N.V. with ING Bank N.V. For further details, see the table...

Page 310
... Insurance business in Malaysia. Capital base and financial leverage of ING Insurance 2012 2011 Shareholder's equity (parent) Revaluation reserve debt securities Revaluation reserve crediting to life policyholders Revaluation reserve cash ï¬,ow hedge Goodwill Minority interests Capital base Group...

Page 311
... capital adequacy ING Group 2012 2011 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts BIS capital IGD capital Group leverage (core debt) Regulatory capital Required capital banking operations Required capital insurance operations Total required capital...

Page 312
...shifted from BIS capital to CT1 capital, ING expects the BIS ratio to lose its meaning. Main credit ratings of ING at 31 December 2012 Standard & Poor's rating outlook Moody's rating outlook Fitch rating outlook ING Groep N.v. - long-term ING Bank N.v. - short-term - long-term - ï¬nancial strength...

Page 313
... L.J. de Waal THE EXECUTIvE BOARD J.H.M. Hommen, CEO and chairman P.G. Flynn, CFO W.F. Nagel, CRO 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 311

Page 314
Parent company balance sheet of ING Groep N.V. as at 31 December before appropriation of result amounts in millions of euros 2012 2011 Assets Investments in wholly owned subsidiaries 1 Other assets 2 Total assets Equity 3 Share capital Share premium Non-voting equity securities Legal reserves (1) ...

Page 315
...group companies after taxation Other results after taxation Net result 4,098 -204 3,894 5,337 429 5,766 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 316
... from net investment hedges Exchange rate differences Total amount recognised directly in equity Net result 3,984 Transfer to share of associates reserve Employee stock option and share plans Repayment of non-voting equity securities Repurchase premium Purchases/sales of treasury shares Balance as...

Page 317
... to the Netherlands without restriction are likewise deducted from the Share of associates reserve. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 315

Page 318
... ING Insurance Topholding N.V. Changes in investments in wholly owned subsidiaries 2012 2011 Opening balance Revaluations Result of group companies Dividend 57,949 4,190 4,098 -2,125 64,112 54,594 1,022 5,337 -3,000 57,953 Changes in ING Groep N.V. shares held by group companies Closing balance...

Page 319
... governance -5,766 3,894 -410 -5,262 4 Consolidated annual accounts 2011 Retained earnings Treasury shares Other reserves Total Other reserves Unappropriated result Total Opening balance Result for the year Unrealised revaluations after taxation Changes in treasury shares Transfer...

Page 320
...-voting equity securities' in the consolidated annual accounts for additional information, including restrictions with respect to dividend and repayment of capital. Change in treasury shares Amount 2012 2011 2012 Number 2011 Opening balance Purchased/sold Share-based payments Other Closing balance...

Page 321
... governance The number of debentures held by group companies as at 31 December 2012 is 57,860 with a balance sheet value of EUR 8 million (2011: 369,160 with a balance sheet value of EUR 35 million). Amounts owed to group companies by remaining term 2012 2011 4 Consolidated annual accounts...

Page 322
... parent company annual accounts of ING Groep N.V. continued REMUNERATION OF SENIOR MANAGEMENT, EXECUTIvE BOARD AND SUPERvISORY BOARD The information on share-based payment plans and remuneration of the members of the Executive Board and the Supervisory Board is included in the Consolidated annual...

Page 323
... annual accounts and the parent company annual accounts. The consolidated annual accounts comprise the consolidated balance sheet as at 31 December 2012, the proï¬t and loss account, statement of comprehensive income, statement of cash ï¬,ows and statement of changes in equity for the year...

Page 324
... result Net result Addition to reserves pursuant to Article 37 (4) of the Articles of Association At the disposal of the General Meeting of Shareholders pursuant to Article 37 (5) of the Articles of Association Dividend of EUR 0.00 per ordinary share 3,894 3,894 0 322 ING Group Annual Report 2012

Page 325
... services industry, our credit ratings and credit capacity, as well as the possibility that customers or 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 326
... our ratings. Disruptions, uncertainty or volatility in the capital and credit markets, such as that experienced over the past few years, including in relation to the ongoing European sovereign debt crisis, may also limit our access to capital required to operate our business. Such market conditions...

Page 327
...and regulations may materially increase the cost of compliance and other expenses of doing business. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 325

Page 328
..., increase the amount of common equity required to be held by subject banking institutions, prescribe the amount of liquid assets and the long-term funding a subject banking institution must hold at any given moment, and limit leverage. Banks will be required to hold a 'capital conservation...

Page 329
...and implement it into our system we may be limited in our ability to engage in hedging transactions. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 327

Page 330
... no earlier than January 2017. In general, non-publicly traded debt and equity interests in investment vehicles will be treated as 'accounts' and subject to these reporting requirements. In addition, certain insurance policies and annuities are considered accounts for these purposes. Some countries...

Page 331
... our Restructuring Plan to the EC in connection with obtaining final approval for the Dutch State 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 329

Page 332
... range of ï¬xed income securities, including those rated investment grade and especially the sovereign debt of some EEA countries and the United States, the international credit and interbank money markets generally, and a wide range of ï¬nancial institutions and markets, asset classes, such as...

Page 333
...) to encourage greater long-term ï¬scal responsibility on the part of the individual member states 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 331

Page 334
... are Achmea, ASR, Delta Lloyd and Aegon. Our main competitors in the United States are insurance companies such as Lincoln National, Hartford, Aegon Americas, AXA, Met Life, Prudential, Nationwide and Principal Financial. Competition could also increase due to new 332 ING Group Annual Report 2012

Page 335
... increase in times of market stress and illiquidity. Any of these developments or losses could materially and adversely affect our business, ï¬nancial condition, results of operations, liquidity and/or prospects. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts...

Page 336
... and reserve requirements are based on formulas and models that consider interest rates, and an extended period of low interest rates may increase the statutory capital we are required to hold and the amount of assets we must maintain to support statutory reserves. 334 ING Group Annual Report 2012

Page 337
... or offset the risk of interest rate volatility, and our hedging transactions may result in losses. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 335

Page 338
...variable remuneration awarded to it until the remaining capital support from the Dutch state has been fully repaired. No base salary increase in relation to 2013 has been proposed and, as of 31 December 2012, the remuneration level of the Executive Board of ING Group was below the median of our EURO...

Page 339
... of risk management, legal and compliance procedures to monitor current sales practices, there can be no assurance that all of the issues associated with current and historic sales practices have 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company...

Page 340
... of certain life & savings products, particularly, those with ï¬xed rates below market rates, (3) require us, as an issuer of securities, to pay higher interest rates on debt securities we issue in the ï¬nancial markets from time to time to ï¬nance our operations which would increase our interest...

Page 341
...the variable annuity balances invested in ï¬xed income funds.In addition, in the context of certain property & casualty risks underwritten by our insurance subsidiaries (particularly 'long-tail' risks), a sustained increase in inï¬,ation with a resulting increase in market interest rates may result...

Page 342
... the consolidated annual accounts of ING Group in the 2012 Annual Report of ING Groep N.V for more information on and implications of the Amended Restructuring Plan. The restrictions imposed by the Restructuring Plan could adversely affect our ability to maintain or grow market share in key markets...

Page 343
... employees in connection with the initiatives; and â€¢ projected savings may fall short of targets. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 344
... manage our business effectively. See 'Risks Related to the Group's Business, Operations, and Regulatory Environment - ING Group may be unable to retain key personnel' above. Our agreements with the Dutch State have also led to certain restrictions imposed by the EC as part of the Restructuring Plan...

Page 345
... should they not be permitted to participate in future equity offerings with subscription rights. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 343

Page 346
... assets (RWAs) relate to business activities and related risks. Present a table showing the capital requirements for each method used for calculating RWAs for credit risk per Basel asset class as well as for major portfolios within those classes 8 9 10 11 12 13 14 344 ING Group Annual Report 2012

Page 347
... including operational, regulatory compliance and legal risks, where material or potentially material loss events have occurred 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 345

Page 348
... on the AIRB and SA portfolios with their accompanying tables is provided in 'The SA and AIRB Approach' section of Pillar 3. ING Bank uses the AIRB and the Internal Assessment Approach (IAA) for liquidity lines provided to Asset Backed Commercial Paper programs. 346 ING Group Annual Report 2012

Page 349
...Assets Total Credit Risk Market risk Standardised approach Internal models approach - trading book Total Market risk Operational risk Advanced measurement approach Total Basel II required Regulatory Capital Basel I ï¬,oor* Additional capital requirement 2,415 2,455 2 Report of the Executive Board...

Page 350
..., Commercial / Residential Mortgage Backed Securities) are shown separately. These amounts also relate to the amount invested prior to any impairment activity or mark-to-market adjustments. These amounts are also considered to be 'Credit Risk outstandings'. 348 ING Group Annual Report 2012

Page 351
...ING in all aspects of our business. From product design, to pricing, to divestment decisions, RWA management is extensively monitored, reported, and managed at all levels of the organisation. 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012...

Page 352
...-Bank Financial Institutions, such as Leasing Companies, Funds and Fund Managers, and Insurance Companies, as well as local and regional government entities not classiï¬ed as governments; â€¢ Corporates include all legal entities, that are not considered to be Governments, Institutions or Retail...

Page 353
...Corporate governance Sovereigns 4 Consolidated annual accounts Sovereigns Product Type Bond Investments Revolving Money Market Term Loans Lending Other PD Bands 50% 5 Parent company annual accounts Sovereigns 6 Other information...

Page 354
...Product Type Bond Investments Derivatives Money Market Term Loans Revolving Other PD Bands 50% Institutions Includes both AIRB and SA portfolios; excludes equities and ONCOA. The divestments of ING Direct US and ING Direct...

Page 355
...American Industry Classiï¬cation System). Corporate credit risk disclosure in READ 2012 2011 Delta % 2 Report of the Executive Board Corporate Rating Performing Impaired/Non-performing Geography/business units Africa America Asia Australia Europe Europe Netherlands Belgium Germany Rest of Europe...

Page 356
...class 'Retail'. Retail credit risk disclosure in READ 2012 2011 Delta % Retail Rating Performing Impaired/Non-performing Customer Segment Private Persons Small Mid-sized Enterprises Private Banking Other Geography/business units Africa America Asia Australia Other Europe Europe Netherlands Belgium...

Page 357
... the Risk Management paragraph sections on: Risk Appetite Framework, Credit Risk Measurement, Monitoring and Reporting within ING Bank. Corporate credit risk disclosure in READ Sovereigns Institutions Corporate Residential mortgages 5 Parent company annual accounts 6 Other information Other retail...

Page 358
... bucket which held mostly ING Direct Canada securities, the decrease in the 50% risk weight bucket due to a reduction in the uncommitted money market limits and the increase in the 100% risk weight bucket which is driven by increased exposure to Turkish Corporates. 356 ING Group Annual Report 2012

Page 359
...nancial assets, in terms of ï¬nancial accounting. As such, rating migrations are closely monitored within ING Bank Exposures (READ) per internal rating grade and corresponding PD, LGD and RWA Internal rating grade PD range for each grade 2 Report of the Executive Board 3 Corporate governance READ...

Page 360
.... Nonetheless, the back-test gives a comparison of the predicted PD versus the observed default rate. In the table below, the default rate is based on the weighted average READ of the defaulted portfolio whereas the models are developed on an obligor basis. 358 ING Group Annual Report 2012

Page 361
... non-performing loans disclosures Commercial Banking Retail Banking Benelux Retail Banking International Total ING Bank 3 Corporate governance 4 Consolidated annual accounts Impaired loan book movements Impaired loans at 1 January 2012 Classiï¬ed as impaired during the year (1) Transferred to not...

Page 362
... stock remained stable in 2012 but the composition changed significant. Increases in commercial real estate especially in Spain, Netherlands and UK were balanced by decreases in private individuals after the sale of ING Direct US and ING Direct Canada. Weaknesses in small and medium enterprises in...

Page 363
.... Credit Risk outstandings include amounts associated with both on- and off- balance sheet products, but exclude amounts related to unused limits. Past due loans by geographic area (based on outstandings) Residential mortgages Other Retail 3 Corporate governance 4 Consolidated annual accounts...

Page 364
... credit risk agreement has occurred. In most cases, the obligor pays a commitment fee to ING Bank on the unused portion of these facilities. Pre-Settlement, Money Market and Investment limits are generally not committed. Undrawn commitments Sovereigns Institutions Corporate Residential mortgages...

Page 365
... collateral agreements in place. Credit risk derivatives 2012 Notional 2012 MtM 3 Corporate governance 4 Consolidated annual accounts OTC derivatives CCP Non-CCP ETD derivatives Total 1,417,454 2,020,068 24,000 3,461,522 -4,430 -3,154 n/a* -7,584 5 Parent company annual accounts Includes both...

Page 366
... by significant amounts of secured lending especially in the key areas of residential and commercial mortgages, structured finance and leasing. Amount of collateral often has a significant impact on provisioning and LGD which directly affects risk density. 364 ING Group Annual Report 2012

Page 367
... Netherlands. The NHG guarantees the repayment of a loan in case of a forced property sale. Exposures READ secured by guarantees received Sovereigns Institutions Corporate Residential mortgages Other retail Total 2012 Total 2011 4 Consolidated annual accounts 5 Parent company annual accounts Under...

Page 368
... to the sale of ING Direct US and ING Direct Canada. As these were mainly mortgages portfolios, the long term tenor buckets were impacted the most. As an outcome of a methodology change, certain Pre-Settlement and trade related products are now based on the outstandings maturity instead of the limit...

Page 369
... by selling the clients' receivables or other ï¬nancial assets to an SPV. The transactions are funded by the ING Bank administered multi seller Asset Backed Commercial Paper (ABCP) conduit Mont Blanc Capital Corp. (rated A-1/P-1). Despite the conditions in the international money markets Mont...

Page 370
... EUR 4.6 billion (BEL SME 2006 on SME exposures and Memphis 2006 on Residential Mortgages) remain outstanding, as further detailed below. Memphis 2006 transfers risk on high Loan to Value (LTV) Dutch mortgages. Retained exposures on securitisation of ING Bank's own assets include the most senior...

Page 371
... in trading books are reported under the Standardised Capital Framework in the Market Risk section. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 369

Page 372
...) Manages the balance sheet of ING, especially with regard to strategic non-trading risk. These risks comprise interest rate exposures, equity risk, real estate risk, liquidity, solvency and foreign exchange risk and ï¬,uctuations. ASSET LIABILITY MANAGEMENT (ALM) The practice of managing a business...

Page 373
...fund does not hold sufï¬cient assets to pay all employee beneï¬ts relating to employee service in the current and prior periods. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING...

Page 374
... external debt management plans, debt consolidations, the deferral of foreclosures and other modiï¬cations. FOREIGN EXCHANGE RATE RISK Probability of loss occurring from an adverse movement in foreign exchange rates. FORWARD CONTRACTS Commitments to exchange currencies or to buy or sell other...

Page 375
..., equity prices, implied volatilities, foreign exchange rates, real estate prices negatively impact the earnings or market value. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING...

Page 376
...xed in terms of units of currency by contract or otherwise. Examples are cash, short or long-term accounts, notes receivable in cash and notes payable in cash. MONEY MARKET RISK Money market risk arises when ING Group places short term deposits with a counterparty in order to manage excess liquidity...

Page 377
...to balance-sheet equivalents (using credit-conversion factors) before being allocated a risk weight. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 375

Page 378
... of clients or to hedge other positions in the trading portfolio. TRANSFER RISK Probability of loss due to currency conversion (exchange) restrictions imposed by a foreign government that make it impossible to move money out of the country. TREASURY BILLS Generally short-term debt certiï¬cates...

Page 379
... any forward-looking statements, whether as a result of new information or for any other reason. 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information ING Group Annual Report 2012 377

Page 380
... Supervisory Board as well as the Annual Accounts and Other information for the ï¬nancial year 2012 in their original language (English). ING Groep N.v. Bijlmerplein 888, 1102 MG Amsterdam P.O. Box 1800, 1000 BV Amsterdam The Netherlands Telephone: +31 20 5639111 Internet: www.ing.com Commercial...

Page 381
... are 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information WRITTEN AND PRODUCED BY ING Groep N.V. Corporate Communications, Amsterdam DESIGNED BY Addison Corporate Marketing, London PRINTED...

Page 382

Page 383
... N.v. Bijlmerplein 888 1102 MG Amsterdam P.O. Box 1800, 1000 BV Amsterdam The Netherlands Telephone: +31 20 5639111 Fax: +31 20 5760950 Internet: www.ing.com Commercial Register of Amsterdam, no. 33231073 Â© CO neutral We print Printed with Bio ink & varnish Â© Drukkerij Tesink CO neutrally...

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