UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number:
(Exact name of Registrant as specified in its charter)
ING GROUP
(Translation of Registrant’s name into English)
The
(Jurisdiction of incorporation or organization)
ING Groep N.V.
,
The
(Address of principal executive offices)
Telephone: +
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I
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close of the period covered by the annual report.
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ING GROUP
Annual Report 2021 on Form 20-F
Contents
Part I
Part II
Part III
Additional information
ING Group Annual Report 2021 on Form 20-F
5
PRESENTATION OF INFORMATION
In this Annual Report, and unless otherwise stated or the context otherwise dictates, references to "ING Groep
N.V.", "ING Groep" and "ING Group" refer to ING Groep N.V. and references to "ING", the "Company", the
"Group", "we" and "us" refer to ING Groep N.V. and its consolidated subsidiaries. ING Groep N.V.'s primary
banking subsidiary is ING Bank N.V. (together with its consolidated subsidiaries, "ING Bank"). References to
"Executive Board" and "Supervisory Board" refer to the Executive Board or Supervisory Board of ING Groep N.V.,
respectively.
ING presents its consolidated financial statements in euros, the currency of the European Economic and
Monetary Union. Unless otherwise specified or the context otherwise requires, references to “$”, “US$” and
“Dollars” are to the United States dollars and references to “EUR” are to euros.
ING prepares financial information in accordance with International Financial Reporting Standards as issued by
the International Accounting Standards Board (“IFRS-IASB”) for purposes of reporting with the U.S. Securities and
Exchange Commission (“SEC”), including financial information contained in this Annual Report on Form 20-F. ING
Group’s accounting policies and its use of various options under IFRS-IASB are described under ‘Principles of
valuation and determination of results’ in the consolidated financial statements. In this document the term “IFRS-
IASB” is used to refer to IFRS-IASB as applied by ING Group.
The published 2021 Annual Accounts of ING Group, however, are prepared in accordance with IFRS-EU. IFRS-EU
refers to International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”), including
the decisions ING Group made with regard to the options available under IFRS as adopted by the EU (IFRS-EU).
IFRS-EU differs from IFRS-IASB, in respect of certain paragraphs in IAS 39 ‘Financial Instruments: Recognition and
Measurement’ regarding hedge accounting for portfolio hedges of interest rate risk. Under IFRS-EU, ING Group
applies fair value hedge accounting for portfolio hedges of interest rate risk (fair value macro hedges) in
accordance with the EU “carve-out” version of IAS 39. Under the EU “IAS 39 carve-out”, hedge accounting may be
applied, in respect of fair value macro hedges, to core deposits and hedge ineffectiveness is only recognised
when the revised estimate of the amount of cash flows in scheduled time buckets falls below the original
designated amount of that bucket, and is not recognised when the revised amount of cash flows in scheduled
time buckets is more than the original designated amount. Under IFRS-IASB, hedge accounting for fair value
macro hedges cannot be applied to core deposits and hedge ineffectiveness arises whenever the revised
estimate of the amount of cash flows in scheduled time buckets is either more or less than the original
designated amount of that bucket. IFRS-IASB financial information is prepared by reversing the hedge accounting
impacts that are applied under the EU “carve-out”’ version of IAS 39. Financial information under IFRS-IASB
accordingly does not take account of the possibility that, had ING Group applied IFRS-IASB as its primary
accounting framework, it might have applied alternative hedge strategies where those alternative hedge
strategies could have qualified for IFRS-IASB compliant hedge accounting. These decisions could have resulted in
different shareholders’ equity and net result amounts compared to those indicated in this Annual Report on
Form 20-
F.
Other than for the purpose of SEC reporting, ING Group intends to continue to prepare its Annual Accounts
under IFRS-EU. A reconciliation between IFRS-EU and IFRS-IASB for shareholders’ equity and net result is included
in Note 1 ‘Basis of preparation and significant accounting policies''’ to the consolidated financial statements.
Certain amounts set forth herein, such as percentages, may not sum due to rounding.
This Annual Report on Form 20-F contains inactive textual addresses to Internet websites operated by us and
third parties. Reference to such websites is made for information purposes only, and information found at such
websites is not incorporated by reference into this Annual Report on Form 20-
F.
ING Group Annual Report 2021 on Form 20-F
6
CAUTIONARY STATEMENT WITH RESPECT
TO FORWARD -LOOKING STATEMENTS
Certain of the statements contained herein are not historical facts, including, without limitation, certain
statements made of future expectations and other forward-looking statements that are based on management’s
current views and assumptions and involve known and unknown risks and uncertainties that could cause actual
results, performance or events to differ materially from those expressed or implied in such statements. Actual
results, performance or events may differ materially from those in such statements due to a number of factors,
including, without limitation,
• changes in general economic conditions and customer behaviour, in particular economic conditions in
ING’s core markets, including changes affecting currency exchange rates and the regional and global
economic impact of the invasion of Russia into Ukraine and related international response measures
• effects of the Covid-19 pandemic and related response measures, including lockdowns and travel
restrictions, on economic conditions in countries in which ING operates, on ING’s business and
operations and on ING’s employees, customers and counterparties
• changes affecting interest rate levels
• any default of a major market participant and related market disruption
• changes in performance of financial markets, including in Europe and developing markets
• fiscal uncertainty in Europe and the United States
• discontinuation of or changes in ‘benchmark’ indices
• inflation and deflation in our principal markets
• changes in conditions in the credit and capital markets generally, including changes in borrower and
counterparty creditworthiness
• failures of banks falling under the scope of state compensation schemes
• non-compliance with or changes in laws and regulations, including those concerning financial services,
financial economic crimes and tax laws, and the interpretation and application thereof
• geopolitical risks, political instabilities and policies and actions of governmental and regulatory
authorities
,
response measures
• legal and regulatory risks in certain countries with less developed legal and regulatory frameworks
• prudential supervision and regulations, including in relation to stress tests and regulatory restrictions on
dividends and distributions, (also among members of the group)
• regulatory consequences of the United Kingdom’s withdrawal from the European Union, including
authorizations and equivalence decisions
• ING’s ability to meet minimum capital and other prudential regulatory requirements
• changes in regulation of US commodities and derivatives businesses of ING and its customers
• application of bank recovery and resolution regimes, including write-down and conversion powers in
relation to our securities
• outcome of current and future litigation, enforcement proceedings, investigations or other regulatory
actions, including claims by customers or stakeholders who feel misled or treated unfairly, and other
conduct issues
• changes in tax laws and regulations and risks of non-compliance or investigation in connection with tax
laws, including FATCA
• operational and IT risks, such as system disruptions or failures, breaches of security, cyber-attacks,
human error, changes in operational practices or inadequate controls including in respect of third parties
with which we do business
• risks and challenges related to cybercrime including the effects of cyberattacks and changes in legislation
and regulation related to cybersecurity and data privacy
• changes in general competitive factors, including ability to increase or maintain market share
• inability to protect our intellectual property and infringement claims by third parties
• inability of counterparties to meet financial obligations or ability to enforce rights against such
counterparties
• changes in credit ratings
• business, operational, regulatory, reputation, transition and other risks and challenges in connection
with climate change and ESG-related matters
• inability to attract and retain key personnel
ING Group Annual Report 2021 on Form 20-F
7
• future liabilities under defined benefit retirement plans
• failure to manage business risks, including in connection with use of models, use of derivatives, or
maintaining appropriate policies and guidelines
• changes in capital and credit markets, including interbank funding, as well as customer deposits, which
provide the liquidity and capital required to fund our operations, and
• the other risks and uncertainties detailed in the most recent annual report of ING Groep N.V. (including
the Risk Factors contained therein) and ING’s more recent disclosures, including press releases, which
are available on www.ing.com.
This annual report contains inactive textual addresses to internet websites operated by us and third parties.
Reference to such websites is made for information purposes only, and information found at such websites is not
incorporated by reference into this annual report. ING does not make any representation or warranty with
respect to the accuracy or completeness of, or take any responsibility for, any information found at any websites
operated by third parties. ING specifically disclaims any liability with respect to any information found at
websites operated by third parties. ING cannot guarantee that websites operated by third parties remain
available following the filing of this annual report or that any information found at such websites will not change
following the filing of this annual report. Many of those factors are beyond ING’s control.
Any forward looking statements made by or on behalf of ING speak only as of the date they are made, and ING
assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new
information or for any other reason.
This document does not constitute an offer to sell, or a solicitation of an offer to purchase, any securities in the
United States or any other jurisdiction.
ING Group Annual Report 2021 on Form 20-F
8
PART I
Item 1. Identity of Directors, Senior
Management And Advisors
Not Applicable.
Item 2. Offer Statistics and Expected
Timetable
Not Applicable.
Item 3. Key Information
A. Selected financial data
Not applicable.
B. Capitalization and indebtedness
This item does not apply to annual reports on Form 20-F.
C. Reasons for the offer and use of proceeds
This item does not apply to annual reports on Form 20-F.
D. Risk Factors
Summary of Risk factors
The following is a summary of the principal risk factors that could have a material adverse effect on the business
activities, financial condition, results and prospects of ING. Please carefully consider all of the information
discussed in this Item 3.D “Risk Factors” for a detailed description of these risks.
Risks related to financial conditions, market environment and general economic trends
●
Our revenues and earnings are affected by the volatility and strength of the economic, business,
liquidity, funding and capital markets environments of the various geographic regions in which we
conduct business, including Russia and Ukraine, as well as by changes in customer behaviour in these
regions, and an adverse change in any one region could have an impact on our business, results and
financial condition.
●
ING’s business, results and financial condition have been, and likely will continue to be, adversely
affected by the Covid-19 pandemic.
●
Interest rate volatility and other interest rate changes may adversely affect our business, results and
financial condition.
●
The default of a major market participant could disrupt the markets and may have an adverse effect on
our business, results and financial condition.
●
Continued risk of political instability and fiscal uncertainty in Europe and the United States, as well as
ongoing volatility in the financial markets and the economy generally have adversely affected, and may
continue to adversely affect, our business, results and financial condition.
●
Discontinuation of USD LIBOR may negatively affect our business, results and financial condition.
●
Inflation and deflation may negatively affect our business, results and financial condition.
●
Market conditions, including those observed over the past few years, and the application of IFRS 9 may
increase the risk of loans being impaired and have a negative effect on our results and financial
condition.
●
We may incur losses due to failures of banks falling under the scope of state compensation schemes.
ING Group Annual Report 2021 on Form 20-F
9
Risks related to the regulation and supervision of the Group
●
Non-compliance with laws and/or regulations concerning financial services or financial institutions,
including with respect to financial economic crimes, could result in fines and other liabilities, penalties or
consequences for us, which could materially affect our business and reduce our profitability.
●
Changes in laws and/or regulations governing financial services or financial institutions or the application
of such laws and/or regulations may increase our operating costs and limit our activities.
●
We are subject to additional legal and regulatory risk in certain countries where we operate with less
developed or predictable legal and regulatory frameworks.
●
We are subject to the regulatory supervision of the ECB and other regulators with extensive supervisory
and investigatory powers.
●
The regulatory consequences of the United Kingdom’s withdrawal from the European Union may have
adverse effects on our business, results and financial condition.
●
Failure to meet minimum capital and other prudential regulatory requirements as applicable to us from
time to time may have a material adverse effect on our business, results and financial condition and on
our ability to make payments on certain of our securities.
●
Our US commodities and derivatives business is subject to CFTC and SEC regulation under the Dodd-
Frank Act.
●
We are subject to several other bank recovery and resolution regimes that include statutory write down
and conversion as well as other powers, which remains subject to significant uncertainties as to scope
and impact on us.
Risks related to litigation, enforcement proceedings and investigations and to changes in tax
laws
●
We may be subject to litigation, enforcement proceedings, investigations or other regulatory actions,
and adverse publicity.
●
We are subject to different tax regulations in each of the jurisdictions where we conduct business, and
are exposed to changes in tax laws, and risks of non-compliance with or proceedings or investigations
with respect to, tax laws.
●
We may be subject to withholding tax if we fail to comply with the Foreign Account Tax Compliance Act
(“FATCA”) and other US withholding tax regulations
●
ING is exposed to the risk of claims from customers who feel misled or treated unfairly because of advice
or information received.
Risks related to the Group’s business and operations
●
ING may be unable to meet internal or external aims or expectations with respect to ESG-related
matters.
●
ING may be unable to adapt its products and services to meet changing customer behaviour and
demand, including as a result of ESG-related matters.
●
ING’s business and operations are exposed to physical risks, including as a direct result of climate
change.
●
ING’s business and operations are exposed to transition risks related to climate change.
●
Operational and IT risks, such as systems disruptions or failures, breaches of security, cyber attacks,
human error, changes in operational practices, inadequate controls including in respect of third parties
with which we do business or outbreaks of communicable diseases may adversely impact our reputation,
business and results.
●
We are subject to increasing risks related to cybercrime and compliance with cybersecurity regulation.
●
Because we operate in highly competitive markets, including our home market, we may not be able to
increase or maintain our market share, which may have an adverse effect on our results.
●
We may not always be able to protect our intellectual property developed in our products and services
and may be subject to infringement claims, which could adversely impact our core business, inhibit
efforts to monetize our internal innovations and restrict our ability to capitalize on future opportunities.
●
The inability of counterparties, including those located in Russia or the Ukraine, to meet their financial
obligations or our inability to fully enforce our rights against counterparties could have a material
adverse effect on our results.
●
Ratings are important to our business for a number of reasons, and a downgrade or a potential
downgrade in our credit ratings could have an adverse impact on our results and net results.
●
An inability to retain or attract key personnel may affect our business and results.
●
We may incur further liabilities in respect of our defined benefit retirement plans if the value of plan
assets is not sufficient to cover potential obligations, including as a result of differences between actual
results and underlying actuarial assumptions and models.
Risks related to the Group’s risk management practices
●
Risks relating to our use of quantitative models or assumptions to model client behaviour for the
purposes of our market calculations may adversely impact our reputation or results.
●
We may be unable to manage our risks successfully through derivatives.
ING Group Annual Report 2021 on Form 20-F
10
Risks related to the Group’s liquidity and financing activities
●
We depend on the capital and credit markets, as well as customer deposits, to provide the liquidity and
capital required to fund our operations, and adverse conditions in the capital and credit markets, or
significant withdrawals of customer deposits, may impact our liquidity, borrowing and capital positions,
as well as the cost of liquidity, borrowings and capital.
●
As a holding company, ING Groep N.V. is dependent for liquidity on payments from its subsidiaries, many
of which are subject to regulatory and other restrictions on their ability to transact with affiliates.
Additional risks relating to ownership of ING shares
●
Holders of ING shares may experience dilution of their holdings and may be impacted by any share
buyback programme.
●
Because we are incorporated under the laws of the Netherlands and many of the members of our
Supervisory and Executive Board and our officers reside outside of the United States, it may be difficult
to enforce judgments against ING or the members of our Supervisory and Executive Boards or our
officers.
Risk factors
Any of the risks described below could have a material adverse effect on the business activities, financial
condition, results and prospects of ING. ING may face a number of the risks described below simultaneously and
some risks described below may be interdependent. While the risk factors below have been divided into
categories, some risk factors could belong in more than one category and investors should carefully consider all
of the risk factors set out in this section. Additional risks of which the Company is not presently aware, or that are
currently viewed as immaterial, could also affect the business operations of ING and have a material adverse
effect on ING’s business activities, financial condition, results and prospects. The market price of ING shares or
other securities could decline due to any of those risks including the risks described below, and investors could
lose all or part of their investments.
Although the most material risk factors have been presented first within each category, the order in which the
remaining risk factors are presented is not necessarily an indication of the likelihood of the risks actually
materialising, of the potential significance of the risks or of the scope of any potential negative impact to our
business, results, financial condition and prospects.
Risks related to financial conditions, market environment and general economic trends
Our revenues and earnings are affected by the volatility and strength of the economic, business,
liquidity, funding and capital markets environments of the various geographic regions in which
we conduct business, as well as by changes in customer behaviour in these regions, and an
adverse change in any one region could have an impact on our business, results and financial
condition.
Because ING is a multinational banking and financial services corporation, with a global presence and serving
around 38 million customers, corporate clients and financial institutions in over 40 countries, ING’s business,
results and financial condition may be significantly impacted by turmoil and volatility in the worldwide financial
markets or in the particular geographic areas in which we operate. In Retail Banking, our products include
savings, payments, investments, loans and mortgages in most of our Retail Banking markets. In Wholesale
Banking, we provide specialised lending, tailored corporate finance, debt and equity market solutions, payments
cash management, trade and treasury services. As a result, negative developments in financial markets and/or
countries or regions in which we operate, have in the past had and may in the future have a material adverse
impact on our business, results and financial condition, including as a result of the potential consequences listed
below.
Factors such as interest rates, securities prices, credit spreads, liquidity spreads, exchange rates, consumer
spending, changes in customer behaviour, climate change, business investment, real estate values and private
equity valuations, government spending, inflation or deflation, the volatility and strength of the capital markets,
political events and trends, supply chain disruptions, shortages, terrorism, pandemics and epidemics (such as
Covid-19, as described in greater detail below under the heading “– ING’s business, results and financial
condition have been, and likely will continue to be adversely affected by the Covid-19 pandemic”) or other
widespread health emergencies all impact the business and economic environment and, ultimately, our solvency,
liquidity and the amount and profitability of business we conduct in a specific geographic region. Certain of these
risks are often experienced globally as well as in specific geographic regions and are described in greater detail
below under the headings “–Interest rate volatility and other interest rate changes may adversely affect our
business, results and financial condition”, “–Inflation and deflation may negatively affect our business, results
and financial condition”, “–Market conditions, including those observed over the past few years and the
application of IFRS 9 may increase the risk of loans being impaired and have a negative effect on our results and
ING Group Annual Report 2021 on Form 20-F
11
financial condition” and “–Continued risk of political instability and fiscal uncertainty in Europe and the United
States, as well as ongoing volatility in the financial markets and the economy generally have adversely affected,
and may continue to adversely affect, our business, results and financial condition”. All of these are factors in
local and regional economies as well as in the global economy, and we may be affected by changes in any one of
these factors in any one country or region, and more if more of these factors occur simultaneously and/or in
multiple countries or regions or on a global scale.
In case one or more of the factors mentioned above adversely affects the profitability of our business, this might
also result, among other things, in the following:
◾
inadequate reserves or provisions, in relation to which losses could ultimately be realised through profit
and loss and shareholders’ equity;
◾
the write-down of tax assets impacting net results and/or equity;
◾
impairment expenses related to goodwill and other intangible assets, impacting our net result and
equity; and/or
◾
movements in risk weighted assets for the determination of required capital.
In particular, we are exposed to financial, economic, market and political conditions in the Benelux countries and
Germany, from which we derive a significant portion of our revenues in both Retail Banking and Wholesale
Banking, and which could present risks of economic downturn. Though less material, we also derive substantial
revenues in the following geographic regions: Turkey, Eastern Europe (primarily Poland among others), Southern
Europe (primarily Spain among others), East Asia (primarily Singapore among others) and Australia. In an
economic downturn affecting some or all of these jurisdictions, we expect that higher unemployment, lower
family income, lower corporate earnings, higher corporate and private debt defaults, lower business investments
and lower consumer spending would adversely affect the demand for banking products, and that ING may need
to increase its reserves and provisions, each of which may result in overall lower earnings. The impact of the
Covid-19 pandemic, as an example of an economic downturn, as well as the substantial monetary and
government measures, are still materialising and expected to continue to affect our business. For more
information, refer to the risk factor described under heading “–ING’s business, results and financial condition
have been, and likely will continue to be adversely affected by the Covid-19 pandemic”. We also have wholesale
banking activities in both Russia and Ukraine, as well as investments in Russia, some of which are denominated in
local currency. The impact on our business in Russia and Ukraine, as well as the potential regional and global
economic impact of the invasion of Ukraine and related international response measures, including sanctions,
capital controls, restrictions on SWIFT access and restrictions on central bank activity, on our broader business,
including spill-over risk to the entire wholesale banking portfolio (e.g. commodities financing, energy and utilities
and energy-consuming clients), remain uncertain. Securities prices, real estate values and private equity
valuations may also be adversely impacted, and any such losses would be realised through profit and loss and
shareholders’ equity. We also offer a number of financial products that expose us to risks associated with
fluctuations in interest rates, securities prices, corporate and private default rates, the value of real estate assets,
exchange rates and credit spreads.
For further information on ING’s exposure to particular geographic areas, see Note 36 ‘Information on
geographic areas’ to the consolidated financial statements.
ING’s business, results and financial condition have been, and likely will continue to be,
adversely affected by the Covid-19 pandemic.
The Covid-19 pandemic and the related response measures introduced by various national and local
governmental authorities aimed at preventing the further spread of the disease (such as bans on public events
with over a certain number of attendees, closures of places where larger groups of people gather such as schools,
sports facilities, bars and restaurants, lockdowns, border controls and travel and other restrictions) have
disrupted the normal flow of business operations in those countries and regions where we and our customers
and counterparties operate (such as, among others, Benelux, Germany, France, Italy, Spain, the U.K. and the
U.S.). This disruption has adversely affected, and will likely continue to adversely affect, global economic growth,
supply chains, manufacturing, tourism, consumer spending, asset prices and unemployment levels, and has
resulted in volatility and uncertainty across the global economy and financial markets. Please also refer to the
interdependent risk factor ‘–ING’s revenues and earnings are affected by the volatility and strength of the
economic, business, liquidity, funding and capital markets environments of the various geographic regions in
which it conducts business, and an adverse change in any one region could have an impact on its business, results
and financial condition’ for a further description of how ING’s business, results and financial condition may be
materially adversely impacted by developments in regional or global economic conditions.
In addition to the measures aimed at preventing the further spread of Covid-19, governments and central banks
around the world have also introduced measures aimed at mitigating the economic consequences of the
pandemic and related response measures, such as guarantee schemes, compensation schemes and cutting
interest rates. For example, the Dutch government has implemented economic measures aimed at protecting
jobs, households’ wages and companies, e.g., by way of tax payment holidays, guarantee schemes and a
ING Group Annual Report 2021 on Form 20-F
12
compensation scheme for heavily affected sectors in the economy. These announced measures and any
additional measures, including any payment holidays with respect to mortgages or other loans, have had and
may continue to have a significant impact on our customers and other counterparties.
Governments, regulators and central banks (including the ECB), have also announced that they are taking or
considering measures seeking to safeguard the stability of the financial sector, to prevent lending to the business
sector from being jeopardised and to ensure the payment system continues to function properly. The ECB allows
banks to operate below the level of capital required by the Pillar 2 Guidance, capital conservation buffer and the
liquidity coverage ratio. The ECB has communicated its commitment to extend this permission until at least the
end of 2022. In March 2020, several countries also released or reduced countercyclical buffers (CCyB), with some
of these countries subsequently announcing increases in CCyB in the second half of 2022. The ECB’s
recommendation to the banks that it supervises to limit shareholder remuneration through dividends or share
buy-backs expired on 30 September 2021. However, it is not certain whether these or future Covid-19 relief
measures will be extended or maintained for a sufficient period of time, or whether such measures will be
successful in mitigating the economic consequences of the pandemic and related response measures. If the
pandemic is prolonged or the actions are unsuccessful, additional actions by governments and central banks may
follow and the adverse impact on the global economy will deepen, and our business, results and financial
condition may be materially adversely affected.
In 2020, the Covid-19 pandemic affected all of our businesses, including lower or negative interest rates, lower oil
prices and credit deterioration of loans to ING’s customers. These effects have also resulted in an increase in the
allowance for credit losses and impairments on non-financial assets, and reduced net interest income due to
lower interest rates. While these effects were partly offset by resilient fee and commission income in 2020, this
level of activity may not persist in future periods.
While vaccination rates continued to increase and Covid-19 related restrictions were lifted in some jurisdictions
in the third quarter of 2021, the end of the 2021 was again marked by an increasing number of Covid-19
infections. This may result in changes in government responses and further downside risk towards macro-
economic developments, with possibly a deeper risk aversion and a delayed recovery. These developments may
result in further negative impact on our business, results and financial condition.
In 2021, ING also took certain measures to support customers impacted by the Covid-19 pandemic, including
payment holidays, offering credit facilities to business clients under government guarantee schemes and
providing liquidity under credit facilities to large corporate clients. As of 31 December 2021, in line with the
European Banking Association (EBA) moratoria guidelines, approximately 137,000 customers had been granted
payment holidays (down from 148,000 as of 30 September 2021 due to reimbursements and prepayments). The
total exposure of loans for these customers for which a payment holiday has been granted amounts to €15.3
billion, of which 57% were for customers located in the Netherlands and Belgium. As of 31 December 2021, the
outstanding amount of granted payment holidays not expired was €38 million. ING recorded a net addition of
€346 million to loan loss provisions in the fourth quarter of 2021, mainly as a result of adjustments to existing
Stage 3 files reflecting uncertainty in recovery scenarios and valuations in certain asset classes and also reflecting
a potential impact of higher inflation and interest rates on customers’ ability to pay and the potential impact of
market uncertainty on the recovery value of certain asset classes. In 2021, ING recorded €516 million of net
additions to loan loss provisions, compared to €2,675 million in 2020. At the end of the fourth quarter of 2021,
increasing numbers of Covid-19 infections were observed and uncertainty concerning the ongoing pandemic
remained. Should these global economic conditions be prolonged or worsen, or should the pandemic lead to
additional market disruptions, we may experience more client defaults and further additions to loan loss
provisions. In these circumstances, we may also experience reduced client activity and demand for its products
and services, increased utilization of lending commitments and higher credit and valuation adjustments on
financial assets. In addition, persistently low interest rates for a longer period, as well as a potential further
decline in interest rates might result in further decreases in net interest income. These factors and other
consequences of the Covid-19 pandemic may materially adversely affect our business, results and financial
condition.
Our capital and liquidity position may also be adversely impacted by the Covid-19 pandemic and related response
measures, including as a result of changes in future levels of savings and deposits from customers, changes in
asset quality, and the effects of government or regulatory responses to the pandemic, and may require changes
to our funding structure, impact our ability to comply with regulatory capital requirements and adversely affect
our cost of capital and credit rating. Any of the foregoing developments may have a material adverse impact on
our business, results and financial condition.
As of December 31, 2021, most of our staff continue to work from home, with employees in certain jurisdictions
beginning to return to ING’s offices in a controlled manner, taking into account local circumstances and any
applicable government measures (including with respect to social distancing where applicable). Due to the
uncertainties relating to the future development of the Covid-19 pandemic, it is not certain when our employees
may be generally expected or permitted to return or to remain at ING’s offices. If due to illness, technical
ING Group Annual Report 2021 on Form 20-F
13
limitations or other restrictions in connection with the pandemic, employees are unable to work or are not able
to operate as effectively and efficiently as they did in the office, this may adversely affect our business, results
and financial condition.
In addition, a situation in which most or some of our employees continue working from home may raise
operational risks, including with respect to information security, data protection, availability of key systems and
infrastructure integrity. There is also a risk that we will not be effective in implementing regulatory or strategic
change programs in the current environment. The Covid-19 pandemic has led to new banking behaviour from
customers. There has been an increase in the digital behaviour of our customers leading to reduced traffic in
branches. Over 95% of our customers now interact with us via digital channels only. Criminals are also taking
advantage of the Covid-19 pandemic to carry out financial fraud and exploitation scams, with examples including
advertising and trafficking in counterfeit medicines, offering fraudulent investment opportunities, fundraising for
fake charities and engaging in phishing schemes that prey on virus-related fears. National authorities and
international bodies (including the Financial Action Task Force) warn citizens and businesses against impostor,
investment and product scams. Although we have organized a Covid-19 taskforce to identify and analyse new
behavioural patterns, leading to new cases of unusual transactions being reported to the relevant authorities,
new banking behaviours may result in additional Know Your Customer (KYC) risks. If any of these risks were to
materialize that may adversely affect our business, results and financial condition.
The duration of the pandemic and the impact of measures taken in response by governmental authorities,
central banks and other third parties, whether direct or indirect, such as by increasing sovereign debt of certain
countries which may result in increased volatility and widening credit spreads, remain uncertain. Therefore, it is
difficult to predict the extent to which our business, results and financial condition, as well as our ability to access
capital and liquidity on financial terms acceptable for us, may be materially adversely affected.
Interest rate volatility and other interest rate changes may adversely affect our business, results
and financial condition.
Changes in prevailing interest rates may negatively affect our business, including the level of net interest revenue
we earn, and the levels of deposits and the demand for loans. A sustained increase in the inflation rate in our
principal markets may also negatively affect our business, results and financial condition. For example, a
sustained increase in the inflation rate may result in an increase in nominal market interest rates. A failure to
accurately anticipate higher inflation and factor it into our product pricing assumptions may result in mispricing
of our products, which could materially and adversely impact our results. On the other hand, negative interest
rates may negatively impact our net interest income, which may have an adverse impact on our profitability.
A prolonged period of low interest rates, and in some situations negative interest rates, has resulted in, and may
continue to result in:
◾
lower earnings over time on investments, as reinvestments will earn lower rates;
◾
increased prepayment or redemption of mortgages and fixed maturity securities in our investment
portfolios, as well as increased prepayments of corporate loans. This as borrowers seek to borrow at
lower interest rates potentially combined with lower credit spreads. Consequently, we may be required
to reinvest the proceeds into assets at lower interest rates;
◾
lower profitability as the result of a decrease in the spread between client rates earned on assets and
client rates paid on savings, current account and other liabilities;
◾
higher costs for certain derivative instruments that may be used to hedge certain of our product risks;
◾
lower profitability since we may not be able to fully track the decline in interest rates in our savings
rates;
◾
lower profitability since we may not always be entitled to impose surcharges to customers to
compensate for the decline in interest rates;
◾
lower profitability since we may have to pay a higher premium for the defined contribution scheme in
the Netherlands for which the premium paid is dependent on interest rate developments and the Dutch
Central Bank’s (“DNB’s”) methodology for determining the ultimate forward rate;
◾
lower interest rates may cause asset margins to decrease thereby lowering our results. This may for
example be the consequence of increased competition for investments as result of the low rates,
thereby driving margins down; and/or
◾
(depending on the position) a significant collateral posting requirement associated with our interest rate
hedge programs, which could materially and adversely affect liquidity and our profitability.
ING Group Annual Report 2021 on Form 20-F
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The foregoing impacts have been and may be further amplified in a negative interest rate environment, since we
may not be able to earn interest on our assets (including reserves). In addition, we have, and may continue to,
earn negative interest on certain of our assets (including cash balances, loans and bonds), while still paying
positive interest or no interest to others to hold our liabilities, resulting in an adverse impact on our credit spread
and lowering of our net interest income. Furthermore, in the event that a negative interest rate environment
results in ING’s depositors being forced to pay interest to ING to hold cash deposits, some depositors may choose
to withdraw their deposits rather than pay interest to ING, which would have an adverse effect on our
reputation, business, results and financial condition. For example, in March 2020, the U.S. Federal Reserve has
cut the benchmark U.S. interest rate in response to the Covid-19 pandemic and related impacts on the economy
and financial markets. On 1 July 2021, ING announced in the Netherlands that it will charge negative interest to
customers on current and deposit accounts exceeding €100,000 (such negative interest rate will only apply to the
amount by which the current or deposit account exceeds €100,000 ). Such declines in interest rates in the United
States or other markets in which ING and its customers and counterparties operate may have a significant
adverse effect on our business and operations.
Alternatively, any period of rapidly increasing interest rates may result in:
◾
a decrease in the demand for loans;
◾
higher interest rates to be paid on customer deposits and on debt securities that we have issued or may
issue on the financial markets from time to time to finance our operations, which would increase our
interest expenses and reduce our results;
◾
higher interest rates which can lead to lower investments prices and reduce the revaluation reserves,
thereby lowering IFRS equity and the capital ratios. Also the lower securities value leads to a loss of
liquidity generating capacity which needs to be compensated by attracting new liquidity generating
capacity which reduces our results;
◾
prepayment losses if prepayment rates are lower than expected or if interest rates increase too rapidly
to adjust the accompanying hedges; and/or
◾
(depending on the position) a significant collateral posting requirement associated with our interest rate
hedge program.
The foregoing impacts grow in relevance following the U.S. Federal Reserve’s plan to wind down its bond-
purchase stimulus program and to set the stage for a series of interest rate increases beginning in spring of 2022.
The default of a major market participant could disrupt the markets and may have an adverse
effect on our business, results and financial condition.
Within the financial services industry, the severe distress or default of any one institution (including sovereigns
and central counterparties (CCPs)) could lead to defaults by, or the severe distress of, other market participants.
While prudential regulation may reduce the probability of a default by a major financial institution, the actual
occurrence of such a default could have a material adverse impact on ING. Such distress of, or default by, a major
financial institution could disrupt markets or clearance and settlement systems and lead to a chain of defaults by
other financial institutions, since the commercial and financial soundness of many financial institutions may be
closely related as a result of credit, trading, clearing or other relationships. Also the perceived lack of
creditworthiness of a sovereign or a major financial institution (or a default by any such entity) may lead to
market-wide liquidity problems and losses or defaults by us or by other institutions. This risk is sometimes
referred to as ‘systemic risk’ and may adversely affect financial intermediaries, such as clearing agencies, clearing
houses, banks, securities firms and exchanges with whom we interact on a daily basis and financial instruments
of sovereigns in which we invest. Systemic risk could impact ING directly, by exposing it to material credit losses
on transactions with defaulting counterparties or indirectly by significantly reducing the available market liquidity
on which ING and its lending customers depend to fund their operations and/or leading to a write down of loans
or securities held by ING. In addition, ING may also be faced with additional open market risk for which hedging
or mitigation strategies may not be available or effective (either by hedges eliminated by defaulting
counterparties, or reduce market liquidity). Systemic risk could have a material adverse effect on our ability to
raise new funding and on our business, results and financial condition. In addition, such distress or failure could
impact future product sales as a potential result of reduced confidence in the financial services industry.
Continued risk of political instability and fiscal uncertainty in Europe and the United States, as
well as ongoing volatility in the financial markets and the economy generally have adversely
affected, and may continue to adversely affect, our business, results and financial condition.
Our global business and results are materially affected by conditions in the global capital markets and the
economy generally. In Europe, there are continuing concerns over weaker economic conditions, levels of
unemployment in certain countries, the availability and cost of credit, as well as credit spreads. In addition,
geopolitical issues, including trade tensions between the US and China, increasing protectionism between key
ING Group Annual Report 2021 on Form 20-F
15
countries, and issues with respect to the Middle East and North Korea may all contribute to adverse
developments in the global capital markets and the economy generally. In addition, Russia’s recent invasion of
Ukraine and related international response measures may have a negative impact on regional and global
economic conditions, including as a result of disruptions in foreign currency markets and increased energy and
commodity prices. This could in turn have a spill-over effect on our entire wholesale banking portfolio, in areas
such as commodities financing, energy and utilities and energy-consuming clients.
Moreover, there is a risk that an adverse credit event at one or more European sovereign debtors (including a
credit rating downgrade or a default) could trigger a broader economic downturn in Europe and elsewhere. In
addition, the confluence of these and other factors has resulted in volatile foreign exchange markets.
International equity markets have also continued to experience heightened volatility and turmoil, with issuers,
including ourselves, that have exposure to the real estate, mortgage, private equity and credit markets
particularly affected. These events, market upheavals and continuing risks, including high levels of volatility, have
had and may continue to have an adverse effect on our results, in part because we have a large investment
portfolio.
There is also continued uncertainty over the long-term outlook for the tax, spending and borrowing policies of
the US, the future economic performance of the US within the global economy and any potential future
budgetary restrictions in the US, with a potential impact on a future sovereign credit ratings downgrade of the US
government, including the rating of US Treasury securities. A downgrade of US Treasury securities could also
impact the ratings and perceived creditworthiness of instruments issued, insured or guaranteed by institutions,
agencies or instrumentalities directly linked to the US government. US Treasury securities and other US
government-linked securities are key assets on the balance sheets of many financial institutions and are widely
used as collateral by financial institutions to meet their day-to-day cash flows in the short-term debt market. The
impact of any further downgrades to the sovereign credit rating of the US government or a default by the US
government on its debt obligations would create broader financial turmoil and uncertainty, which would weigh
heavily on the global financial system and could consequently result in a significant adverse impact to the
Group’s business and operations.
In many cases, the markets for investments and instruments have been and remain illiquid, and issues relating to
counterparty credit ratings and other factors have exacerbated pricing and valuation uncertainties. Valuation of
such investments and instruments is a complex process involving the consideration of market transactions,
pricing models, management judgment and other factors, and is also impacted by external factors, such as
underlying mortgage default rates, interest rates, rating agency actions and property valuations. Historically
these factors have resulted in, among other things, valuation and impairment issues in connection with our
exposures to European sovereign debt and other investments.
Any of these general developments in global financial and political conditions could negatively impact to our
business, results and financial condition in future periods.
Discontinuation of USD LIBOR may negatively affect our business, results and financial condition.
Changes to major interest rates benchmarks may negatively affect our business, including the level of net interest
revenue. Financial markets have historically relied on Interbank Offered Rates (‘IBORs’) benchmarks, such as the
London Interbank Offered Rate (‘LIBOR’), the Euro Over Night Index Average (‘EONIA’) and the Euro Interbank
Offered Rate (‘EURIBOR’). While some interest benchmarks have been reformed and will continue to exist, such
as EURIBOR, others such as EONIA and LIBOR have been or will be replaced by alternative rates. EONIA ceased to
be published on 3 January 2022, and is succeeded by €STR. All GBP, JPY, CHF and EUR LIBOR settings ceased on
31 December 2021. ING has substantially completed the transition of contracts referencing these benchmark
rates and now offers the recommended alternative benchmark rates.
The most commonly used USD LIBOR tenors will continue to be published until 30 June 2023 to support existing
contracts. However, the use of USD LIBOR for new contracts is no longer allowed from January 2022, with only
limited exceptions.
Public authorities have recognised that many contracts do not contain reference to alternative rates, or
reference inappropriate alternatives, or cannot be renegotiated or amended prior to the cessation of the
relevant benchmark. In response, the European Commission has implemented legislation that gives the
Commission the power to replace critical benchmarks if their termination would significantly disrupt or otherwise
affect the functioning of the financial markets in the EU. The EU has used these powers to put in place statutory
replacement rates for EONIA and CHF LIBOR. The UK government has also granted additional powers to the
Financial Conduct Authority (FCA) to enable the temporary publication of a ‘synthetic‘ LIBOR using a different
methodology and inputs. The FCA has used these powers to ensure the most commonly used GBP and JPY
LIBOR settings continue to be available using a “synthetic” methodology for a limited time. The FCA has not yet
decided whether it will require the LIBOR benchmark administrator to publish synthetic USD LIBOR after June
2023. On 6 April 2021, the State of New York passed legislation on benchmark replacement addressing certain
ING Group Annual Report 2021 on Form 20-F
16
contracts, securities and instruments governed by New York which involve interest rates or dividend rates
determined by the use of USD LIBOR without “fallback” rate provisions or with inadequate “fallback” rate
provisions. A U.S. federal version of such legislation (passed by the U.S. House of Representatives on 8 December
2021) remains under consideration in the U.S. Senate.
The discontinuation of USD LIBOR and related interest rate benchmarks could result in a number of risks for the
Group, its customers, and the financial services industry more widely. These risks include legal risks and costs in
relation to changes required to documentation for existing transactions. In addition to the heightened conduct
and operational risks, the process of adopting new reference rates may expose the Group to an increased level of
financial risk, such as potential earnings volatility resulting from contract modifications and changes in hedge
accounting relationships.
It is not possible to determine the full impact of the USD LIBOR transition on the Group. However, the experience
gained and solutions put in place for the other LIBOR rates, together with our investment in and ability to offer a
wide range of products using alternative rates, should help to limit any material adverse effect on our business,
results and financial condition.
Inflation and deflation may negatively affect our business, results and financial condition.
A sustained increase in the inflation rate in our principal markets could have multiple impacts on us and may
negatively affect our business, results and financial condition. For example, a sustained increase in the inflation
rate may result in an increase in market interest rates, which may:
◾
decrease the estimated fair value of certain fixed income securities that we hold in our investment
portfolios, resulting in:
◾
reduced levels of unrealised capital gains available to us, which could negatively impact our
solvency position and net income, and/or
◾
a decrease in collateral values,
◾
result in increased withdrawal of certain savings products, particularly those with fixed rates below
market rates,
◾
require us, as an issuer of securities, to pay higher interest rates on debt securities that we issue in the
financial markets from time to time to finance our operations, which would increase our interest
expenses and reduce our results,
◾
result in further customer defaults as interest rate rises flow through into payment stress for lower
credit quality customers.
A significant and sustained increase in inflation has historically also been associated with decreased prices for
equity securities and sluggish performance of equity markets generally. A sustained decline in equity markets
may:
◾
result in impairment charges to equity securities that we hold in our investment portfolios and reduced
levels of unrealised capital gains available to us which would reduce our net income, and
◾
lower the value of our equity investments impacting our capital position.
In addition, a failure to accurately anticipate higher inflation and factor it into our product pricing may result in a
systemic mispricing of our products, which would negatively impact our results.
On the other hand, deflation could be experienced in our principal markets adversely affecting our financial
performance. Deflation may erode collateral values and diminish the quality of loans and cause a decrease in
borrowing levels, which would negatively affect our business and results.
Market conditions, including those observed over the past few years, and the application of IFRS
9 may increase the risk of loans being impaired and have a negative effect on our results and
financial condition.
We are exposed to the risk that our borrowers (including sovereigns) may not repay their loans according to their
contractual terms and that the collateral securing the payment of these loans may be insufficient. We may see
adverse changes in the credit quality of our borrowers and counterparties, for example, as a result of their
inability to refinance their indebtedness, with increasing delinquencies, defaults and insolvencies across a range
of sectors. This may lead to impairment charges on loans and other assets, higher costs and additions to loan loss
provisions. A significant increase in the size of our provision for loan losses could have a material adverse effect
on our business, results and financial condition. Also see above under the heading “–ING’s business, results and
financial condition have been, and likely will continue to be adversely affected by the Covid-19 pandemic”. As set
out there, we expect to be affected by the Covid-19 pandemic through its impact on, among others, the financial
condition of our customers or other counterparties.
ING Group Annual Report 2021 on Form 20-F
17
We may incur losses due to failures of banks falling under the scope of state compensation
schemes.
While prudential regulation is intended to minimize the risk of bank failures, in the event such a failure occurs,
given our size, we may incur significant compensation payments to be made under the Dutch Deposit Guarantee
Scheme (DGS), which we may be unable to recover from the bankrupt estate, and therefore the consequences of
any future failure of such a bank could be significant to ING. Such costs and the associated costs to be borne by
us may have a material adverse effect on our results and financial condition. On the basis of the EU Directive on
deposit guarantee schemes, ING pays quarterly risk-weighted contributions into a DGS-fund. The DGS-fund is to
grow to a target size of 0.8% of all deposits guaranteed under the DGS, which is expected to be reached in July
2024. In case of failure of a Dutch bank, depositor compensation is paid from the DGS-fund. If the available
financial means of the fund are insufficient, Dutch banks, including ING, may be required pay to extraordinary ex-
post contributions not exceeding 0.5% of their covered deposits per calendar year. In exceptional circumstances
and with the consent of the competent authority, higher contributions may be required. However, extraordinary
ex-post contributions may be temporarily deferred if, and for so long as, they would jeopardise the solvency or
liquidity of a bank. Depending on the size of the failed bank, the available financial means in the fund, and the
required additional financial means, the impact of the extraordinary ex-post contributions on ING may be
material.
Since 2015, the EU has been discussing the introduction of a pan-European deposit guarantee scheme (‘EDIS’),
(partly) replacing or complementing national compensation schemes in two or three phases. Proposals contain
elements of (re)insurance, mutual lending and mutualisation of funds. The new model is intended to be ‘overall
cost-neutral’. Discussions have continued in 2020, but it remains uncertain when EDIS will be introduced and, if
introduced, what impact EDIS would have on ING’s business and operations.
In February 2021, the European Commission issued a public consultation on the review of the bank crisis
management and deposit insurance (CMDI) framework, with a focus on three EU legislative texts: the Bank
Recovery and Resolution Directive (BRRD), the Single Resolution Mechanism Regulation (SRMR), and the Deposit
Guarantee Schemes Directive (DGSD). The anticipated revision of the CMDI framework is part of the debate on
the completion of the Banking Union and in particular its third and missing pillar EDIS. The consultation period
ran until May 2021. It is uncertain when the next steps towards revision of the CMDI framework, including EDIS,
can be expected.
Risks related to the regulation and supervision of the Group
Non-compliance with laws and/or regulations concerning financial services or financial
institutions, including with respect to financial economic crimes, could result in fines and other
liabilities, penalties or consequences for us, which could materially affect our business and
reduce our profitability.
ING has faced, and in the future may continue to face, the risk of consequences in connection with non-
compliance with applicable laws and regulations. For additional information on legal proceedings, see Note 46
‘Legal proceedings’ to the consolidated financial statements. There are a number of risks in areas where
applicable regulations may be unclear, subject to multiple interpretations or under development, or where
regulations may conflict with one another, or where regulators revise their previous guidance or courts overturn
previous rulings, which could result in our failure to meet applicable standards. Regulators and other authorities
have the power to bring administrative or judicial proceedings against us, which could result, among other things,
in suspension or revocation of our licenses, cease and desist orders, fines, civil penalties, criminal penalties or
other disciplinary action, which could materially harm our results and financial condition. If we fail to address, or
appear to fail to address, any of these matters appropriately, our reputation could be harmed and we could be
subject to additional legal risk, which could, in turn, increase the size and number of claims and damages brought
against us or subject us to enforcement actions, fines and penalties.
Furthermore, as a financial institution, we are exposed to the risk of unintentional involvement in criminal
activity in connection with the commission of financial economic crimes, including with respect to money
laundering and the funding of terrorist and other criminal activities. The failure or perceived failure by us to
comply with legal and regulatory requirements with respect to financial economic crimes may result in adverse
publicity, claims and allegations, litigation and regulatory investigations and sanctions, which may have a material
adverse effect on our business, results, financial condition and/or prospects in any given period. For further
discussion of the impact of litigation, enforcement proceedings, investigations or other regulatory actions with
respect to financial economic crimes, see “– We may be subject to litigation, enforcement proceedings,
investigations or other regulatory actions, and adverse publicity” below.
ING Group Annual Report 2021 on Form 20-F
18
Changes in laws and/or regulations governing financial services or financial institutions or the
application of such laws and/or regulations may increase our operating costs and limit our
activities.
We are subject to detailed banking laws and financial regulation in the jurisdictions in which we conduct
business. Regulation of the industries in which we operate is becoming increasingly more extensive and complex,
while also attracting supervisory scrutiny. Compliance with applicable and new laws and regulations is resources-
intensive, and may materially increase our operating costs. Moreover, these regulations intended to protect our
customers, markets and society as a whole and can limit our activities, among others, through stricter net capital,
market conduct and transparency requirements and restrictions on the businesses in which we can operate or
invest.
Our revenues and profitability and those of our industry have been and will continue to be impacted by
requirements relating to capital, additional loss-absorbing capacity, leverage, minimum liquidity and long-term
funding levels, requirements related to resolution and recovery planning, derivatives clearing and margin rules
and levels of regulatory oversight, as well as limitations on which and, if permitted, how certain business
activities may be carried out by financial institutions.
We are subject to additional legal and regulatory risk in certain countries where we operate with
less developed or predictable legal and regulatory frameworks.
In certain countries in which we operate, judiciary and dispute resolution systems may be less effective. As a
result, in case of a breach of contract, we may have difficulties in making and enforcing claims against contractual
counterparties and, if claims are made against us, we might encounter difficulties in mounting a defence against
such allegations. If we become party to legal proceedings in a market with an insufficiently developed judicial
system, it could have an adverse effect on our operations and net results.
In addition, as a result of our operations in certain countries, we are subject to risks of possible nationalisation,
expropriation, price controls, exchange controls and other restrictive government actions, as well as the outbreak
of hostilities and or war, in these markets. In particular, we have wholesale banking activities in both Russia and
Ukraine, as well as investments in Russia, some of which are denominated in local currency, and other
counterparties located in Russia. Furthermore, the current economic environment in certain countries in which
we operate may increase the likelihood for regulatory initiatives to enhance consumer protection or to protect
homeowners from foreclosures. Any such regulatory initiative could have an adverse impact on our ability to
protect our economic interest, for instance in the event of defaults on residential mortgages.
We are subject to the regulatory supervision of the ECB and other regulators with extensive
supervisory and investigatory powers.
In its capacity as principal prudential supervisor in the EU, the ECB has extensive supervisory and investigatory
powers, including the ability to issue requests for information, to conduct regulatory investigations and on-site
inspections, and to impose monetary and other sanctions. For example, under the Single Supervisory Mechanism
(SSM), the regulators with jurisdiction over the Group, including the ECB, may conduct stress tests and have
discretion to impose capital surcharges on financial institutions for risks that are not otherwise recognised in risk-
weighted assets or other surcharges depending on the individual situation of the bank and take or require other
measures, such as restrictions on or changes to the Group’s business. Competent authorities may also, if the
Group fails to comply with regulatory requirements, in particular with supervisory actions, minimum capital
requirements (including buffer requirements) or with liquidity requirements, or if there are shortcomings in its
governance and risk management processes, prohibit the Group from making dividend payments to shareholders
or distributions to holders of its regulatory capital instruments. Generally, a failure to comply with prudential or
conduct regulations could have a material adverse effect on the Group’s business, results and financial condition.
The regulatory consequences of the United Kingdom’s withdrawal from the European Union may
have adverse effects on our business, results and financial condition.
On 24 December 2020, the United Kingdom and the EU agreed to the EU-UK Trade and Cooperation Agreement
(the “TCA”) in connection with the departure of the UK from the EU (commonly referred to as ‘Brexit’). However,
the financial services provisions of the TCA are very limited and , as a result, UK-based financial services providers
lost EU passporting rights as of 1 January 2021 and EU-UK financial services are now subject to unilateral
equivalence decisions. EU and UK regulators have, however, taken certain measures to address overall financial
stability risks, such as the temporary extension by the EU of equivalence recognition to UK-based central
counterparties (UK CCPs) through to 30 June 2022. In November 2021 the European Commissioner for financial
services announced that the 30 June 2022 extension date will be further extended in early 2022, although the
duration of the extension has not yet been specified. There is, however, no guarantee that such equivalence
decisions will be issued by the EU or the UK in the future, or that any further extensions or renewals of
ING Group Annual Report 2021 on Form 20-F
19
temporary equivalence decisions or similar transitional arrangements will be made by the EU or the UK in the
future. The absence of such equivalence decisions for financial services could have a negative impact on ING’s
activities, with the absence of future UK CCPs recognition expected to increase costs for both ING and its
financial markets customers. In addition, Brexit has required and will require other changes to ING’s business and
operations, including requiring ING to obtain a third country branch banking license in the UK, which was granted
in November 2021. ING is also progressing the move of certain financial markets activities from London to
Amsterdam in light of the ECB’s supervisory expectations on booking models as a result of Brexit. The regulatory
impact of Brexit continues to present material risks and uncertainties, particularly as to how regulations may
diverge between the EU and the UK, which could materially increase ING’s compliance costs and have a material
adverse effect on ING’s business, results and financial condition.
Failure to meet minimum capital and other prudential regulatory requirements as applicable to
us from time to time may have a material adverse effect on our business, results and financial
condition and on our ability to make payments on certain of our securities.
ING is subject to a variety of regulations that require us to comply with minimum requirements for capital (own
funds) and additional loss absorbing capacity, as well as for liquidity, and to comply with leverage restrictions. In
addition, such capital, liquidity and leverage requirements and their application and interpretation may change.
Any changes may require us to maintain more capital or to raise a different type of capital by disqualifying
existing capital instruments from continued inclusion in regulatory capital, requiring replacement with new
capital instruments that meet the new criteria. Sometimes changes are introduced subject to a transitional
period during which the new requirements are being phased in, gradually progressing to a fully phased-in, or
fully-loaded, application of the requirements.
Any failure to comply with these requirements, or to adapt to changes in such requirements, may have a material
adverse effect on our business, results and financial condition, and may require us to seek additional capital.
Failures to meet minimum capital or other prudential requirements may also result in ING being prohibited from
making payments on certain of our securities. Because implementation phases and transposition into EU or
national regulation where required may often involve a lengthy period, the impact of changes in capital, liquidity
and leverage regulations on our business, results and financial condition, and on our ability to make payments on
certain of our securities, is often unclear.
For further discussion of the impact of minimum capital and other prudential regulatory requirements on ING,
see “Item 4. Information on the Company—Regulation and Supervision—Regulatory Developments—Basel III and
European Union Standards as currently applied by ING Group.”
Our US commodities and derivatives business is subject to CFTC and SEC regulation under the
Dodd-Frank Act.
Our affiliate ING Capital Markets LLC is registered with the Commodity Futures Trading Commission (“CFTC”) as a
swap dealer and is subject to CFTC regulation of the off-exchange derivatives market pursuant to Title VII of the
U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Operating as a swap dealer
requires compliance with CFTC regulatory requirements, which may be burdensome, impose additional
compliance costs and could adversely affect the profitability of this business, as well as exposing ING to the risk
of non-compliance with these regulations.
ING Capital Markets LLC is also registered with the SEC as a security-based swap dealer pursuant to Dodd-Frank
and SEC regulations enacted thereunder effective 1 November 2021. While ING Capital Markets LLC, as a
security-based swap dealer, is required to comply with SEC rules with respect to most of these requirements, SEC
rules have permitted an “Alternative Compliance Mechanism” that allows for compliance, subject to eligibility
requirements, with CFTC capital and margin rules applying to swap dealers in lieu of SEC capital and margin rules
applying to security-based swap dealers. ING Capital Markets LLC has elected to use the Alternative Compliance
Mechanism. However, should ING Capital Markets LLC in the future be ineligible for the “Alternative Compliance
Mechanism” it would be subject to SEC capital and margin security-based swap dealer rules instead of the CFTC
capital and margin security-based swap dealer rules. SEC registration may increase ING Capital Markets LLC’s
operational costs as a result of compliance, margin, capital and other requirements, and result in a substantial
portion or all of ING’s security-based swap activities with U.S. persons being conducted through ING Capital
Markets LLC. These registration and related requirements may also reduce trading activity, reduce market
liquidity and increase volatility in the relevant markets.
In addition, new position limits under Dodd-Frank applicable to the derivatives market generally for futures
contracts based on any of twenty-five commodity futures contracts on physical commodities, which to all market
participants, could limit ING’s position sizes in these futures contracts and similarly limit the ability of
counterparties to utilize certain of our products to the extent hedging exemptions from the position limits are
unavailable. In addition, position limits on swaps on the same physical commodities will become effective in
ING Group Annual Report 2021 on Form 20-F
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January 2023, which could further limit the ability of ING and its counterparties to enter into such swaps. Such
regulation of the derivative markets and market participants will likely result in increased cost of hedging and
other trading activities, both for ING and its customers, which could expose our business to greater risk and could
reduce the size and profitability of our customer business. The imposition of these regulatory restrictions and
requirements, could also result in reduced market liquidity, which could in turn increase market volatility and the
risks and costs of hedging and other trading activities.
Any of the foregoing factors, and any further regulatory developments with respect to commodities and
derivatives, could have a material impact on our business, results and financial condition.
For further discussion of the impact of regulation of commodities and derivatives on ING, see “Item 4.
Information on the Company—Regulation and Supervision—Regulatory Developments—Dodd-Frank Act and
other US Regulations.”
We are subject to several other bank recovery and resolution regimes that include statutory
write down and conversion as well as other powers, which remains subject to significant
uncertainties as to scope and impact on us.
We are subject to several recovery and resolution regimes, including the Single Resolution Mechanism (‘SRM’),
the ‘Bank Recovery and Resolution Directive’ (‘BRRD’) as implemented in national legislation, and the Dutch
‘Intervention Act’ (Wet bijzondere maatregelen financiële ondernemingen, as implemented in the Dutch
Financial Supervision Act). The SRM applies to banks that are supervised by the ECB under the SSM, with the aim
of ensuring an orderly resolution of failing banks at minimum costs for taxpayers and the real economy. The
BRRD establishes a common framework for the recovery and resolution for banks within the European Union,
with the aim of providing supervisory authorities and resolution authorities with common tools and powers to
address banking crises pre-emptively in order to safeguard financial stability and minimise taxpayers’ exposure to
losses. In addition, the Intervention Act confers wide-ranging powers to the Dutch Minister of Finance, including,
among other things, in relation to shares and other securities issued by us or with our cooperation or other
claims on us (including, without limitation, expropriation thereof) if there is a serious and immediate threat to
the stability of the financial system. Any application of statutory write-down and conversion or other powers
would not be expected to constitute an event of default under our securities entitling holders to seek repayment.
If any of these powers were to be exercised in respect of ING, there could be a material adverse effect on both
ING and on holders of ING securities, including through a material adverse effect on credit ratings and/or the
price of our securities. Investors in our securities may lose their investment if resolution measures are taken
under current or future regimes.
For further discussion of the impact of bank recovery and resolution regimes on ING, see “Item 4. Information on
the Company—Regulation and Supervision—Regulatory Developments—Bank Recovery and Resolution
Directive.”
Risks related to litigation, enforcement proceedings and investigations and to changes in tax
laws
We may be subject to litigation, enforcement proceedings, investigations or other regulatory
actions, and adverse publicity.
We are involved in governmental, regulatory, arbitration and legal proceedings and investigations involving
claims by and against us which arise in the ordinary course of our businesses, including in connection with our
activities as financial services provider, employer, investor and taxpayer. As a financial institution, we are subject
to specific laws and regulations governing financial services or financial institutions. See “Risks related to the
regulation and supervision of the Group– Changes in laws and/or regulations governing financial services or
financial institutions or the application of such laws and/or regulations may increase our operating costs and limit
our activities” above. Financial reporting irregularities involving other large and well-known companies, possible
findings of government authorities in various jurisdictions which are investigating several rate-setting processes,
notifications made by whistleblowers, increasing regulatory and law enforcement scrutiny of ‘know your
customer’ anti-money laundering, tax evasion, prohibited transactions with countries or persons subject to
sanctions, and bribery or other anti-corruption measures and anti-terrorist-financing procedures and their
effectiveness, regulatory investigations of the banking industry, and litigation that arises from the failure or
perceived failure by us to comply with legal, regulatory, tax and compliance requirements could result in adverse
publicity and reputational harm, lead to increased regulatory supervision, affect our ability to attract and retain
customers and maintain access to the capital markets, result in cease and desist orders, claims, enforcement
actions, fines and civil and criminal penalties, other disciplinary action or have other material adverse effects on
us in ways that are not predictable. With respect to sanctions, beginning in February 2022, the EU, UK and the
US, in a coordinated effort joined by several other countries, imposed a variety of new sanctions with respect to
Russia and various Russia-related parties. Despite significant similarities between these Russia-related sanctions
programmes, there are notable differences between the EU, UK and US sanctions programmes, which may
ING Group Annual Report 2021 on Form 20-F
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continue to evolve and are expected to require ING to implement new control measures with related costs and
risks of non-compliance. While various sanctions include grace periods before full compliance is required, there is
no guarantee that ING will be able to implement all required procedures within the applicable grace periods. In
addition, some claims and allegations may be brought by or on behalf of a class and claimants may seek large or
indeterminate amounts of damages, including compensatory, liquidated, treble and punitive damages. Our
reserves for litigation liabilities may prove to be inadequate. Claims and allegations, should they become public,
need not be well founded, true or successful to have a negative impact on our reputation. In addition, press
reports and other public statements that assert some form of wrongdoing could result in inquiries or
investigations by regulators, legislators and law enforcement officials, and responding to these inquiries and
investigations, regardless of their ultimate outcome, is time consuming and expensive. Adverse publicity, claims
and allegations, litigation and regulatory investigations and sanctions may have a material adverse effect on our
business, results, financial condition and/or prospects in any given period.
We are subject to different tax regulations in each of the jurisdictions where we conduct
business, and are exposed to changes in tax laws, and risks of non-compliance with or
proceedings or investigations with respect to, tax laws.
Changes in tax laws (including case law) and tax treaties (including the termination thereof) could increase our
taxes and our effective tax rates and could materially impact our tax receivables and liabilities as well as deferred
tax assets and deferred tax liabilities, which could have a material adverse effect on our business, results and
financial condition. Changes in tax laws could also make certain ING products less attractive, which could have
adverse consequences for our businesses and results. On 7 June 2021, the Dutch government received a formal
notice of denunciation of the Dutch-Russian tax treaty from Russia, and as a result, the tax treaty was terminated
as of 1 January 2022. The termination of the Dutch-Russian tax treaty or any other similar developments may
have adverse effects on ING and ING’s customers.
Because of the geographic spread of its business, ING may be subject to tax audits, investigations and procedures
in numerous jurisdictions at any point in time. Although we believe that we have adequately provided for all our
tax positions, the ultimate resolution of these audits, investigations and procedures may result in liabilities which
are different from the amounts recognized. In addition, increased bank taxes in countries where the Group is
active result in increased taxes on ING’s banking operations, which could negatively impact our operations,
financial condition and liquidity.
We may be subject to withholding tax if we fail to comply with the Foreign Account Tax
Compliance Act (“FATCA”) and other US withholding tax regulations
Due to the nature of its business, ING is subject to various provisions of US tax law. These include FATCA, which
requires ING to provide certain information for the US Internal Revenue Service (“IRS”), and the Qualified
Intermediary (“QI”) requirements, which require withholding tax on certain US-source payments. Failure to
comply with FATCA and/or QI requirements and regulations could harm our reputation and could subject the
Group to enforcement actions, fines and penalties, which could have a material adverse effect on our business,
reputation, revenues, results, financial condition and prospects. For further discussion of FATCA and QI
requirements with respect to ING, see “Item 4. Information on the Company—Regulation and Supervision—KYC
Requirements.”
ING is exposed to the risk of claims from customers or stakeholders who feel misled or treated
unfairly because of advice or information received.
Our products and services, including banking products and advice services for third-party products are exposed
to claims from customers who might allege that they have received insufficient advice or misleading information
from advisers (both internal and external) as to which products were most appropriate for them, or that the
terms and conditions of the products, the nature of the products or the circumstances under which the products
were sold, were misrepresented to them. When new financial products are brought to the market, ING engages
in a multidisciplinary product approval process in connection with the development and distribution of such
products, including production of appropriate marketing and communication materials. Notwithstanding these
processes, customers may make claims against ING if the products do not meet their expectations , either at the
purchase/execution of the product and/or through the life of the product. Customer protection regulations, as
well as changes in interpretation and perception by both the public at large and governmental authorities of
acceptable market practices, influence customer expectations.
Products distributed through person-to-person sales forces have a higher exposure to such claims as the sales
forces may provide face-to-face financial planning and advisory services. Complaints may also arise if customers
feel that they have not been treated reasonably or fairly, or that the duty of care has not been complied with.
While a considerable amount of time and resources have been invested in reviewing and assessing historical
sales practices and products that were sold in the past, and in the maintenance of risk management, legal and
compliance procedures to monitor current sales practices, there can be no assurance that all of the issues
ING Group Annual Report 2021 on Form 20-F
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associated with current and historical sales practices have been or will be identified, nor that any issues already
identified will not be more widespread than presently estimated.
The negative publicity associated with any sales practices, any compensation payable in respect of any such
issues and regulatory changes resulting from such issues, has had and could have a material adverse effect on our
reputation, business, results, financial condition and prospects. For additional information regarding legal
proceedings or claims, see Note 46 ‘Legal proceedings’ to the consolidated financial statements.
Risks related to the Group’s business and operations
ING may be unable to meet internal or external aims or expectations with respect to ESG-related
matters.
Environmental, Social and Governance (ESG) is an area of significant and increased focus for governments and
regulators, investors, ING’s customers and employees, and other stakeholders or third parties (e.g., non-
governmental organizations or NGOs). As a result, an increasing number of laws, regulations and legislative
actions have been introduced to address climate change, sustainability and other ESG-related matters, including
in relation to the financial sector’s operations and strategy. Such recent regulations include the EU Sustainable
Finance Disclosure Regulation (SFDR), EU Taxonomy Regulation and EU Green Bond Standards, which broadly
focus on disclosure obligations, standardized definitions and classification frameworks for environmentally
sustainable activities. These laws, regulations and legislative frameworks may directly and indirectly impact the
business environment in which ING operates and may expose ING to significant risks.
National or international regulatory actions or developments may also result in financial institutions coming
under increased pressure from internal and external stakeholders regarding the management and disclosure of
their ESG risks and related lending and investment activities. ING may from time to time disclose ESG-related
initiatives or aims in connection with the conduct of its business and operations. However, there is no guarantee
that ING will be able to implement such initiatives or meet such aims within anticipated timeframes, or at all. ING
may fail to fulfil internal or external ESG-related initiatives, aims or expectations, or may be perceived to fail to
do so, or may fail to adequately or accurately report performance or developments with respect to such
initiatives, aims or expectations. ING could therefore be criticized or held responsible for the scope of its
initiatives or goals regarding such matters. In addition, ING might face requests for specific strategies, plans or
commitments to address ESG-related matters, which may or may not be viewed as satisfactory to the relevant
internal and external stakeholders (including NGOs). Any of these factors may have an adverse impact on ING’s
reputation and brand value, or on ING’s business, financial condition and operating results.
ING may be unable to adapt its products and services to meet changing customer behaviour and
demand, including as a result of ESG-related matters.
Customers or other counterparties may increasingly assess sustainability or other ESG-related matters in their
economic decisions. For instance, customers may choose investment products or services based on sustainability
or other ESG criteria, or may look at a financial institution’s ESG-related lending strategy when choosing to make
deposits. To remain competitive and to safeguard its reputation, ING is required to continuously adapt its
business strategy, products and services to respond to emerging, increasing or changing sustainability and other
ESG-related demands from customers, investors and other stakeholders. However, there is no guarantee that
ING’s current or future products or services will meet applicable ESG-related regulatory requirements, customer
preferences or investor expectations.
For further information regarding the alignment of ING’s lending portfolio with its climate-related goals, see
“Item 4. – Information on the Company – Business Overview – Responsible finance” below.
ING’s business and operations are exposed to physical risks, including as a direct result of climate
change.
ING’s business and operations may be exposed to the impacts of physical risks arising from climate and weather-
related events, including heatwaves, droughts, flooding, storms, rising sea levels, other extreme weather events
or natural disasters, and to the impacts of physical risks arising from the environmental degradation, including
loss of biodiversity, water or resources scarcity, pollution or waste management. Such physical risks could disrupt
ING’s business continuity and operations or impact ING’s premises or property portfolio, as well as its customers’
property, business or other financial interests. These risks could potentially result in impairing asset values,
financial losses, declining creditworthiness of customers and increased defaults, delinquencies, write-offs and
impairment charges in ING’s portfolio, etc. In particular, changing climate patterns resulting in more frequent and
extreme weather events, such as the severe flooding that occurred in Western Europe in July 2021 or the long-
lasting bushfires in Australia in February 2021, could lead to unexpected business interruptions or losses for ING
or its customers.
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For a description of physical risks to our operations and business other than resulting from natural disasters as a
result of climate change, see “–Operational and IT risks, such as systems disruptions or failures, breaches of
security, cyber attacks, human error, changes in operational practices, inadequate controls including in respect of
third parties with which we do business or outbreaks of communicable diseases may adversely impact our
reputation, business and results” above.
ING’s business and operations are exposed to transition risks related to climat e change.
The transition to a low carbon or net zero economy may give rise to risks and uncertainties associated with
climate change-related laws, regulations and oversight, changing or new technologies, and shifting customer
sentiment. For instance, ING may be required to change its lending portfolio to comply with new climate change-
related regulations. As a result, it might be unable to lend to certain prospective customers, or might even lead to
the termination of certain existing relationships with certain customers. This could result in claims or legal
challenges from such customers against ING. This transition may also adversely impact the business and
operations of ING’s customers and other counterparties. If ING fails to adequately factor in such risks in its
lending or other business decisions, ING could be exposed to losses.
The low carbon or net zero transition may also require ING to modify or implement new compliance systems,
internal controls and procedures or governance frameworks. The integration and automation of internal
governance, compliance, and disclosure and reporting frameworks across ING could lead to increased
operational costs for ING and other execution and operational risks. The implementation cost of these systems
may especially be higher in the near term as ING seeks to adapt its business, or address overlapping, duplicative
or conflicting regulatory or other requirements in this fast-developing area. Furthermore, ING’s ongoing
implementation of appropriate systems, controls and frameworks increasingly requires ING to develop adequate
climate change-related risk assessment and modelling capabilities (as there is currently no standard approach or
methodology available), and to collect customer, third party or other data. There are significant risks and
uncertainties inherent in the development of new risk modelling methodologies and the collection of data,
potentially resulting in systems or frameworks that could be inadequate, inaccurate or susceptible to incorrect
customer, third party or other data.
Any delay or failure in developing, implementing or meeting ING’s climate change-related commitments and
regulatory requirements may have a material adverse impact on our business, financial condition, operating
results and reputation, and lead to climate change or ESG-related investigations, enforcement proceedings or
litigation.
Operational and IT risks, such as systems disruptions or failures, breaches of security, cyber
attacks, human error, changes in operational practices, inadequate controls including in respect
of third parties with which we do business or outbreaks of communicable diseases may
adversely impact our reputation, business and results.
We face the risk that the design and operating effectiveness of our controls and procedures may prove to be
inadequate. Operational and IT risks are inherent to our business. Our businesses depend on the ability to
process and report a large number of transactions efficiently and accurately. In addition, we routinely transmit,
receive and store personal, confidential and proprietary information by email and other electronic means.
Although we endeavour to safeguard our systems and processes, losses can result from inadequately trained or
skilled personnel, IT failures (including due to a computer virus or a failure to anticipate or prevent cyber attacks
or other attempts to gain unauthorised access to digital systems for purposes of misappropriating assets or
sensitive information, corrupting data, or impairing operational performance, or security breaches by third
parties), inadequate or failed internal control processes and systems, regulatory breaches, human errors,
employee misconduct, including fraud, or from natural disasters or other external events that interrupt normal
business operations. Such losses may adversely affect our reputation, business and results. We depend on the
secure processing, storage and transmission of confidential and other information in our computer systems and
networks. The equipment and software used in our computer systems and networks may not always be capable
of processing, storing or transmitting information as expected. Despite our business continuity plans and
procedures, certain of our computer systems and networks may have insufficient recovery capabilities in the
event of a malfunction or loss of data. We are consistently managing and monitoring our IT risk profile globally.
ING is subject to increasing regulatory requirements including EU General Data Protection Regulation (‘GDPR’)
and EU Payment Services Directive (‘PSD2’). Failure to appropriately manage and monitor our IT risk profile could
affect our ability to comply with these regulatory requirements, to securely and efficiently serve our clients or to
timely, completely or accurately process, store and transmit information, and may adversely impact our
reputation, business and results. For further description of the particular risks associated with cybercrime, which
is a specific risk to ING as a result of its strategic focus on technology and innovation, see “–We are subject to
increasing risks related to cybercrime and compliance with cybersecurity regulation” below.
ING Group Annual Report 2021 on Form 20-F
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Widespread outbreaks of communicable diseases may impact the health of our employees, increasing
absenteeism, or may cause a significant increase in the utilisation of health benefits offered to our employees,
either or both of which could adversely impact our business. Also see above under the heading “–ING’s business,
results and financial condition have been, and likely will continue to be adversely affected by the Covid-19
pandemic”. As set out there, we expect to be affected by the Covid-19 pandemic through its impact on, among
others, our employees. In addition, other events including unforeseeable and/or catastrophic events can lead to
an abrupt interruption of activities, and our operations may be subject to losses resulting from such disruptions.
Losses can result from destruction or impairment of property, financial assets, trading positions, and the loss of
key personnel. If our business continuity plans are not able to be implemented, are not effective or do not
sufficiently take such events into account, losses may increase further.
We are subject to increasing risks related to cybercrime and compliance with cybersecurity
regulation.
Like other financial institutions and global companies, we are regularly the target of cyber attacks, which is a
specific risk to ING as a result of its strategic focus on technology and innovation. In particular, threats from
Distributed Denial of Service (‘DDoS’), targeted attacks (also called Advanced Persistent Threats) and
Ransomware intensify worldwide, and attempts to gain unauthorised access and the techniques used for such
attacks are increasingly sophisticated. We have faced, and expect to continue to face, an increasing number of
cyber attacks (both successful and unsuccessful) as we have further digitalized. This includes the continuing
expansion of our mobile- and other internet-based products and services, as well as our usage and reliance on
cloud technology.
Cybersecurity, customer data and data privacy have become the subject of increasing legislative and regulatory
focus. The EU’s second Payment Services Directive (‘PSD2’) and GDPR are examples of such regulations. In certain
locations where ING is active, there are additional local regulatory requirements and legislation on top of EU
regulations that must be followed for business conducted in that jurisdiction. Some of these legislations and
regulations may be conflicting due to local regulatory interpretations. We may become subject to new EU and
local legislation or regulation concerning cybersecurity, security of customer data in general or the privacy of
information we may store or maintain. Compliance with such new legislation or regulation could increase the
Group’s compliance cost. Failure to comply with new and existing legislation or regulation could harm our
reputation and could subject the Group to enforcement actions, fines and penalties.
ING may be exposed to the risks of misappropriation, unauthorised access, computer viruses or other malicious
code, cyber attacks and other external attacks or internal breaches that could have a security impact. These
events could also jeopardise our confidential information or that of our clients or our counterparties and this
could be exacerbated by the increase in data protection requirements as a result of GDPR. These events can
potentially result in financial loss and harm to our reputation, hinder our operational effectiveness, result in
regulatory censure, compensation costs or fines resulting from regulatory investigations and could have a
material adverse effect on our business, reputation, revenues, results, financial condition and prospects. Even
when we are successful in defending against cyber attacks, such defence may consume significant resources or
impose significant additional costs on ING.
Because we operate in highly competitive markets, including our home market, we may not be
able to increase or maintain our market share, which may have an adverse effect on our results.
There is substantial competition in the Netherlands and the other countries in which we do business for the types
of wholesale banking, retail banking, investment banking and other products and services we provide. Customer
loyalty and retention can be influenced by a number of factors, including brand recognition, reputation, relative
service levels, the prices and attributes of products and services, scope of distribution, credit ratings and actions
taken by existing or new competitors (including non-bank or financial technology competitors). A decline in our
competitive position as to one or more of these factors could adversely impact our ability to maintain or further
increase our market share, which would adversely affect our results. Such competition is most pronounced in our
more mature markets of the Netherlands, Belgium, the rest of Western Europe and Australia. In recent years,
however, competition in emerging markets, such as Asia and Central and Eastern Europe, has also increased as
large financial services companies from more developed countries have sought to establish themselves in
markets which are perceived to offer higher growth potential, and as local institutions have become more
sophisticated and competitive and proceeded to form alliances, mergers or strategic relationships with our
competitors. The Netherlands is our largest market. Our main competitors in the banking sector in the
Netherlands are ABN AMRO Bank and Rabobank.
Competition could also increase due to new entrants (including non-bank and financial technology competitors)
in the markets that may have new operating models that are not burdened by potentially costly legacy
operations and that are subject to reduced regulation. New entrants may rely on new technologies, advanced
data and analytic tools, lower cost to serve, reduced regulatory burden and/or faster processes in order to
challenge traditional banks. Developments in technology has also accelerated the use of new business models,
ING Group Annual Report 2021 on Form 20-F
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and ING may not be successful in adapting to this pace of change or may incur significant costs in adapting its
business and operations to meet such changes. For example, new business models have been observed in retail
payments, consumer and commercial lending (such as peer-to-peer lending), foreign exchange and low-cost
investment advisory services. In particular, the emergence of disintermediation in the financial sector resulting
from new banking, lending and payment solutions offered by rapidly evolving incumbents, challengers and new
entrants, in particular with respect to payment services and products, and the introduction of disruptive
technology may impede our ability to grow or retain our market share and impact our revenues and profitability.
Increasing competition in the markets in which we operate (including from non-banks and financial technology
competitors) may significantly impact our results if we are unable to match the products and services offered by
our competitors. Future economic turmoil may accelerate additional consolidation activity. Over time, certain
sectors of the financial services industry have become more concentrated, as institutions involved in a broad
range of financial services have been acquired by or merged into other firms or have declared bankruptcy. These
developments could result in our competitors gaining greater access to capital and liquidity, expanding their
ranges of products and services, or gaining geographic diversity. We may experience pricing pressures as a result
of these factors in the event that some of our competitors seek to increase market share by reducing prices,
which may have a material adverse impact on our business, results and financial condition.
We may not always be able to protect our intellectual property developed in our products and
services and may be subject to infringement claims, which could adversely impact our core
business, inhibit efforts to monetize our internal innovations and restrict our ability to capitalize
on future opportunities.
In the conduct of our business, we rely on a combination of contractual rights with third parties and copyright,
trademark, trade name, patent and trade secret laws to establish and protect our intellectual property, which we
develop in connection with our products and services. Third parties may infringe or misappropriate our
intellectual property. We may have to litigate to enforce and protect our copyrights, trademarks, trade names,
patents, trade secrets and know-how or to determine their scope, validity or enforceability. In that event, we
may be required to incur significant costs, and our efforts may not prove successful. The inability to secure or
protect our intellectual property assets could have an adverse effect on our core business and our ability to
compete, including through the monetization of our internal innovations.
We may also be subject to claims made by third parties for (1) patent, trademark or copyright infringement, (2)
breach of copyright, trademark or licence usage rights, or (3) misappropriation of trade secrets. Any such claims
and any resulting litigation could result in significant expense and liability for damages. If we were found to have
infringed or misappropriated a third-party patent or other intellectual property right, we could in some
circumstances be enjoined from providing certain products or services to our customers or from utilizing and
benefiting from certain methods, processes, copyrights, trademarks, trade secrets or licences. Alternatively, we
could be required to enter into costly licensing arrangements with third parties or to implement a costly
workaround. Any of these scenarios could have a material adverse effect on our business and results and could
restrict our ability to pursue future business opportunities.
The inability of counterparties to meet their financial obligations or our inability to fully enforce
our rights against counterparties could have a material adverse effect on our results.
Third parties that have an payment obligations to ING, or obligations to return money, securities or other assets,
may not pay or perform under their obligations. These parties include the issuers and guarantors (including
sovereigns) of securities we hold, borrowers under loans originated, reinsurers, customers, trading
counterparties, securities lending and repurchase counterparties, counterparties under swaps, credit default and
other derivative contracts, clearing agents, exchanges, clearing houses and other financial intermediaries.
Defaults by one or more of these parties on their obligations to us due to bankruptcy, lack of liquidity, downturns
in the economy or real estate values, continuing low oil or other commodity prices, operational failure or other
factors, or even rumours about potential defaults by one or more of these parties or regarding a severe distress
of the financial services industry generally, could have a material adverse effect on our results, financial condition
and liquidity. Given the high level of interdependence between financial institutions, we are and will continue to
be subject to the risk of deterioration of the commercial and financial soundness, or perceived soundness, of
sovereigns and other financial services institutions. This is particularly relevant to our franchise as an important
and large counterparty in equity, fixed income and foreign exchange markets, including related derivatives.
We routinely execute a high volume of transactions, such as unsecured debt instruments, derivative transactions
and equity investments with counterparties and customers in the financial services industry, including brokers
and dealers, commercial and investment banks, mutual and hedge funds, insurance companies, institutional
clients, futures clearing merchants, swap dealers, and other institutions, resulting in large periodic settlement
amounts, which may result in us having significant credit exposure to one or more of such counterparties or
customers. As a result, we could face concentration risk with respect to liabilities or amounts we expect to collect
ING Group Annual Report 2021 on Form 20-F
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from specific counterparties and customers. We are exposed to increased counterparty risk as a result of recent
financial institution failures and weakness and will continue to be exposed to the risk of loss if counterparty
financial institutions fail or are otherwise unable to meet their obligations. As a result of the Russian invasion of
Ukraine and related international response measures, including sanctions and capital controls, we may be
exposed to increased risk of default of counterparties located in Russia and Ukraine, counterparties of which the
ultimate parent is located in Russia or may be considered effectively controlled or influenced through Russian
involvement, and other counterparties in sectors affected by the response measures. Also liquidity or currency
controls enforced by the Russian Central Bank may impact Russian companies ability to pay. In addition, we have
counterparty exposure to Russian entities in connection with foreign exchange derivatives for future receipt of
foreign currencies against RUB. Of our total EUR 600 billion loan book, the total Russia exposure is around EUR
6.7 billion on 28 February 2022 and EUR 500 million with clients in Ukraine. A default by, or even concerns about
the creditworthiness of, one or more of these counterparties or customers or other financial services institutions
could therefore have an adverse effect on our results or liquidity.
With respect to secured transactions, our credit risk may be exacerbated when the collateral held by us cannot
be or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due to us.
We also have exposure to a number of financial institutions in the form of unsecured debt instruments,
derivative transactions and equity investments. For example, we hold certain hybrid regulatory capital
instruments issued by financial institutions which permit the issuer to cancel coupon payments on the
occurrence of certain events or at their option. The EC has indicated that, in certain circumstances, it may require
these financial institutions to cancel payment. If this were to happen, we expect that such instruments may
experience ratings downgrades and/or a drop in value and we may have to treat them as impaired, which could
result in significant losses. There is no assurance that losses on, or impairments to the carrying value of, these
assets would not materially and adversely affect our business, results or financial condition.
In addition, we are subject to the risk that our rights against third parties may not be enforceable in all
circumstances. The deterioration or perceived deterioration in the credit quality of third parties whose securities
or obligations we hold could result in losses and/ or adversely affect our ability to rehypothecate or otherwise
use those securities or obligations for liquidity purposes. A significant downgrade in the credit ratings of our
counterparties could also have a negative impact on our income and risk weighting, leading to increased capital
requirements. While in many cases we are permitted to require additional collateral from counterparties that
experience financial difficulty, disputes may arise as to the amount of collateral we are entitled to receive and
the value of pledged assets. Also in this case, our credit risk may also be exacerbated when the collateral we hold
cannot be liquidated at prices sufficient to recover the full amount of the loan or derivative exposure due to us,
which is most likely to occur during periods of illiquidity and depressed asset valuations, such as those
experienced during the financial crisis of 2008. The termination of contracts and the foreclosure on collateral
may subject us to claims. Bankruptcies, downgrades and disputes with counterparties as to the valuation of
collateral tend to increase in times of market stress and illiquidity. Any of these developments or losses could
materially and adversely affect our business, results, financial condition, and/or prospects.
Ratings are important to our business for a number of reasons, and a downgrade or a potential
downgrade in our credit ratings could have an adverse impact on our results and net results.
Credit ratings represent the opinions of rating agencies regarding an entity’s ability to repay its indebtedness.
Our credit ratings are important to our ability to raise capital and funding through the issuance of debt and to the
cost of such financing. In the event of a downgrade, the cost of issuing debt will increase, having an adverse
effect on our net results. Certain institutional investors may also be obliged to withdraw their deposits from ING
following a downgrade, which could have an adverse effect on our liquidity. They can also have lower risk
appetite for our debt notes, leading to lower purchases of (newly issued) debt notes. We have credit ratings from
SP, Moody’s Investor Service and Fitch Ratings. Each of the rating agencies reviews its ratings and rating
methodologies on a recurring basis and may decide on a downgrade at any time.
As rating agencies continue to evaluate the financial services industry, it is possible that rating agencies will
heighten the level of scrutiny that they apply to financial institutions, increase the frequency and scope of their
credit reviews, request additional information from the companies that they rate and potentially adjust upward
the capital and other requirements employed in the rating agency models for maintenance of certain ratings
levels. It is possible that the outcome of any such review of us would have additional adverse ratings
consequences, which could have a material adverse effect on our results and financial condition. We may need to
take actions in response to changing standards or capital requirements set by any of the rating agencies, which
could cause our business and operations to suffer. We cannot predict what additional actions rating agencies
may take, or what actions we may take in response to the actions of rating agencies.
Furthermore, ING Bank’s assets are risk-weighted. Downgrades of these assets could result in a higher risk-
weighting, which may result in higher capital requirements. This may impact net earnings and the return on
capital, and may have an adverse impact on our competitive position.
ING Group Annual Report 2021 on Form 20-F
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An inability to retain or attract key personnel may affect our business and results.
ING Group relies to a considerable extent on the quality of its senior management, such as members of the
executive committee, and management in the jurisdictions which are material to ING’s business and operations.
The success of ING Group’s operations is dependent, among other things, on its ability to attract and retain highly
qualified personnel. Competition for key personnel in most countries in which ING Group operates, and globally
for senior management, is intense. ING Group’s ability to attract and retain key personnel, in senior management
and in particular areas such as technology and operational management, client relationship management,
finance, risk and product development, is dependent on a number of factors, including prevailing market
conditions and compensation packages offered by companies competing for the same talent.
The (increasing) restrictions on remuneration, plus the public and political scrutiny especially in the Netherlands,
will continue to have an impact on existing ING Group remuneration policies and individual remuneration
packages for personnel. For example, under the EU’s amended Shareholder Rights Directive, known as ‘SRD II’,
which came into effect on June 10, 2019, ING is required to hold a shareholder (binding) vote on ING’s Executive
Board remuneration policy and Supervisory Board remuneration policy at least every four years. Furthermore the
shareholders have an advisory vote on ING’s remuneration report annually. This may restrict our ability to offer
competitive compensation compared with companies (financial and/or non-financial) that are not subject to such
restrictions and it could adversely affect ING Group’s ability to retain or attract key personnel, which, in turn, may
affect our business and results.
We may incur further liabilities in respect of our defined benefit retirement plans if the value of
plan assets is not sufficient to cover potential obligations, including as a result of differences
between actual results and underlying actuarial assumptions and models.
ING Group companies operate various defined benefit retirement plans covering the post-employment benefits
of a number of our employees. The liability recognised in our consolidated balance sheet in respect of our
defined benefit plans is the present value of the defined benefit obligations at the balance sheet date, less the
fair value of each plan’s assets, together with adjustments for unrecognised actuarial gains and losses and
unrecognised past service costs. We determine our defined benefit plan obligations based on internal and
external actuarial models and calculations using the projected unit credit method. Inherent in these actuarial
models are assumptions, including discount rates, rates of increase in future salary and benefit levels, mortality
rates and consumer price index. These assumptions are based on available market data and are updated
annually. Nevertheless, the actuarial assumptions may differ significantly from actual results due to changes in
market conditions, economic and mortality trends and other assumptions. Any changes in these assumptions
could have a significant impact on our present and future liabilities and costs associated with our defined benefit
plans.
Risks related to the Group’s risk management practices
Risks relating to our use of quantitative models or assumptions to model client behaviour for the
purposes of our market calculations may adversely impact our reputation or results.
We use quantitative methods, systems or approaches that apply statistical, economic financial, or mathematical
theories, techniques and assumptions to process input data into quantitative estimates. Errors in the
development, implementation, use or interpretation of such models, or from incomplete or incorrect data, can
lead to inaccurate, noncompliant or misinterpreted model outputs, which may adversely impact our reputation
and results. In addition, we use assumptions in order to model client behaviour for the risk calculations in our
banking books. Assumptions are used to determine the interest rate risk profile of savings and current accounts
and to estimate the embedded option risk in the mortgage and investment portfolios. Assumptions based on
past client behaviour may not always be a reliable indicator of future behaviour. The realisation or use of
different assumptions to determine client behaviour could have a material adverse effect on the calculated risk
figures and, ultimately, our future results or reputation. Furthermore, we may be subject to risks related to
changes in the laws and regulations governing the risk management practices of financial institutions. For further
information, see “Risks related to the regulation and supervision of the Group – Changes in laws and/or
regulations governing financial services or financial institutions or the application of such laws and/or regulations
may increase our operating costs and limit our activities” above. As noted there, regulation of the industries in
which we operates is becoming increasingly more extensive and complex, while also attracting supervisory
scrutiny. Compliance failures may lead to changes in the laws and regulations governing the risk management
practices and materially increase our operating costs.
We may be unable to manage our risks successfully through derivatives.
We employ various economic hedging strategies with the objective of mitigating the market risks that are
inherent in our business and operations. These risks include currency fluctuations, changes in the fair value of our
ING Group Annual Report 2021 on Form 20-F
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investments, the impact of interest rates, equity markets and credit spread changes, the occurrence of credit
defaults and changes in client behaviour. We seek to control these risks by, among other things, entering into a
number of derivative instruments, such as swaps, options, futures and forward contracts, including, from time to
time, macro hedges for parts of our business, either directly as a counterparty or as a credit support provider to
affiliate counterparties. Developing an effective strategy for dealing with these risks is complex, and no strategy
can completely insulate us from risks associated with those fluctuations. Our hedging strategies also rely on
assumptions and projections regarding our assets, liabilities, general market factors and the creditworthiness of
our counterparties that may prove to be incorrect or prove to be inadequate. Accordingly, our hedging activities
may not have the desired beneficial impact on our results or financial condition. Poorly designed strategies or
improperly executed transactions could actually increase our risks and losses. Hedging strategies involve
transaction costs and other costs, and if we terminate a hedging arrangement, we may also be required to pay
additional costs, such as transaction fees or breakage costs. There have been periods in the past, and it is likely
that there will be periods in the future, during which we have incurred or may incur losses on transactions,
possibly significant, after taking into account our hedging strategies. Further, the nature and timing of our
hedging transactions could actually increase our risk and losses. Hedging instruments we use to manage product
and other risks might not perform as intended or expected, which could result in higher (un)realised losses, such
as credit value adjustment risks or unexpected PL effects, and unanticipated cash needs to collateralise or settle
such transactions. Adverse market conditions can limit the availability and increase the costs of hedging
instruments, and such costs may not be recovered in the pricing of the underlying products being hedged. In
addition, hedging counterparties may fail to perform their obligations, resulting in unhedged exposures and
losses on positions that are not collateralised. As such, our hedging strategies and the derivatives that we use or
may use may not adequately mitigate or offset the risks they intend to cover, and our hedging transactions may
result in losses.
Our hedging strategy additionally relies on the assumption that hedging counterparties remain able and willing to
provide the hedges required by our strategy. Increased regulation, market shocks, worsening market conditions
(whether due to the ongoing euro crisis or otherwise), and/or other factors that affect or are perceived to affect
the financial condition, liquidity and creditworthiness of ING may reduce the ability and/or willingness of such
counterparties to engage in hedging contracts with us and/or other parties, affecting our overall ability to hedge
our risks and adversely affecting our business, results and financial condition.
Risks related to the Group’s liquidity and financing activities
We depend on the capital and credit markets, as well as customer deposits, to provide the
liquidity and capital required to fund our operations, and adverse conditions in the capital and
credit markets, or significant withdrawals of customer deposits, may impact our liquidity,
borrowing and capital positions, as well as the cost of liquidity, borrowings and capital.
Adverse capital market conditions have in the past affected, and may in the future affect, our cost of borrowed
funds and our ability to borrow on a secured and unsecured basis, thereby impacting our ability to support
and/or grow our businesses. Furthermore, although interest rates are at or near historically low levels, since the
recent financial crisis, we have experienced increased funding costs due in part to the withdrawal of perceived
government support of such institutions in the event of future financial crises. In addition, liquidity in the
financial markets has also been negatively impacted as market participants and market practices and structures
adjust to new regulations.
We need liquidity to fund new and recurring business, to pay our operating expenses, interest on our debt and
dividends on our capital stock, maintain our securities lending activities and replace certain maturing liabilities.
Without sufficient liquidity, we will be forced to curtail our operations and our business will suffer. The principal
sources of our funding include a variety of short-and long-term instruments, including deposit fund, repurchase
agreements, commercial paper, medium- and long-term debt, subordinated debt securities, capital securities and
shareholders’ equity.
In addition, because we rely on customer deposits to fund our business and operations, the confidence of
customers in financial institutions may be tested in a manner that may adversely impact our liquidity and capital
position. Consumer confidence in financial institutions may, for example, decrease due to our or our competitors’
failure to communicate to customers the terms of, and the benefits to customers of, complex or high-fee
financial products. Reduced confidence could have an adverse effect on our liquidity and capital position through
withdrawal of deposits, in addition to our revenues and results. Because a significant percentage of our customer
deposit base is originated via Internet banking, a loss of customer confidence may result in a rapid withdrawal of
deposits over the Internet.
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In the event that our current resources do not satisfy our needs, we may need to seek additional financing. The
availability of additional financing will depend on a variety of factors, such as market conditions, the general
availability of credit, the volume of trading activities, the overall availability of credit to the financial services
industry, our credit ratings and credit capacity, as well as the possibility that customers or lenders could develop
a negative perception of our long- or short-term financial prospects. Also see under the heading “Ratings are
important to our business for a number of reasons, and a downgrade or a potential downgrade in our credit
ratings could have an adverse impact on our results and net results”. Similarly, our access to funds may be limited
if regulatory authorities or rating agencies take negative actions against us. If our internal sources of liquidity
prove to be insufficient, there is a risk that we may not be able to successfully obtain additional financing on
favourable terms, or at all. Any actions we might take to access financing may, in turn, cause rating agencies to
re-evaluate our ratings.
Disruptions, uncertainty or volatility in the capital and credit markets may also limit our access to capital. Such
market conditions may in the future limit our ability to raise additional capital to support business growth, or to
counterbalance the consequences of losses or increased regulatory capital and rating agency capital
requirements. This could force us to (i) delay raising capital, (ii) reduce, cancel or postpone payment of dividends
on our shares, (iii) reduce, cancel or postpone interest payments on our other securities, (iv) issue capital of
different types or under different terms than we would otherwise, or (v) incur a higher cost of capital than in a
more stable market environment. This would have the potential to decrease both our profitability and our
financial flexibility. Our results, financial condition, cash flows, regulatory capital and rating agency capital
position could be materially adversely affected by disruptions in the financial markets.
Furthermore, regulatory liquidity requirements in certain jurisdictions in which we operate are remain stringent,
undermining our efforts to maintain centralised management of our liquidity. These developments may cause
trapped pools of liquidity and capital, resulting in inefficiencies in the cost of managing our liquidity and solvency,
and hinder our efforts to integrate our balance sheet. An example of such trapped liquidity includes our
operations in Germany where German regulations impose separate liquidity requirements that restrict ING’s
ability to move a liquidity surplus out of the German subsidiary.
As a holding company, ING Groep N.V. is dependent for liquidity on payments from its
subsidiaries, many of which are subject to regulatory and other restrictions on their ability to
transact with affiliates.
ING Groep N.V. is a holding company and, therefore, depends on dividends, distributions and other payments
from its subsidiaries to fund dividend payments to its shareholders and to fund all payments on its obligations,
including debt service obligations.
ING Groep N.V.’s ability to obtain funds to meet its obligations depends on legal and regulatory restrictions
applicable to ING Groep N.V.’s subsidiaries. Many of ING Groep N.V.’s direct and indirect subsidiaries, including
certain subsidiaries of ING Bank N.V., may be subject to laws that restrict dividend payments, as well as
requirements with respect to capital and liquidity levels. For example, certain local governments and regulators
have taken steps and may take further steps to “ring fence” or impose minimum internal total loss-absorbing
capacity on the local affiliates of a foreign financial institution in order to protect clients and creditors of such
affiliates in the event of financial difficulties involving such affiliates or the broader banking group. Increased
local regulation and supervision have therefore limited and may in the future further limit the ability to move
capital and liquidity among affiliated entities and between ING Groep N.V. and its direct and indirect subsidiaries,
limit the flexibility to structure intercompany and external activities of ING as otherwise deemed most
operationally efficient, and increase in the overall level of capital and liquidity required by ING on a consolidated
basis.
Lower earnings of a local entity may also reduce the ability of such local entity to make dividends and
distributions to ING Groep N.V. Other restrictions, such as restrictions on payments from subsidiaries or
limitations on the use of funds in client accounts, may also apply to distributions to ING Groep N.V. from its
subsidiaries.
ING Groep N.V. has also in the past guaranteed and may in the future continue to guarantee the payment
obligations of some of its subsidiaries, including ING Bank N.V. Any such guarantees may require ING Groep N.V.
to provide substantial funds or assets to its subsidiaries or the creditors or counterparties of these subsidiaries at
a time when the guaranteed subsidiary is in need of liquidity to fund its own obligations.
Finally, ING Groep N.V., as the resolution entity of ING, has an obligation to remove impediments to resolution
and to improve resolvability. Regulatory authorities have required and may continue to require ING to increase
ING Group Annual Report 2021 on Form 20-F
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capital or liquidity levels at the level of the resolution entity or at particular subsidiaries. This may result in,
among other things, the issuance of additional long-term debt issuance at the level of ING Groep N.V. or
particular subsidiaries.
Additional risks relating to ownership of ING shares
Holders of ING shares may experience dilution of their holdings and may be impacted by any
share buyback programme.
ING’s AT1 Securities may, under certain circumstances, convert into equity securities. Such conversion would
dilute the ownership interests of existing holders of ING shares and such dilution could be substantial.
Additionally, any conversion, or the anticipation of the possibility of a conversion, could depress the market price
of ING shares. Furthermore, we may undertake future equity offerings with or without subscription rights. In case
of equity offerings without subscription rights, holders of ING shares may suffer dilutions. In case of equity
offerings with subscription rights, holders of ING shares in certain jurisdictions, however, may not be entitled to
exercise such rights unless the rights and the related shares are registered or qualified for sale under the relevant
legislation or regulatory framework. Holders of ING shares in these jurisdictions may suffer dilution of their
shareholding should they not be permitted to, or otherwise chose not to, participate in future equity offerings
with subscription rights.
Any share repurchases could affect the price of our ordinary shares, ADSs or other securities and increase trading
price volatility. The existence of a share buyback programme could also cause the price of our ordinary shares,
ADSs or other securities to be higher than it would be in the absence of such a share buyback programme, and
could potentially reduce the market liquidity of our ordinary shares, ADSs or other securities. There can be no
assurance that any share buybacks will enhance shareholder value because the market price of our ordinary
shares or ADSs may decline below the levels at which we repurchase any ordinary shares or ADSs.
In addition, ING cannot guarantee that any future share buyback programme will be fully consummated. The
timing and amount of share repurchases pursuant to a share buyback programme will depend upon a number of
factors, including market, business conditions, and the trading price of the our ordinary shares or ADSs. A share
buyback programme may also be suspended or terminated at any time, and any such suspension or termination
could negatively affect the trading price of, increase trading price volatility of or reduce the market liquidity of
our ordinary shares, ADSs or other securities. Additionally, a share buyback programme could diminish our cash
reserves, which may impact our ability to finance future growth and to pursue possible future strategic
opportunities.
Because we are incorporated under the laws of the Netherlands and many of the members of
our Supervisory and Executive Board and our officers reside outside of the United States, it may
be difficult to enforce judgments against ING or the members of our Supervisory and Executive
Boards or our officers.
Most of our Supervisory Board members, our Executive Board members and some of the experts named in this
Annual Report, as well as many of our officers are persons who are not residents of the United States, and most
of our and their assets are located outside the United States. As a result, investors may not be able to serve
process on those persons within the United States or to enforce in the United States judgments obtained in US
courts against us or those persons based on the civil liability provisions of the US securities laws.
Investors also may not be able to enforce judgments of US courts under the US federal securities laws in courts
outside the United States, including the Netherlands. The United States and the Netherlands do not currently
have a treaty providing for the reciprocal recognition and enforcement of judgments (other than arbitration
awards) in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any
federal or state court in the United States based on civil liability, whether or not predicated solely upon the U.S.
federal securities laws, would not be enforceable in the Netherlands unless the underlying claim is re-litigated
before a Dutch court. However, under current practice, the courts of the Netherlands may be expected to render
a judgment in accordance with the judgment of the relevant U.S. court, provided that such judgment (i) is a final
judgment and has been rendered by a court which has established its jurisdiction on the basis of internationally
accepted grounds of jurisdictions, (ii) has not been rendered in violation of elementary principles of fair trial, (iii)
is not contrary to the public policy of the Netherlands, and (iv) is not incompatible with (a) a prior judgment of a
Netherlands court rendered in a dispute between the same parties, or (b) a prior judgment of a foreign court
rendered in a dispute between the same parties, concerning the same subject matter and based on the same
cause of action, provided that such prior judgment is not capable of being recognized in the Netherlands. It is
uncertain whether this practice extends to default judgments as well.
Based on the foregoing, there can be no assurance that U.S. investors will be able to enforce against us or
members of our board of directors, officers or certain experts named herein who are residents of the
ING Group Annual Report 2021 on Form 20-F
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Netherlands or countries other than the United States any judgments obtained in U.S. courts in civil and
commercial matters, including judgments under the U.S. federal securities laws.
In addition, there is doubt as to whether a Dutch court would impose civil liability on us, the members of our
board of directors, our officers or certain experts named herein in an original action predicated solely upon the
U.S. federal securities laws brought in a court of competent jurisdiction in the Netherlands against us or such
members, officers or experts, respectively.
ING Group Annual Report 2021 on Form 20-F
32
Item 4. Information on the Company
A. History and development of the company
General
ING Groep N.V. was established as a Naamloze Vennootschap (a Dutch public limited liability company) on March
4, 1991. ING Groep N.V. is incorporated under the laws of the Netherlands.
The corporate site of ING, www.ing.com, provides news, investor relations and general information about the
company.
ING is required to file certain documents and information with the United States Securities and Exchange
Commission (SEC). These filings relate primarily to periodic reporting requirements applicable to issuers of
securities, as well as to beneficial ownership reporting requirements as a holder of securities. The most common
filings we submit to the SEC are Forms 6-K and 20-F (periodic reporting requirements). The SEC maintains an
internet site that contains reports, proxy and information statements, and other information regarding issuers
that file electronically with the SEC at http://www.sec.gov. ING’s electronic filings are available on the SEC’s
internet site under CIK ID 0001039765 (ING Groep N.V.).
The official address of ING Group is:
ING Groep N.V.
Bijlmerdreef 106
1102 CT Amsterdam
P.O. Box 1800,
1000 BV Amsterdam
The Netherlands
Telephone +31 20 563 9111
The name and address of ING Group’s agent for service of process in the United States in connection with ING’s
registration statement on Form F-3 is:
ING Financial Holdings Corporation
1133 Avenue of the Americas
New York, NY 10036
United States of America
Telephone +1 646 424 6000
Changes in the composition of the Group
For information on changes in the composition of the Group, reference is made to Note 47 ‘Consolidated
companies and businesses acquired and divested’.
ING Group Annual Report 2021 on Form 20-F
33
ING at a glance
ING Group Annual Report 2021 on Form 20-F
34
Our strategy
Delivering on our strategy is about creating a differentiating customer
experience that is personal, easy and smart. It’s also about focusing on the
things that matter: being a bank that is safe, secure and compliant; maintaining
a healthy business; data-driven digitalisation to better meet our customers’
evolving needs; and jointly building a sustainable future for all.
ING has a clear purpose: empowering people to stay a step ahead in life and in business. This is reflected by our
‘do your thing’ tagline, which encapsulates our brand and our promise to make banking frictionless so people and
businesses can do more of the things that move them. Our purpose guides us in everything we do and is founded
on our belief that it’s our role to support and promote social and environmental progress and at the same time
generate healthy returns for shareholders.
We have a strong – and growing – primary customer base. We have a digital, mobile-first mindset and we’ve put
in place the building blocks for becoming a data-driven digital bank. We continuously strive to improve the
customer experience, working in an agile way and guided by our Orange Code, which describes the values and
behaviours that define ING.
Even in a digital world, our business is founded on relationships and our people are among our greatest assets.
We therefore work to provide a differentiating employee experience that keeps our people motivated and
engaged. This includes supporting their wellbeing, providing a safe and healthy workplace and opportunities to
develop themselves to their full potential, as well as promoting a diverse and inclusive work environment where
they feel free to be themselves. For most of the year, the majority of our employees continued to work from
home due to ongoing measures to stop the spread of Covid-19. As restrictions were lifted in various countries,
we moved towards a hybrid mode, giving employees the flexibility to combine working from home with working
from the office. However, new outbreaks meant they had to remain ready to adapt to a constantly changing
situation.
The trends that have shaped our direction so far – digitalisation, continuing low and negative interest rates, new
competitors, changing customer behaviours and expectations, increasing regulation and the growing urgency for
action on climate change and to address social imbalances – continue to influence our business and were
amplified by the Covid-19 pandemic.
We’ve also learnt some important lessons over the past years: some of our projects became too complex, went
on for too long or resulted in us sometimes losing sight of customers and competition. We’re guided by our
purpose and our strategy in how we respond to these and other challenges and opportunities.
As we look to the future, we are now focusing on delivering with impact so we can truly differentiate ourselves
from the competition and emerge from the pandemic in a position of strength for our customers, our investors,
our employees and society in general. In the near-to-mid-term, this means focusing on:
●
being a safe, secure and compliant bank
●
being a healthy business making healthy returns
●
data-driven digitalisation
●
sustainability.
Safe, secure and compliant bank
Keeping our bank safe, secure and compliant remains a top priority for ING. This means fighting financial
economic crime as a gatekeeper to the financial system, protecting our bank and our customers against
cybercrime and fraud, as well as from conduct that will jeopardise people’s trust in us, and the safe and ethical
use of data and data-driven models. This year too, the growing importance of climate risk was emphasised in
ING’s first integrated climate report.
Protecting our bank and our customers also means continuously improving our risk culture and behaviours.
Everyone at ING has a responsibility to understand, discuss and act on the many non-financial risks that banks are
confronted with every day. To this end, we introduced a risk culture programme in 2021 that aims to ensure our
risk culture reflects the dynamic business and regulatory environment we operate in. By acting with the right
mindset and living up to our Orange Code and Global Code of Conduct, we all play a part in safeguarding ING and
our customers.
Knowing our customers (KYC) and ensuring we only do business with people and companies that meet regulatory
requirements and are within our risk appetite, are essential for preventing financial economic crime. Monitoring
ING Group Annual Report 2021 on Form 20-F
35
transactions for unusual activities and carrying out customer due-diligence checks at regular intervals are an
important part of KYC. We also assess the environmental and social impact of companies and projects we
finance.
Since 2017, we’ve introduced a number of structural improvements to enhance our KYC organisation and
activities, including standardised policies and digital tooling, and further increasing knowledge and awareness
across the bank. This includes mandatory e-learnings for all staff and the KYC and Risk Academies for more
specialist training. We are building on this with our financial economic crime controls maturity programme,
which consolidates all our activities to fight financial economic crime (policies, systems and processes) in one
holistic approach.
With the growing number of digital transactions and employees working from home it’s of the utmost
importance to safeguard ING and our customers against cybercrimes such as digital fraud, phishing scams and
malicious software. ING has preventative measures in place to test our resilience against cyberattacks and
attempts to gain unauthorised access to our systems. We also focus strongly on managing our exposure to
operational risks with respect to the availability of our networks and infrastructure to ensure we’re always
accessible to our customers and our employees.
Closely related to cybersecurity resilience is protecting customers’ data and their privacy. To this end, ING follows
European data protection regulation (GDPR) and local laws applicable in our countries. We consider people’s
expectations about how their data is used and respect their privacy when processing it. Local and global data
ethics councils help ensure we use data responsibly.
Healthy business
While the economy picked up in many of our markets in 2021, to remain a financially healthy business it’s
imperative that we diversify our income, optimise capital allocation and scrutinise costs. Our 2021 figures show
we’re on the right track, with fee income up 17% compared to a year earlier and contributing 19% to our full-year
income, which is a crucial component of our strategy to diversify our revenue sources in the negative interest
environment. This strong fee income growth combined with higher lending volumes contributed to a 4.8%
increase in total income compared to 2020, while net customer deposits grew with €10.3 billion.
We earned higher fees from daily banking activities in 2021, spurred by economic recovery, and benefitted from
continued demand for digital investment products in our Retail business. Our results were also supported by low
risk costs. We were able to release some of the Covid-19-related provisions we took earlier and are confident
about the quality of our loan book. However, we remain cautious about the impact of supply chain disruptions,
rising energy prices and increasing inflation on companies and consumers. We therefore remain ready to support
our clients when they need it.
Ensuring ING remains a financially healthy company means there are also times we have to make difficult
decisions about where and how we allocate our capital, so that we put it to work in the places that provide the
best growth opportunities and viable returns. Unfortunately, this can affect our customers and colleagues. In the
current environment, with varying local and regulatory environments, we believe that we require sufficient local
scale in the Retail markets in which we operate to maintain a reasonable franchise. It’s in these markets that we
want to invest our people, capital and costs. This led to our decision to exit selected Retail markets in 2021.
Separately, we decided to wind down our payment services provider Payvision, which we believe was not
evolving rapidly enough to keep pace with the competitive payments market, and to stop certain partnerships.
These include discontinuing the consumer-facing smart money app Yolt to focus instead on growing its business-
to-business open banking platform Yolt Technology Services. We also sold our stake in Dutch property platform
Makelaarsland as the partnership did not bring what we had expected from it.
We had expenses under control in 2021, with room for us as a digital-first bank to improve our cost-to-serve,
supported by investments in further (end-to-end) digitalisation. This brings benefits to the experience of
customers and colleagues and improves our operational quality and processing speed. It also helps us better
absorb the eroding effects of negative interest rates on our net interest income.
In October 2021, we launched a €1,744 million share buyback programme related to the amount reserved over
2019. The distribution is in line with our aim to provide an attractive return to shareholders and follows the
expiration of the European Central Bank’s (ECB) recommendation not to pay dividends during the pandemic in
2020. The buyback was possible due to ING’s strong capital position. At year-end 2021, approximately 92% of the
maximum total value of the programme had been completed. On 28 February 2022, we announced the
programme was fully complete, having repurchased 139,711,040 ordinary shares for a total consideration of
€1,741,696,166.19.
Data-driven digitalisation
Delivering on our customer promise is all about creating a customer experience that’s personal, easy and smart.
And a key driver for this is digitalisation – a trend that was accelerated by the Covid-19 pandemic and the
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demand it unleashed for mobile and contactless banking – and data, which is the fuel powering end-to-end
digitalisation.
Reflecting the growing importance of technology and digitalisation in fulfilling our purpose and strategy, in 2021,
ING appointed a chief technology officer to its Management Board Banking for the first time, having split the role
of the chief operations officer. Digitalisation has benefits for our customers, our employees and our business.
Automating tasks frees up time for more rewarding activities. It improves efficiency and effectiveness, and helps
to make our bank safer and compliant-by-design. However, we also have to be cognisant of those customers who
are not (yet) fully digital and ensure our products and services remain accessible to them.
In 2021, mobile interactions grew to 6.2 billion from 5.3 billion in 2020, accounting for 91% of total interactions
with ING. The number of mobile payment transactions also grew each quarter, with 267 million made in 4Q 2021,
compared to 154 million transactions in 1Q 2020.
This digital connectivity in turn yields data and insights that contribute to a more personalised and empowering
experience, giving customers even more reason to interact with us. This is how we believe we can become an
essential part of people’s digital lives.
Mastering data is essential for this. Data, used responsibly, helps us understand our customers better and
personalise our interactions. It is the main ingredient for the models that inform our business decisions, manage
risks and keep our capital in control. We use transaction data to detect money laundering and fight financial
crime. And it powers technologies like artificial intelligence, robotics and blockchain that digitalise processes and
improve the customer experience. Examples include using machine learning to understand why customers
contact us and proactively come up with solutions that will reduce the number of calls in future; virtual assistants
to help customers 24/7; and instant loans, personalised insurance and easy-to-use investment products. And
there are innovative solutions for ING and for our customers, such as Komgo, which digitalises trade finance;
supply chain management tool Stemly; and Flowcast to reduce risk and unlock credit for businesses.
To make raw data meaningful it needs to be sorted, harmonised and put into context. That’s why it’s essential to
have one common language for defining our data. We call this ING Esperanto. In addition, we’re standardising
data models (Esperanto Warehouse Model) through which we can store and use our data. This approach
contributes to the availability, quality, integrity, usability, control and governance of our data. We also have a
uniform global customer data management approach that facilitates customer self-service and enables new ways
of doing banking by making it easier to retrieve information that can be used to propose new types of billable
ING services or new product bundles. Global and local data ethics councils guide our decisions around the use of
data based on ING’s Orange Code values.
Our customers’ appreciation of ING’s smart and personal experience is reflected in above-average NPS scores in a
number of our Retail and Wholesale Banking markets. Over the past year we gained 481,000 primary customers,
bringing the total to 14.3 million, 3.5% higher than at end-2020.
ING is not the only bank with digital ambitions. Society’s growing reliance on the internet has fundamentally
changed the way people shop – and pay. These changing behaviours, along with the second European Payments
Services Directive (PSD2), are reshaping the role of banks in the payments industry, opening it up to new (non-
traditional) payments providers. To stay a step ahead in this competitive digital environment, there’s a growing
urgency to speed up end-to-end digitalisation and the associated requirement for operational excellence.
Given the increasing commoditisation of payments and the need for scale and efficiency to remain competitive in
this fast-growing area, we’re looking to create a dedicated payments and settlement utility within the chief
technology office domain in 2022 that will deliver all payments, settlement and liquidity services across ING,
subject to Works Council approval. Until now this has been done within the business lines, notably Wholesale
Banking, also for Retail payments. The aim is to build on our existing payments capabilities and further mature,
scale and evolve the way these services are delivered, allowing the business lines to focus on meeting the needs
of our customers.
Digitalisation is also empowering customers to have agency over their finances with innovative tools such as
personal budget planners, expense trackers and smart saver tools. Given the costs and complexities of cross-
border integration, we’re using our scalable technology to implement products locally that meet the needs of our
customers, particularly in areas such as retail investments, consumer finance and insurance.
Since 2016, we’ve worked on putting in place a technology and operations foundation on which to build a
mobile-first digital experience for all our 38 million customers. This foundation includes IT infrastructure, uniform
processes, data management and way of working, and bundling expertise in shared service centres that support
our businesses globally. Underlying all of this are technology platforms such as Touchpoint and OnePipeline.
Designed to create speed, scale, security and cost efficiency, this foundation allows us to bring new products and
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services to our customers faster and in multiple markets using next-generation technologies and re-useable
modular components.
It has also enabled our employees to continue working from home during the ongoing lockdowns and supports
their return to the office in a hybrid mode when that’s possible.
Sustainability
Sustainability in all its forms is one of the biggest challenges facing society. Climate change is threatening our
planet and its people, many of whom also struggle with inequality, poor financial health and even a lack of basic
human rights. It’s clear the world is changing and banking needs to change with it. We have a responsibility to
society to define new ways of doing business that align economic growth with positive environmental and social
impact.
On the environmental side, we believe we can do this by aligning our lending portfolio with global climate goals,
supporting the transition to a net-zero economy in our own operations and by actively engaging with companies
to finance the investments needed, and addressing related challenges like biodiversity; on the people side, by
steering customers and local communities towards improved financial health.
To tackle climate change even faster, we joined the Net-Zero Banking Alliance in 2021 and increased the
ambition of our Terra approach. We’re now aiming to steer our lending portfolio towards net-zero greenhouse
gas emissions by 2050 or sooner. In our integrated climate report on ing.com we report on our progress until
end-2020 in the nine most carbon-intensive sectors, which are our main focus for steering. We’re working on
pathways for those sectors to align our targets for them with our own net-zero ambitions.
In addition to financing sustainable projects, we believe we can influence positive change by advising clients on
their own transition to sustainable and circular business models, as well as through innovative products such as
sustainability-linked financing, gaining access to a new range of opportunities. To protect the integrity of this
fast-growing market, we believe these targets should be ambitious, recognised industry-wide and verified by a
reputable, independent party, thereby ensuring companies tackle the most difficult and urgent climate issues
first.
It’s also about what we don’t finance: we say no to certain companies and sectors; for example, new clients
active in palm oil plantations and new coal-fired power plants. However, much of the ‘real’ economy still runs on
fossil fuels, and some sectors are further along on their journey than others. So rather than withdrawing
completely from a particular sector (such as oil and gas) – with the associated impact in terms of jobs and
economic fall-out – we believe we can be more effective by actively engaging with that sector to speed up its
transition. For example, we’re leading the climate-aligned finance working group for the Net-Zero Steel Initiative
to support the sector’s decarbonisation and have signed up to the Global Maritime Forum’s call to action to
decarbonise the shipping industry.
Climate change also brings risks for ING and the companies we finance. These range from physical risks such as
floods and wildfires to social risks related to displacement, discrimination and human rights violations, as well as
transition risks that could lead to stranded assets when policies, regulations or consumer preferences shift
towards a lower-carbon economy. We’re working to embed the management of climate risk into our overall risk
management approach and our business practices. We also evaluate clients and transactions against our
environmental and social risk framework to limit the negative impact of our financing decisions on the
environment and communities.
Climate action requires a concerted collaborative effort across all sections of society. There’s a growing sense of
urgency for governments and businesses to step in and help. While banks can finance the transition, it’s
companies that need to make it happen in their own businesses and supply chains. Governments can, and
should, direct and guide this change. We believe the European Union’s Green Deal is a step in the right direction.
Recognising the importance of environmental, social and corporate governance (ESG), we have a number of
initiatives running in the bank covering our governance structure, developing a diverse and engaged workforce
and being a trusted counterparty for our customers and clients.
When it comes to financial health, we’re embedding our activities directly into our core business where we can
make a more tangible impact on our customers. We’re currently defining actions we can take in our Retail
markets to help customers who are financially vulnerable; for example, to get out of problematic debt, or to save
more. We’re also bringing our community support closer to home through our new community investment
programme, which targets a broader range of local initiatives that contribute to an inclusive economy and
support vulnerable groups in the communities we serve.
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B. Business Overview
A sharper focus on digital investment products, daily banking and on providing
a smart, easy and personal customer experience, boosted growth in 2021, with
more people than ever doing their banking on a mobile device. Companies also
increasingly chose to link their financing to their efforts to protect our planet
and its people.
Diversifying our income is a crucial component of our strategy in a negative interest environment, and in 2021,
our fee income grew by 17% year-on-year. Much of this growth came from an increase in daily banking activities
on the back of economic recovery, coupled with good investment product revenues from the growing number of
new investment accounts opened and customers making a higher average number of trades.
We saw continued lending growth in mortgages and in the last quarter of the year lending volumes increased, a
sign that confidence in the economy is picking up. Still, economic recovery remains fragile. Covid-19 continues to
be a factor in many markets with new waves of infections, geopolitical tensions and supply chain disruptions,
rising energy prices and increasing inflation impacting companies and consumers alike. We therefore continue to
be cautious and remain ready to support our clients when they need it.
A differentiating customer experience
Delivering a differentiating customer experience is what sets ING apart and ensures customers choose us rather
than another provider. We can measure how successful we are by looking at our Net Promoter Scores, which are
an indicator of customer satisfaction. To provide a differentiating customer experience, we have to keep making
banking as frictionless as possible, providing smarter, easier and more personal experiences, and continuously
work to keep getting better at it.
Every interaction with our customers – whether it’s a call to a contact centre, a click on a web page, a
conversation or a survey – is an opportunity to understand their thinking and how we can improve their
experience. Sometimes it’s small changes that can make a big impact. This is the idea behind our global CX Day
where colleagues from across the organisation work on ways to improve the customer experience. In 2021,
teams from 27 countries and 15 Wholesale Banking business units worked on around 300 improvements on the
day, of which 21 were aimed at corporate clients.
By enabling ING designers and customer journey experts to work together, we connect the dots between insights
and delivering real value for our customers. This is the case for example in Germany where our designers joined a
cross-industry effort to make digital experiences more accessible to all. Customer testimonials underscore that
good design is good business.
As we’ve digitalised more of our processes, we’ve empowered customers to take more of their money matters
into their own hands. For example, in Germany, Spain, Poland, Italy and Turkey pre-approved consumer loans are
available for existing customers via our digital channels, providing them with instant access to financing when
and where they need it. Users of our OneApp in the Netherlands, Belgium and Germany can update their contact
details, block a stolen bank card, open a new account and send payment requests without needing to visit a
branch. Financial advice is also increasingly given online.
In 2021, digital interactions with customers rose to 6.9 billion (up from 5.3 billion in 2020). In Wholesale Banking,
the number of digital interactions increased to 11.8 million, of which 49% were via or in combination with the
mobile app introduced five years ago.
This digital connectivity yields data and insights that contribute to a more personalised and empowering
experience, giving customers more reasons to interact with ING. Getting the most out of our data will unlock
even more potential to create a differentiating experience for our customers. But there’s still work to be done to
gain the most value from our data, both by moving data into our data lakes and by using analytics. Closely linked
to this is the trust our customers and employees have that we will protect their data and ensure it’s not used for
purposes they have not agreed to.
Retail Banking
For consumers using our Retail Banking services our focus is on providing a fully digital, mobile-first experience
that’s smart, personal and easy, empowering, and seamlessly connects with the apps and platforms they’re on.
We want to engage with these customers on mobile at every stage of the customer journey. This means as far as
possible each step of our processes has to be fully digitalised, from onboarding and customer due diligence
checks to daily banking and contact centres.
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Over the past years we’ve been working to harmonise the customer experience in our different markets and
created one brand identity. Now we’re increasingly focused on end-to-end digitalisation of our customer
journeys to make our products and services even easier, smarter and more personal.
In 2021, we migrated the last of our Belgian Retail customers to ING’s OneApp for mobile banking, which is now
available to 17.4 million customers in the Netherlands, Belgium and Germany, of which 9.8 million are actively
using mobile channels. OneApp offers a single unified banking proposition that is continuously being extended
with new functionalities (e.g. Apple Pay). In addition, all 9.8 million active Retail customers in Belgium and the
Netherlands have the same OneWeb online banking environment. This is an outcome of the unite be+nl
transformation programme, which ended in the first half of 2021.
A positive impact of the pandemic was the acceleration of mobile banking, with high adoption by customers in
Turkey (88%), Romania (72%) and Spain (59%). More than half of active ING customers – 51% – were mobile-
only at end-2021, up from 40% in 2020.
In addition, mobile and card payment volumes more than doubled compared to 2020, reflecting the increasing
use of contactless payments via third-party services like Apple Pay and our own Android solution in the banking
app. In Poland customers can also use their mobile phone to make contactless ATM transactions and here the
ING app has more functionality than our website (unique in the market). Over two-thirds (68%) of active
customers in Poland use mobile banking.
Another fast-growing digital market is Romania where mobile sales have tripled since 2019. Customers here can
access a complete offering of digital products from loans and insurance to investments, shopping programmes
and virtual cards.
Remote advice
This digital shift also means more customers are now using remote video advice and digital self-service channels.
We can connect with customers across multiple channels through ING’s cloud-based customer interaction
platform for phone, chat and video contacts. The customer interaction platform is used in nine countries to
harmonise the experience and ensure customers receive the same services everywhere.
In the Netherlands, we saw a year-on-year increase of video contacts through ING Beeldgesprek, which enables
customers to speak to an advisor about a new mortgage or investment product from the comfort of their own
home. On average, it is used for around 7,500 customer conversations per month in the Netherlands and is now
also available in Belgium, Spain, Italy and Germany. A similar remote advice service was launched in Turkey in
March 2021 via the ING app. ING is the first bank to offer this service in Turkey.
In addition, more customers are using the chat function on our website and mobile app to reach out to us. On
average, we handle around 22,500 chat interactions per month in each of the six countries where the service is
offered.
Given the rise in digital interactions, we announced the closure of a number of bank branches. In March 2021, we
announced the closure of 69 branches in the Netherlands by July 2022, and over the course of 2021 we closed 59
statutory branches in Belgium. Our business is built on both digital and real-life connections and there are still
customers who prefer to visit us in person. To make sure these customers can still get in-person assistance, in the
Netherlands, for example, we are expanding the number of ING service points (shops inside other shops) to 321.
In some countries, like the Philippines, our Retail offering is entirely digital.
All but a limited number of branches remained open throughout the Covid-19 lockdowns, working by
appointment only in most countries. In all our branches we took precautions to ensure the health and safety of
our customers and employees, such as limiting the number of visitors, installing plexiglass screens and making
hand sanitisers available.
Financing for consumers
Point-of-sale (POS) lending, where online merchants offer shoppers the option to ‘buy now, pay later’, is a new
area offering opportunities for ING. In June, ING Ventures invested in POS platform Divido, which allows its
partners to ‘white-label’ its technology. Merchants, banks and payment companies can brand the Divido platform
as their own to give their customers the option of paying for their purchases in instalments when they check out
online, or in-store. Based on this, ING launched its first European POS lending initiative in Spain, where pre-
approved ING customers can pay in instalments for online purchase from enrolled merchants.
In addition to a physical POS offering in Turkey, we launched ING Shopper, a new digital sales channel that
enables shoppers (including non-ING customers) to apply for an online loan at checkout (thanks to digital
customer onboarding) or pay for their purchases in instalments. It also allows e-commerce merchants to grow
their customer base by offering easy payment alternatives. For ING Orange Extra programme members there’s
an additional incentive to repay their loans interest-free.
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In Romania, we’re encouraging consumers to become more environmentally friendly by offering green loans with
favourable rates for electric and hybrid cars. A pilot programme involving 1,000 loans was launched in the
summer of 2021 as a limited offer. Around 180 loans were distributed by year-end and ING’s share of the market
for new electric and plug-in hybrid vehicle sales reached 11%. Building on this, in 2022 we intend to add eligible
new green and sustainability products to increase our social responsibility impact.
In our mortgages business in the Netherlands, where around 60% of mortgages are sold through intermediaries,
we have been making strides to improve our services, including faster processing times for their applications and
fewer documents needing to be provided. In December 2021, intermediaries named ING as the best money
provider in a survey by the national mortgage association (Nationale Hypotheekbond). In addition, we developed
new mortgage propositions for customers nearing retirement age, and for international home buyers, and made
it possible for customers to see their mortgages in the ING app and use it to make repayments.
At Interhyp in Germany, the HOME platform digitalises the mortgage process for home buyers, advisors, brokers
and bank partners. Almost 500,000 Interhyp customers can connect directly to real-estate portals, create
financing scenarios and upload documents from their smartphones, speeding up the mortgage decision process.
Machine learning personalises the experience by matching (potential) buyers to advisors and mortgages for their
needs, and providing property valuations. Mortgage advisors and brokers use HOME for processing mortgages
and consultations with buyers via phone, video and chat messaging. To complete the end-to-end digitalisation of
the mortgage process we’re now focusing on integrating scoring mechanisms and digital signatures for instant
approvals in just a few clicks. In 2021, Interhyp’s market share rose to 11.6% in Germany (10% in 2020).
Business Banking
Our Business Banking segment is part of Retail Banking and serves around 1.7 million clients in seven markets
(Belgium, Luxembourg, the Netherlands, Poland, Romania, Germany and Turkey). These range from self-
employed and micro businesses to small and medium-sized enterprises (SMEs) and mid-corporate companies.
We’re using Touchpoint (ING’s open banking technology platform) to digitalise and standardise our offering for
business clients on ING’s OneApp and OneWeb in Belgium, the Netherlands and Germany, with Luxembourg
currently being migrated. This is helping to drive efficiency by avoiding duplication of services and unlocking
synergies between the countries. In Belgium, all business clients now use OneApp and over 90% use OneWeb,
providing a consistent experience for both their personal and professional financial needs. Further roll-outs are
planned for Poland and Romania.
Our ambition to serve over 80% of SMEs digitally is in direct response to the increasing customer demand for
digital solutions and self-servicing capabilities. To ensure the continuity of the quality customer relationships we
have, we are focusing our efforts on the most important interactions with our customers, namely: KYC outreach
for customer due diligence, onboarding, account opening, and loan or card requests. Each interaction is built in a
modular way to ensure reusability across the global network, while leveraging and scaling local best practices.
Invariably, automation underpins any improvement and supplies the speed needed to improve the customer
experience.
Digital transformation of loan requests is end-to-end and focused on improving cycle times for the application
process (‘time to apply’), underwriting process (‘time to yes’) and fulfilment (‘time to cash’). For example, Poland
offers instant and fully automated lending journeys for disbursement of small tickets in less than two hours,
whereas in Germany, semi-automated (fast-track) journeys for bigger tickets are possible within 48 hours.
We can add value for these clients through digital services that go beyond banking, such as factoring, liquidity
management, tax accounting and by using APIs (application programming interfaces) that connect to third-party
providers.
Wholesale Banking
In Wholesale Banking we believe our differentiators are our sector expertise, our network and our people. We
continued in 2021 to focus on deepening client relationships and growing our franchise by unleashing our sector
potential and delivering more of our network to our core clients in EMEA (Europe, the Middle East and Africa),
Asia and the US. By this we mean partnering global product and sector specialists with local expert teams across
our network to meet the increasingly sophisticated and complex cross-border needs of the companies we serve.
This is reflected in deals such as with Korea Ocean Business Corporation, a government agency that supports
South Korea’s maritime industry with ships and liquidity. The successful distribution of a $108.3 million out of the
total $171.5 million loan to Korean investors – the third such transaction for KOBC in three years – relied on close
cooperation between ING teams in Seoul and Singapore combined with our sector and product knowledge and
distribution networks.
Our client segmentation model aligns our strengths with our clients’ needs and is an important element for
deepening relationships. ING’s way of working allows us to respond rapidly to our clients’ changing needs and to
close the gap between local and global specialists, making an impact in our markets. During the year we
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continued to pair our sector knowledge and financial expertise to support companies with tailored advisory and
daily banking, in line with the client segmentation model. We aim to provide relevant advice, data-driven insights
and customised, integrated solutions that make our clients day-to-day banking more efficient and support their
business ambitions.
Corporate clients also benefit from gains in speed, transparency, security and efficiency created by technologies
such as blockchain and artificial intelligence. In 2021, Global Finance magazine named ING as the best bank for
Commodity Finance in recognition of our efforts to modernise the market with digital trade finance initiatives
such as Komgo, MineHub, Vakt, Marco Polo and Contour. Read more below in ‘Innovating to stay a step ahead’.
Sustainability is another area where we can make a real difference for clients. We work closely with companies to
help them transition towards net-zero emissions by providing advice, insights and financing, including for green
projects and new technology like battery storage. Recognising the challenges many companies face in their
transition journey, Wholesale Banking’s 2021 global brand campaign is built around ‘sustainable finance for the
real world’, which features actual clients who are working to change their sectors or industries from the inside. In
2021, we also supported 147 sustainability-linked loans (SLLs), where rates are linked to a client’s sustainability
performance. These included several firsts in their sector or industry, cementing our position as a sustainability-
linked pioneer.
Supporting customers in crisis
The last thing customers want to worry about in the midst of a crisis is their daily banking. We aim to ensure
uninterrupted access to our call centres, online banking and ATMs, and to make it easy for our customers to
make contactless payments and arrange their finances from home. But for some customers, a bigger concern
may be their ability to pay back a mortgage, loan or credit card debt.
At the start of the pandemic, ING introduced a raft of measures worldwide to alleviate these concerns. These
differed from country to country and included payment deferrals on mortgages, personal loans, credit cards and
business loans to small and medium-sized companies, as well as financing solutions to help companies bridge
their short-term liquidity needs. In harder hit sectors we proactively reached out to business clients with tailored
solutions for their specific circumstances.
A 2021 Coalition Greenwich survey recognised ING as one of eight ‘standout’ banks for its support of corporate
clients during the Covid-19 pandemic. This included maintaining a strong, coordinated and continuous flow of
information between clients and internal departments to address their clients’ evolving needs at the right time,
accommodate their liquidity needs and allow more operational flexibility while managing the potential
associated risks.
Loan demand in 2021 continued to be influenced by the economic effects of the Covid-19 pandemic. To support
the provision of credit to companies and consumers, the European Central Bank modified the terms and
conditions of its third targeted longer-term refinancing operations (TLTRO III) programme. Under these
conditions (which ING has met), banks can borrow from the ECB at attractive conditions up to -100 basis points.
The programme aims to stimulate the real economy by providing funding to banks at favourable interest rates
that they can pass on to their customers and business clients.
At the same time, signs of economic recovery during the year were tempered by other issues like supply chain
disruptions, rising energy prices and rising inflation. We continue to support our customers and business clients
wherever we can.
Financial health
According to the financial health working group convened by the United Nations Secretary-General’s Special
Advocate for Inclusive Finance for Development, having financial health as a core business purpose contributes
to happier, more engaged and more profitable customers (larger deposit balances, lower delinquency and loan
loss), leading to greater financial resilience and enhanced brand and reputation. ING is part of this working group
and our approach to financial health has been showcased as a best practice.
In 2021, we renewed our financial health approach to integrate it more closely into our core business in order to
increase the impact on our customers and target our support to the local communities where we operate.
This includes embedding into our business some of the activities related to the Think Forward Initiative (TFI),
which was discontinued in December 2021. ING and its TFI partners believe the initiative has achieved key
milestones in fulfilling its purpose to empower people financially through its research and insights. Since it was
started in 2016, TFI has supported almost 60 research projects, 19 start-ups and reached more than 100 million
people in 18 countries with insights aimed at improving their financial health. We will continue to use our insights
into money management and people’s financial behaviour to empower our customers and communities to make
better financial decisions.
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In late 2021, we started defining new ambitions for our financial health approach. We’ll determine the specific
financial health challenges in our local markets and actions we can take in each country to support financially
vulnerable customers, for example with programmes to save structurally for the future or overcome problematic
debt. This reflects our belief that financial health contributes to a healthy economy and helps drive social
progress. We are committed to reporting on our financial health activities and progress systematically and
regularly, as we do for climate action. Our efforts are aligned with the Principles for Responsible Banking and
we’re working with the United Nations Environment Programme Finance Initiative (UNEP FI) to contribute to
setting a standard for financial health impact for our industry.
We think our biggest impact on improving financial health can be made through our products and services by
equipping our customers with actionable insights, innovative tools and real-time information to make better,
smarter financial choices now and in the future.
Financial health is also about financial inclusion. By this we mean creating equal opportunities and making sure
our products, services and facilities are accessible to everyone in a way that best suits people’s needs and
abilities. Examples of this include talking ATMs in Poland, the Netherlands and Turkey, and an accessible bank
card in the Netherlands and Belgium; the card has a notch in it so customers with a visual impairment can insert
it correctly when it’s used. It’s also designed to support customers with limited hand functionality. In Australia we
provide phone banking for customers with speech or hearing impairments via the national relay service, and sign
language services are available in some bank branches in Poland. When it comes to accessible content on our
websites we’re working towards the web content accessibility guidelines standard (WCAG 2.1).
By using our knowledge of digitalisation and insights about money we’ve created innovative tools that help our
customers manage their finances and improve their financial health. Among these are a personal budget planner
and categorisation tool that helps customers in Germany to plan and control their expenses better and discover
potential savings and a ‘Smart Saver’ tool that helps customers in Poland build their savings with automated
transfers to a special account.
Customers in Romania, and, since early 2021, in Germany and Belgium, can use their banking app to access
Dealwise, ING’s smart shopping platform. Dealwise promotes healthier financial behaviour and encourages users
to save on their daily spending by gathering the best shopping deals and giving them cash back on purchases.
More than 1.1 million users have generated €30 million in transactions so far, which in turn has helped
customers save almost €1.72 million in cashbacks. Merchants too can benefit from the insights they gain into
customer behaviour on the platform. Over 1,100 brands offering fashion, accessories, electronics and even travel
deals have partnered with Dealwise.
In the Netherlands, ING has a similar programme where customers can earn points from their daily banking
activities, which they can use in ING’s online shop to buy a wide range of fashion, beauty, household and other
products at discount prices. Initiated in 2006, ING Points was added to the OneApp in 2021, delivering a turnover
of €75 million on 2.4 million products sold to 812,000 customers.
As a result of our financial health activities, 72.2% of our customer base felt financially empowered by ING in
2021 (71% in 2020). In absolute numbers this is 27.5 million people, compared to 27.8 million people in 2020,
due to the discontinuation of our Retail activities in Austria and the Czech Republic in 2021. More details on the
scope and reporting methodology can be found on ing.com.
Achieving our business goals
Achieving our business goals is about growing our primary relationships by providing a differentiating experience
that’s safe and secure while driving capital and cost efficiency. We achieve this by deploying our resources
effectively on activities that deliver sustainable returns, diversifying our income, driving an engaging and
personalised experience through end-to-end digitalisation and data analytics, and developing new propositions
that meet our customers’ needs in areas such as insurance, investments and consumer lending.
To really stand out, we need to focus on our strengths. We have strong brand recognition. A higher-than-average
Net Promoter Score (NPS) in many of our markets is indicative of customer satisfaction. We’ve built a solid Tech
foundation for digitalising and innovating to improve the customer experience, make processes more efficient
and effective, and bring new solutions to our markets faster. And not forgetting our people – even in a digital
world ours is a relationship business – our people are crucial to our success.
Healthy business
To remain a financially healthy company, we have to put our people, capital and investments to work in markets
and activities that provide the best growth opportunities and sustainable returns. Retail markets where ING has
mostly savings and current accounts put pressure on our business model, especially in the negative interest rate
environment. Rather than remain in markets where we do not see growth opportunities, we prefer to reallocate
our resources to markets where we are growing. This led to our decision in 2021 to discontinue our Retail
ING Group Annual Report 2021 on Form 20-F
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Banking businesses in several countries that we believe have insufficient scale to maintain a reasonable
franchise.
In Austria, we transferred our Retail operations to bank99, the digital banking arm of the Austrian postal service,
and in the Czech Republic around half of ING’s Retail customers and 60% of client balances were transferred to
Raiffeisenbank. In December, following a strategic review of our activities, we announced we would also exit the
French Retail Banking market where ING has been active as an online bank since 2000. In all these markets our
Wholesale Banking activities will continue.
Diversifying our income: investment products
With customers looking for alternatives to savings accounts in the negative interest market, we’re empowering
them with smart digital investment tools like My Money Coach in Italy, Naranja+ in Spain and Easy Invest in the
Netherlands. At the same time, growing our fee and commission income, and increasing its share in our overall
income mix, remain very important as our net income is impacted by the negative or low interest rate
environment. In 2021, fee income rose 17% in 2021, contributing 19% to our full-year income.
In 2021, we introduced Komfort-Anlage (Comfort Investing) in Germany, a low-threshold entry point for new
investors. From as little as one euro, customers can invest in one of seven ING World funds according to their risk
appetite. Komfort-Anlage is based on ING Spain’s Naranja+ product and owes its scalability to reusable
Touchpoint components that enable it to be rolled out in other countries. Since its introduction in June 2021, it
has attracted 10,000 investors and €120 million in assets under management. Of these customers, 85% have a
recurrent investment plan.
Also in Germany we offer securities savings plans that allow customers to invest small amounts in over 1,800
securities (shares, exchange-traded funds or mutual plans). More than half a million savings plans were activated
in 2021, growing this service from 0.6 million savings plans at end-2020 to 1.3 million at end-2021. For more
experienced investors, we have self-directed accounts as well as robo-advice from our fintech partner Scalable
Capital, which has attracted more than €1.6 billion in assets under management.
This demand for digital investment products helped to boost our fee income to record levels in 2021, attracting
€79 billion in assets under management (AuM) in Germany at year-end (39% higher than end-2020) and close to
€15 billion in Spain (€12.3 billion in 2020). In Belgium and the Netherlands, investment product balances
increased respectively to €42.6 billion (from €36.8 billion in 2020) and €40.1 billion (from €32.2 billion in 2020).
Insurance
In various Retail markets ING has teamed up with insurance partners to offer our customers insurance products
via the ING app or website, based on the local needs within those markets. With insurer NN we’re offering
insurance linked to loans in Belgium, Poland, Romania, Turkey and Spain, as well as a range of standalone non-life
insurance policies in Belgium, the Netherlands and Poland. In some countries we also team up with other
insurers for additional protection needs. For example, in 2021 we introduced a new health insurance product in
Romania and device protection in Turkey, as well as distributing pensions and offering insurance-based
investment products in several countries.
Through our bancassurance offering in partnership with insurer AXA we’ve launched 20 products in five countries
to date. Given the reduced number of markets now covered by the partnership (following ING’s exit from the
Retail Banking markets in the Czech Republic and Austria), which decreases the level of scalability, we announced
our intention in November 2021 to refocus the scope of the partnership from a central platform approach to the
local delivery of existing insurance propositions.
Daily banking and savings
Everyday Roundup (ERU) is a digital product that aims to make saving simpler at a time when customers may be
financially vulnerable (due to the economic disruption caused by Covid-19). Used by more than 1 million
customers in five countries (Poland, Australia, Germany, Romania and Turkey), it works by rounding up every
transaction on a customer’s current account and automatically transferring the difference to their savings
account. ING in Australia also has a roundup option for mortgages while in Germany customers can use the
service to make donations to support the UN’s sustainable development goals. The next step will be investments.
Increased emphasis on fighting financial economic crime has necessitated investments in areas like know your
customer and data protection over the past years with the aim of ensuring our relationships with our clients
meet the highest due-diligence standards. In light of this, ING introduced a banking service fee for Wholesale
Banking clients in 2021. It includes access to our CoorpID digital vault where they can store, manage and share
their know your customer documentation, to make this often time-consuming process easier. Although there
was some resistance to the fee, many clients see the benefits of making banking safer and more secure.
Similarly, banking fees for Retail customers in the Netherlands and Belgium were increased in 2021 in the context
of higher regulatory costs combined with increasing investments in digitalisation, with a further rise announced
ING Group Annual Report 2021 on Form 20-F
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for Dutch customers from January 2022. In Germany, where we introduced a monthly fee for current accounts
linked to non-primary customers, we will also now charge a €0.99 fee a month for the girocard debit card from
March 2022, reflecting a trend towards payment cards that are more suited to e-commerce and contactless
payments. The fee will apply to all new customers. Existing customers will be approached for consent.
The negative interest rate environment is disadvantageous for savers and for banks. Some banks, including ING,
are already charging a negative interest rate fee for savings above a certain threshold. At ING, this threshold is
currently set at different levels across our euro markets, depending on local market dynamics and regulatory
frameworks.
In October 2021, we reached an agreement with the Dutch consumer association to compensate certain Dutch
Retail customers for past interest charges on revolving consumer loans that allegedly did not sufficiently follow
market rates. We expect any such compensation to be paid before the end of 2022. Read more in the
Digitalisation
We aim to digitalise our processes in order to increase productivity and decrease the time customers have to
spend on banking. The Covid-19 pandemic accelerated the shift to mobile and online banking, with customers
increasingly using their phones to connect to apps for shopping, making contactless payments, opening a bank
account and getting instant financing.
Although ING has been a frontrunner in online banking (we were one of the first direct banks in Europe), we’re
no longer the only bank with digital ambitions. As we saw during the many Covid lockdowns, the demand for
digital and contactless banking has grown exponentially, making digital delivery an essential requirement for all
banks. Here, operational excellence matters.
Operational excellence leads to a better customer experience. It ensures effective and efficient processes that
improve productivity and enable us to deliver high-quality services more easily. Operations management is
therefore one of the Big 6 capabilities ING has identified for success, along with related capabilities such as
customer experience, non-financial risk management and data fluency. Looking back at past years, we’ve learnt
that by sharing our expertise and strengths across our countries we can be more effective in reducing duplication
of business services and processes,developing new solutions and achieving end-to-end digitalisation.
ING Business Shared Services BV (IBSS) is a fully owned service company employing around 13% of ING’s global
workforce. Its shared service centres in Bratislava, Manila, Poland (Katowice and Warsaw) and Bucharest
contribute to ING’s digital transformation and cross-border scalability by providing shared operational and
technology services in areas such as business operations, tech development, non-financial risk and compliance,
KYC, data analytics and modelling.
Scalable technology
Given the costs and complexities of cross-border integration, we stopped the Maggie transformation programme
(that aimed to standardise our Retail offering in four countries) in late 2020. Instead we’re focusing on using our
scalable technology – shared data lakes, infrastructure and reusable app components– to implement global
products locally. In this way we can build on what we already have and scale it to our markets, adapting it to local
needs as necessary.
To enable us to build and share standardised IT components and reusable services we developed Touchpoint, our
open banking technology platform. It provides access to 31.8 million customers (over 80% of our customer base)
using common architecture and shared application programming interfaces (APIs).
Related to Touchpoint, ING has built a private cloud (IPC) where we store and manage applications and data such
as channel applications, core bank systems and other banking applications. Given its flexibility and scalability,
cloud computing is an important component for scaling our digital capabilities. To keep up with global usage,
scalability, availability and delivery speed, ING uses public cloud computing in addition to the IPC. By end-2021,
34.2% of our global infrastructure was running on IPC (up from 25% in 2020) following the migration to IPC of ING
in the Netherlands, Belgium and Spain. One of the many advantages of a cloud-based infrastructure is that
security-patching of databases can be done globally, with near-to-zero downtime. This new feature was added to
IPC in 4Q 2021 and in the future will allow for the rapid global roll-out of other new cloud-based improvements.
As an early adopter of cloud technology, ING joined forces with other banks in 2021 to establish the European
Cloud User Coalition (ECUC). It aims to develop common security standards and best practices to mitigate
security risks and address regulatory requirements around data privacy and sovereignty.
To consistently manage and protect data across ING we have built a set of data repositories: the data lake. By
using a universal data language called ING Esperanto we make it easier to share and use data across the
company.
ING Group Annual Report 2021 on Form 20-F
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OnePipeline is the third element of our scalable technology, providing engineers with a consistent and secure
capability to develop, test and deploy fully automated software across ING. Around 74% of our engineers were
using OnePipeline at the end of 2021.
Scalable technology allows us to create global and local propositions that can be shared across our business
quickly and easily. We are focusing on products in three areas: investment products, consumer finance and
insurance.
Open banking
In an age of disruption and changing customer expectations, banks have to keep adapting their services to
become safer, more personalised, easier and more accessible for customers. Moreover, the introduction of the
second European Payment Service Directive (PSD2) in 2019 changed the competitive landscape of banks
dramatically, opening it up to non-traditional payments providers. This has created an uneven playing field
disadvantaging more heavily regulated traditional banks. At the same time, it’s the catalyst for banks to rethink
traditional products and services and create new customer experiences using application programming interfaces
(APIs).
More than compliance or regulated access via PSD2, open banking is about connecting with customers directly or
through a third party (API banking) and adding value with new banking and ‘beyond banking’ propositions
(embedded finance). Additionally, there are opportunities for Banking-as-a-Service (BaaS), which enables
businesses to integrate banking processes into their own non-bank products through a secure and regulated
infrastructure.
Open banking offers opportunities for us to meet the needs of our customers by connecting to the apps where
they’re shopping and socialising. This is supported by our open banking platform, which provides the capabilities
we need to establish secure, scalable, compliant and uniform connectivity with external parties using APIs. These
API-based propositions can often be used in multiple ways in new and traditional channels, apps, and platforms.
At the same time, there are inherent risks to sharing sensitive data and it’s critical to protect the privacy and
security of our customers’ data. Each participant in the open banking ecosystem has a duty to treat data with the
utmost care and to educate users on data permissions and privacy. Under European data privacy laws explicit
consent is required from the account holder before sharing their data. For consumers, where their data is stored
could also be a concern.
API-enabled services such as Minna (subscription management via OneApp) and small and medium-sized
enterprise (SME) loans via Amazon’s sellers platform showcase how open banking is digitalising our customer and
partner relationships. The pandemic accelerated the need for end-to-end digitalisation and we’ve found that
these ambitions go hand-in-hand with realising our open banking objectives. By breaking down our back office
into modular, reusable, real-time services we can ultimately offer them externally to our customers and partners.
Internal applications using API services to exchange data are built with this external reuse in mind. The recent go-
live of our transaction screening API shows how we’re putting this vision into practice. Now, payment service
providers can integrate ING’s capabilities for screening transactions into their systems of choice or customer
journeys. We believe open banking and APIs are a great way to foster innovation, accelerate digitalisation and
integrate and co-create with others, and are pursuing this across the bank and with our partners.
Given the rising demand for open banking services, we decided in 2021 to discontinue smart money app Yolt and
focus our attention on growing its business-to-business open banking platform Yolt Technology Services. It
provides businesses across Europe with the APIs they need to connect to users’ bank accounts and initiate
payments. In this way we are helping to speed up the adoption of open banking and empowering businesses to
grow. Yolt Technology Services offers businesses API coverage to over 95% of bank accounts in the Netherlands,
France and the UK, and its API infrastructure can connect to 80% of bank accounts in Belgium, Italy and Spain. By
end-2021, it had made over two billion API calls – single uses of its API.
Payments
Open banking has changed the way people pay, giving consumers more options and opening up this service to
non-traditional providers. This has accelerated the trend for instant payments executed in real time 24/7, 365
days a year. ING makes it possible for customers to make instant payments from the Netherlands, Belgium and
Spain to the rest of Europe and is expanding this capability to other countries. Customers can instantly request
and receive money from friends and family via mobile phone apps. We’re now working with major Dutch
retailers to extend peer-to-peer payments (apps enabling users to request and receive payments instantly) so
merchants can send their customers a mobile payment request on delivery of goods.
To speed up international money transfers, ING uses SWIFT gpi (global payments innovation) in 11 countries.
SWIFT – the Society for Worldwide Interbank Financial Telecommunication – facilitates payments between
financial institutions. Around 80% of SWIFT gpi transfers are completed on the same day, as compared with three
to five days previously. Our ‘proof of payment’ module on InsideBusiness now includes gpi information that
allows corporate clients to track and trace their international transfers, including fees and FX conversions made
ING Group Annual Report 2021 on Form 20-F
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during processing through our network of correspondent banks. For our Business Banking customers, we provide
a bulk payment functionality API that makes it possible to pay up to 5,000 recipients simultaneously and which
supports multiple strong customer authentication for all types of payments requiring two or more authorisations.
We announced in October 2021 that we are phasing out the services of our Payvision subsidiary by the second
quarter of 2022. Acquired by ING in 2018 to grow our share in the e-commerce/online merchant payments
market, Payvision offers business clients an omni-channel payments platform. However, this market has evolved
faster than we anticipated, and is increasingly competitive and capital intensive. After thoroughly evaluating all
options we concluded it’s not feasible for ING to achieve its ambitions with Payvision. Until it’s wound down,
Payvision will continue to fulfil its contractual obligations and assist clients in the move to a new service provider.
ING will continue to serve business clients in the offline point-of-sale market and in e-commerce payments, for
example through providers such as iDeal in the Netherlands. Given iDeal’s dominance in the local payments
market, ING and other Dutch banks decided to discontinue the Payconiq payments app in the Netherlands from
January 2022. Conceived by ING in 2014 and a stand-alone company since 2018, Payconiq remains active in other
markets such as Belgium (via ING’s OneApp) and Luxembourg.
Earning the primary relationship
Earning the primary relationship is an important driver for profitable growth. It leads to deeper relationships,
greater customer satisfaction and ultimately customers choosing us for more of their banking needs. We want
our customers to do more than just some of their banking with us; we want to be their first partner, where they
deposit their salary, handle their payments, manage their assets, take out loans and do most of their other
banking business.
In Retail Banking, primary customers have at least two active ING products. One of these should be a current
account into which they deposit regular income. In Wholesale Banking, these are clients with lending and daily
banking products and at least one other product generating recurring revenues.
ING grew the number of primary customers by 481,000 to 14.3 million in 2021, 3.5% higher than at end-2020.
Measuring customer satisfaction
One of the ways we measure our progress is through the Net Promoter Score (NPS), which indicates customer
satisfaction and loyalty (whether they would recommend ING to others) compared to selected peers in each
market. The score is calculated as the difference between the percentage of promoters (who rate ING as 9 or 10
out of 10) and detractors (those scoring ING below 6). Our aim is to achieve a number one NPS ranking in all our
Retail markets, with a 10-point lead over our main competitors.
Retail Banking
Based on a rolling average of our NPS scores in 2021, ING ranked number one at year-end in five of our 11 Retail
markets (six out 14 markets in 2020, which then had included Austria, the Czech Republic and France). In four of
these we are more than 10 points ahead of our nearest competitor. In Australia, Spain and Germany we widened
the gap on the number two player and maintained our number one position in Poland and Romania. In the
Netherlands, where we rank second, our NPS score improved to close the gap on the top scorer, while in Italy we
moved up two positions in the ranking.
Business Banking
In this segment, serving self-employed and micro businesses, small and medium-sized enterprises and mid-
corporate companies, we measure NPS in four markets (on a scale of -100 to +100):
●
Netherlands
: NPS for mid-corporate clients improved to +30.5 (from +18.4 in 4Q 2020), well above our
competitors (-19.2), based on feedback from clients who do business with multiple banks. In particular
clients appreciate ING’s sector knowledge combined with regional presence, with satisfaction highest in
the services, industry and transport and logistics sectors. For Real Estate Finance clients there is a
relational and transactional survey in place with a healthy +39 outcome in 2021. However, there is room
to improve the digital customer experience for small and medium-sized businesses and for self-
employed clients where NPS respectively declined to -39 (from -26 in 4Q 2020) and -23 (from -18).
●
Poland
: combined NPS for SME and mid-corporate clients improved to +47 (from +43 in 4Q 2020) and
the relationship NPS for the self-employed and micro segment the NPS was +49.1.
●
Romania
: NPS for mid-corporates rose to +64 (from +54 in 2020) and for micro clients and SMEs it
increased to +51 (from +43 in 2020), putting ING in joint first place in both categories.
●
Belgium
: NPS for mid-corporate and institutional clients (MCIs) improved to -33 in December 2021 (from
-40 in January 2021), with an average score of -31 over the year. The NPS for self-employed and micro
clients (SEMs) decreased to -55 from -32 at the start of 2021, scoring an average of -47 over the year.
ING Group Annual Report 2021 on Form 20-F
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This can be attributed to several factors including a new loans policy, branch closures, proximity to
clients and ease of contact.
Wholesale Banking
In Wholesale Banking we measure both relational and transactional NPS. The relational NPS programme runs in
32 Wholesale Banking markets and is a qualitative measure of client satisfaction and how likely they are to
recommend ING. The transactional NPS programme measures satisfaction with regards to specific transactions
and services and the ease of doing business with ING. This is run in 23 countries.
In 2021, ING’s relationship NPS score rose to +59.2 (on a scale of -100 to +100), from +56.3 in 2020, and 26%
ahead of the industry average of +46.9 (+49 in 2020). The response rate increased to 62% from 60.4% and is
based on clients representing more than 55% of Wholesale Banking revenue. In three of our four client segments
(Platinum, Gold and Silver) NPS was higher; among Sapphire clients it retracted by 5% to 64.7. Six out of seven
sectors registered stronger NPS, with Financial Institutions joining for the first time in a pilot programme. The
higher scores suggest that clients appreciate our approach and that Wholesale Banking is succeeding in its
strategy to focus on core clients, with as a result more resources allocated to a smaller group of clients and
higher client satisfaction.
On the transactional side, the number of invites increased by ~68% compared to 2020, with an overall response
rate of ~45%. A Client Services survey in June 2021 included a Transaction Services-related question. Here the
response rate was ~48% and client services/transaction services scored above target with an overall satisfaction
of 8.6 and a customer efforts score (measuring ease of doing business with ING) of 8.5. Also in June 2021, a Trade
Financial Services survey was carried out in EMEA and APAC, with these clients rating ING above target with
overall satisfaction of 8.8 and customer efforts score of 8.6.
External recognition
ING’s digital leadership, customer experience and innovative products were recognised with several ‘best bank’
awards in 2021:
●
Best bank in Spain at the 2021 HelpMyCash awards. ING was rated 4.4 out of 5 by customers. The sector
average was 3.6.
●
Euromoney named ING best bank in Poland and best bank for SMEs in Central and Eastern Europe, based
on digital leadership, client-centricity and support for businesses during the pandemic.
●
First in the Polish Banking Stars 2021 ranking by financial newspaper Dziennik Gazeta Prawna and PwC
for the sixth consecutive year.
●
ING in the Philippines named best digital bank for customer experience (Digital Banker magazine), and
best savings bank, fastest-growing retail bank and most innovative mobile savings app (Global Banking
Finance Review).
●
Recognised as most supportive bank through the Covid-19 crisis by trade commodity finance media
outlet TXF.
Innovating to stay a step ahead
Innovation is a prerequisite for remaining relevant to our customers and living up to our purpose in a fast-
changing world. It’s how we can create new and differentiating experiences that deepen our engagement with
customers and improve our own operational excellence. Ever since the introduction of direct banking in 1997,
ING has been finding ways to make banking easier, smarter and more personal for our customers. Many of these
advances stem from twinning the latest technologies with data insights. Growing demand for digital solutions is
also spurring new ideas.
To increase the speed and impact of our innovation, at the start of 2021 we merged all of our innovation
activities into one business area called ING Neo, which reports directly to the chief executive officer. This includes
our beyond banking and platform activities in Retail Banking, Wholesale Banking innovation, the chief innovation
office, ING Labs and our investment vehicle ING Ventures.
We’re concentrating our innovation efforts on five value spaces chosen for their relative market size, potential to
disrupt, and ING’s right to play in those markets: housing, trade, disrupt lending, financial health, and safe and
compliant. Closely related to our core business, these value spaces address trends that we believe will impact our
customers and our business in areas such as customer convenience and access, sustainability, automation and
digitalisation.
We’ve learnt that it takes time for an innovation to be widely adopted and reach the scale it needs to have an
impact. This requires longer horizons and different ways of measuring success while still within a reasonable time
frame for ING. New, non-traditional products and services also require a different approach to evaluating risk.
ING Neo therefore has its own second line of defence (which reports into the group line), ensuring compliance by
design and the right risk and control frameworks for our innovation activities.
ING Group Annual Report 2021 on Form 20-F
48
How we innovate
Innovative ideas come from inside and outside ING. We encourage our employees to think creatively and turn
their ideas into opportunities through hackathons and initiatives like CX Day (to improve customer experience).
In addition, ING’s Innovation Summit aims to raise awareness among all employees of innovation trends and
activities, and innovation ambassadors link our activities more closely to our business goals. In November, ING’s
second virtual Innovation Summit was streamed to 26 countries and reached more than 2,000 users.
ING also has its own customised innovation methodology called PACE, which emphasises customers validation to
ensure we’re only developing what they really want. So far over 12,500 employees have been trained in PACE. In
2021, we set up a digital PACE Academy to move the training from the classroom to online and reach more
colleagues. The PACE programme was recognised at the 2021 Stevie Awards for Great Employers in the
categories Skills Training and Problem-solving Training.
Partner, invest and build
No-one knows what the future may hold, nor what technologies may emerge and we recognise we don’t always
have all the knowledge and skills in-house. That’s why we partner with academic institutions like the Dutch
Technical University of Delft on technologies like artificial intelligence, with consortiums like R3 on blockchain
initiatives that are modernising commodity and trade finance, and with fintechs and others who look at banking
from a different perspective.
ING Labs is our incubator for potential scale-ups where we work with various partners to validate and build new
businesses for ING and our customers, such as Stemly, an AI-driven forecasting tool for supply chain managers,
and Cobase, a cloud-based multi-bank platform for corporate clients. One of the first initiatives to be incubated
in our Singapore Labs in 2018, Stemly was spun out as an independent venture in 2021, while Cobase, which was
spun out earlier, became a minority shareholding in 2020. We believe combining corporate innovation with
entrepreneurial experience contributes to a higher success and greater impact than either partner could achieve
alone. In our four ING labs in Amsterdam, London, Singapore and Brussels we currently have 18 initiatives in the
innovation funnel in our five value spaces. Global Finance magazine named ING as one of the best bank-
sponsored innovation labs in its 2021 Innovators awards.
Through ING Ventures, our corporate venture capital fund, we make minority investments in early-stage
companies with a strategic relevance for ING. These are mainly fintechs developing disruptive technologies that
will ensure our customers get access to best-in-class services. In 2021, the size of the fund was €350 million.
In total, ING had 114 active fintech partnerships at end-2021, of which 17 are among 34 ING Ventures
investments. These include eXate (data privacy and security fintech); Divido (buy-now-pay-later platform);
Flowcast (AI-powered credit decisions); PRODA (commercial real estate automation); and Stemly (AI forecasting
tool for supply chain managers).
In the housing value space, ING partnered with property valuation firm Sprengnetter on Scoperty, a digital
marketplace that aims to make Germany’s real-estate market more transparent. With valuation estimates for
more than 35 million residential properties, it creates a ‘pre-market’ where buyers can make a bid directly to the
seller before the property is officially listed. Scoperty also provides related services such as sales support and
mortgage qualification, which is aligned with ING’s independent mortgage brokerage platform Interhyp, offering
access to 400 lenders.
In the safe and compliant value space, Blacksmith KYC and CoorpID are two initiatives being implemented
globally for KYC processes. Blacksmith’s digital policy management is designed to help banks digitalise and
accelerate know your customer workflows, provide insight into industry practices and better monitor financial
economic crime risk exposure, while CoorpID gives corporate clients a platform to easily store, manage and
synchronise KYC documents.
For our Business Banking clients, various fintech partnerships are opening up new sources of financing to help
companies find the right loans for their businesses. Countingup is a mobile banking app for self-employed
entrepreneurs and freelancers that combines accounting and banking features into one seamless solution to
reduce operating complexity and cost.
Not all our collaborations lead to new products or services. We’ve stopped over 90 partnerships so far, mostly
after unsuccessful or unsatisfactory proofs of concept.
ING Group Annual Report 2021 on Form 20-F
49
Distributed ledger technology and blockchain
When it comes to distributed ledger technology (DLT) and blockchain, ING was an early adopter of the
technology and is considered an industry leader, consistently ranked among Forbes magazine’s top-50 companies
active in this area (for the third consecutive year in 2021).
Komgo – previously called Easy Trading Connect – is a former ING Innovation Bootcamp winner and one of the
first to use DLT to digitalise commodities trade financing in 2017. In May 2021, ING-backed Komgo raised CHF26
million (€24.9 million) in its third funding round from a consortium of investors including ING Ventures. Spurred
by demand for digital services during the pandemic, Komgo saw a 50% increase in trade finance transactions on
its platform and a 65% increase in clients in the past year. Other DLT solutions include Contour, enabling letters
of credit to be processed in under 24 hours (from 10 days); and HQLAx, facilitating trades in high-quality liquid
assets, which was commercially launched in December 2020.
We amplify our DLT impact by addressing how our solutions can solve key problems in the finance industry and
work with others to produce open-source assets that can serve and influence the wider community. Among
others, ING contributed to the development of open-source blockchain platform Corda (with R3) and Ethereum,
as well as zero-knowledge proof solutions to improve privacy and security of DLT-based transactions.
We continue to support the adoption of the technology in different areas of the bank and to explore additional
opportunities as client demand, regulation and the technology evolve.
Data, AI and advanced analytics
In our competitive industry, data analytics stands to give us an edge. It goes hand-in-hand with digitalisation and
we can use analytics to create actionable insights about customers and improve our daily decision-making.
Advanced analytics techniques (machine learning and big data) can be applied to automate processes, making
them faster and better; create better products and services; and fight financial crime. In 2021, we initiated a
programme to further develop and strengthen our global analytics strategy and align it with our business goals,
moving analytics closer to customer experience-related activities and creating a global community of data and
analytics experts.
ING Analytics delivers solutions in areas such as customer interaction, smart pricing strategies and risk
management, innovation, anti-money laundering, people analytics, automation and for Wholesale Banking. In
2021, we further invested in an analytics platform to service the analytics needs of ING. It has over 2,000 users
working on more than 300 unique projects across the bank.
One of the ways we use AI to improve the customer experience is with chatbots, which are available 24/7 to
answer questions and interact with customers. In Germany, our virtual assistant pING was able to answer 7.6
million customer queries in 2021; the recogniton rate for current account questions, for example, improved to
95.7% from 94.2% the previous year. INGo in Turkey has a 92% accuracy score on customer queries and can also
assist with money transfers, loan applications, changing passwords and locating the nearest ATM. Since its
introduction in 2018, it has been further improved and ‘humanised’ to make small talk and jokes with customers
and proactively reach out on birthdays and other special occasions. In 2021, INGo had around 900,000 users in
5.1 million chat sessions and approved 476 million lira worth of loans.
Some of our fintech partnerships enhance our data capabilities, such as London-based data security company
Exate, which makes it possible to securely share data with greater speed and efficiency. This will allow ING to test
new software on real data to ensure effectiveness in production and enable closer collaboration with external
partners across borders. Other solutions delivered by ING Analytics in 2021 were Nadia, a robot that automates
repetitive tasks in our non-financial risk database in seven ING countries and SAIO, which automates financial and
other administrative processes for business customers in Poland.
Sustainable business
Being sustainable is not just about reducing our own environmental footprint. We see it as an opportunity to use
our experience and knowledge to support our clients on their own sustainability journeys. Our biggest impact is
through our financing, via the loans we provide. That’s why in 2018 we committed to steering our lending
portfolio towards meeting the well-below two-degree goal of the Paris Agreement – an ambition we sharpened
in 2021 when we joined the Net-Zero Banking Alliance. We use our Terra approach to align our portfolio with our
ambitions, as well as to measure and report on our progress.
Recognising the merit of disclosing absolute greenhouse gas emissions we started doing so in our integrated
climate report published in September 2021 (available on ing.com). This report also gives a broader overview of
all the elements of our climate action approach, including how we assess climate risks and take action to mitigate
them.
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Terra approach
Terra helps us to steer our portfolio away from high-carbon technology towards the new low-carbon technology
needed to reach these net-zero goals in the nine sectors most responsible for climate change. These are power
generation, fossil fuels, automotive, shipping, aviation, steel, cement, residential mortgages and commercial real
estate. To measure our progress, Terra uses the most appropriate methodology available per sector, given that
each has its own transition pathway, and that some sectors are further along on their journeys.
One of the methodologies is PACTA for Banks, which ING co-created with 2DII (the 2° Investing Initiative). It looks
at the technology shift that’s needed across certain sectors to slow global warming and then measures this
against the actual technology clients are using or plan to use in the future. For example, in the automotive sector
we measure the number of internal combustion engines our clients are making compared to electric vehicles and
based on science-based transition pathways, we can then see what needs to shift, by how much and when. This
is where financing comes in, and where ING can have an impact in the real economy.
Reporting process
The process for reporting on Terra consists of a number of steps, most of them carried out by ING’s Global
Sustainability department in conjunction with colleagues in the front office. Required internal data relating to our
portfolio composition is made available soon after ING’s year-end close in February. External data relating to
climate performances is collected around April. The external data is checked for consistency and matched with
our internal data. A year-on-year portfolio comparison is made to analyse fluctuations at company or asset level
for each sector. This helps us understand the drivers behind any changes, which are usually attributable to the
climate performance of our clients, the composition of our sector portfolios or data improvements. When
necessary, scenarios and targets are updated in conjunction with external parties.
Once the data is validated we draft our progress report, which since 2021 has been incorporated into the
integrated climate report. The report is approved at board level and published in September of the reporting
year. As such, all progress reported in 2021 relates to 2020. Reporting on progress in the shipping sector is linked
to and aligned with the Poseidon Principles timelines. The report on 2020 year-end data was published in
December 2021.
Targets and progress
We are currently working on incorporating our updated ambition into our Terra approach and aim to have the
steps and intermediate targets needed for a net-zero pathway for all nine sectors by end-2022.
As a first step, we’ve updated our target for upstream oil and gas in line with the International Energy Agency’s
net-zero scenario. Our aim is to reduce financing to upstream oil and gas by 12% by 2025 (from the around €4
billion we loaned the industry in 2019) by decreasing our exposure in the sector and engaging with clients to help
them shift to low-carbon technology. This new target reflects the accelerated pace that’s needed to bring about
change. Previously we had aimed to reduce financing in this sector by 19% by 2040.
To measure our progress we use the 2DII PACTA ‘economic activities’ methodology, which has two metrics to
identify the carbon intensity of the Energy sector. For ‘power generation’ the alignment metric we use is
emissions intensity. For ’fossil fuels’ (coal, oil gas) we use the ‘portfolio financing trend’, which requires an
absolute reduction in the financing of primary energy production by reducing the size of our upstream oil gas
and thermal coal mining portfolios. Both metrics use the assumptions of International Energy Agency’s net-zero
scenario pathway to reduce the carbon intensity of global power generation.
Financing and advising our clients
As a financial institution we see it as our role to support the transition to net zero through our financing and by
using our knowledge and insights to support our clients in their own transitions towards a greener future. We
believe we can have more impact with what we do finance than what we don’t finance. So while we say ‘no’ to
financing certain businesses and sectors, in others we say ‘yes but’, outlining sustainability changes clients have
to make to reach net zero.
Our integrated climate strategy helps us decide what activities we’ll support and those we’ll no longer finance.
Our approach is closely aligned with the climate goals of the Paris Agreement, as well as the objectives of the
European Commission’s (EC’s) Green Deal, which provides a framework for Europe’s journey to achieve net-zero
greenhouse gas emissions by 2050. It also aims to decouple economic growth from resource use and ensure
economic inclusivity so no person or place is left behind.
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European Taxonomy regulation, Article 8 Delegated Act
Throughout 2021, the EC published a set of policies and regulations aimed at channelling money towards
sustainable activities and creating a level playing field for both companies and investors. This included defining
which activities are considered to be environmentally sustainable and creating a common classification system
for these activities: the European Taxonomy (EUT).
The EUT regulation aims to redirect capital flows to support the transition, help generate sustainable and
inclusive growth and prevent greenwashing. Moreover, the EC has started translating its six environmental goals
into technical screening criteria. These six goals are: climate mitigation, climate adaption, the sustainable use and
protection of water and marine resources, transition to a circular economy, pollution prevention and control, and
protection and restoration of biodiversity and ecosystems. Both financial services companies and non-financial
companies are called upon to scrutinise their balance sheets with regards to climate change mitigation and
adaptation in line with these criteria under the Climate Delegated Act (DA).
The EU’s pathway to 2050 is laid out in a phased approach, with the first phase described in the DA Article 8 of
the EUT regulation published in June 2021. Within the scope of Article 8 DA, all non-financial companies in the EU
required to disclose ESG information under the non-financial reporting directive (NFRD companies) will have to
determine the parts of their turnover, capital and operating expenditures that are eligible for inclusion in the EUT
framework. Financial companies, including ING, will reuse the disclosed information from NFRD companies to
determine their eligibility ratio. The eligible assets in scope can eventually be aligned with one or more of the six
environmental goals, while doing no significant harm to any of the other goals and ensuring minimum
safeguards.
ING sees the EUT as an opportunity to re-evaluate our assets and sustainable products, to be transparent about
our efforts to our stakeholders, and ultimately to reach net zero. The EUT is still
evolving and so are our sustainability efforts. It’s essential to distinguish between our own efforts (through our
Terra approach and sustainable finance products and services) and the incorporation of EUT requirements to
reassess our assets for eligibility under the EC’s scope.
When it comes to sustainable finance we categorise our lending activities to corporate clients as climate finance
(funding to advance the transition) or social impact finance (driving social progress). Before providing financing
we assess whether clients meet our environmental and social risk criteria, which are defined by our own risk
appetite statement. Among the products we offer are green and social loans and bonds, sustainability-linked
loans and bonds, and structured finance products.
We’re continuously exploring new ways to support our clients in a sustainable way and aligned with the
principles of the Loan Market Association, the International Capital Markets Association for green, social and
sustainability-liked financial products and the EUT. We also proactively inform our clients about aligning their
business activities with the EUT and have started incorporating published technical screening criteria into our
loan assessment processes.
Energy policy in practice
Reducing society’s reliance on fossil fuels is a vital contributor to the energy transmission and for reducing the
emission of greenhouse gases. As part of our integrated sustainability strategy, we’re working to align our energy
portfolio (and other major CO2-emitting sectors) with net zero by 2050 targets through our Terra approach.
However, transitioning from fossil-based fuels to low-carbon and renewable power sources requires massive
investment in cleaner technologies and infrastructure to meet the growing demand for energy. This is a complex
process that will not happen overnight and in the meantime the real economy still relies on fossil fuels. The least
environmentally damaging of these is natural gas.
We believe that simply reallocating capital from high-carbon clients and assets to low-carbon ones does not
support the transition we want to see in the real economy because it does not reduce the actual global CO2
emissions as the same assets can be financed through other means. Rather, we believe in working with our
clients to support them in the transition towards reaching climate goals together. In the Terra approach, we’ve
developed a distinct method for steering our portfolio by identifying carbon intensity metrics that reflect the shift
that needs to happen in each specific sector to achieve climate goals.
Financing the transition
Since ING introduced the first sustainability-linked loan (SLL) for Philips in 2017, where rates are linked to the
client’s sustainability performance, the popularity of these products has increased as more and more companies
push sustainability to the top of their strategic agendas. ING closed 147 sustainability-linked transactions in 2021.
These included the world’s biggest-yet SLL and the first in its sector for brewer AB InBev ($10.1 billion revolving
credit facility linked to water-efficiency improvements, PET packaging recycling, renewable energy use and
reduced emissions targets).
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In addition, ING received four consecutive sustainability-related mandates from US data centre provider Aligned,
acting as sole sustainability coordinator and sole green structuring advisor on the first SLL and first green
securitisation in the data centre space.
Pioneering for the future
We also invest in the technology needed to reach a net-zero world, things like battery storage and solar power. In
2021, ING’s innovative financing method to make inland shipping in the Netherlands more sustainable with a
pay-per-use structure for renewable batteries, Zero Emissions Services (ZES), was recognised by the International
Association of Ports and Harbours (IAPH) with a sustainability award in the climate and energy category. ING
founded ZES along with consortium partners the Port of Rotterdam, energy company ENGIE, Finnish maritime
technology company Wärtsilä and its first customer, Dutch brewer Heineken. The first vessel started sailing in
September 2021.
ZES is also an example of how ING is exploring circular business models with various partners. The circular
economy is a way for companies to reduce waste and emissions by rethinking their use of raw materials and
resources from a ‘take, make and waste’ approach to ‘reduce, reuse and recycle’. Companies like ZES stimulate
other use models for depleted battery packs, giving them a second or even a third life after they are exchanged.
Another ING investment in green transport, electric bus company Ebusco made its debut on the Amsterdam
stock exchange in October 2021. The initial public offering raised €300 million to fund Ebusco’s international
expansion and growth strategy and valued the company at around €1.3 billion. ING Corporate Investments
continues to hold a 21% stake in Ebusco (initially acquired in 2016).
Accelerating the green economy
To accelerate a green and sustainable economy we provide financing for projects such as wind or solar energy
and sustainability-linked financing that supports companies on their own sustainability journeys. In 2021, we
closed 317 sustainable finance transactions (139 in 2020). These include 45 green and social loans, 147
sustainability-linked loans and 95 green, social, sustainability(-linked) and transition bonds. The remaining 30
transactions were spread among green and sustainability-linked schuldscheins (an investment form
predominantly used in Germany), other sustainable investments, sustainable structured finance transactions and
ESG advisory and green guarantees.
Sustainable bonds are an integral part of our sustainable finance offering and are supported by ING’s Green Bond
Framework, which is in line with the Green Bond Principles of the International Capital Market Association.
Among these are a euro-denominated green bond (two-part €1.1 billion) for US IT and data centre provider
Equinix, which builds on the green finance framework ING created for them in 2020; and a $3.2 billion equivalent
dual-currency bond offering for FedEx, part of which was a sustainability bond offering. ING was sole structuring
advisor on the sustainability financing framework.
Through our social impact finance portfolio we lend to projects that lead to, for example, basic infrastructure
improvements, community development or essential services. In December 2021, ING acted as joint coordinator
of a social loan for the Ghanaian Ministry of Finance to set up national vocational training institutes across
Ghana. The export credit facility is aligned with the standards of the Social Loan Principles. We also aim to make a
positive contribution to human rights as financier, employer, taxpayer and as a driver of progress and prosperity.
This is in line with the United Nations’ Principles for Responsible Banking, of which ING was a founding signatory
in 2019.
Who we finance is as important as what we finance. In 2021, lending to industry ESG leaders (based on the scores
of independent ESG ratings provider Sustainalytics) grew to €37.8 billion from €28.5 billion in 2020. (This amount
may overlap with the amounts reported under climate and social impact finance.)
In the Bloomberg league tables, ING ranked second for green, social and sustainability euro bond issues with
more than €7.5 billion in bonds issued in 2021 (fourth with €3.8 billion in 2020), and fifth for green and
sustainability-linked loans valued at €5.4 billion (fifth with €3.3 billion in 2020).
Greener homes
A significant part of our loan book – 42% – consists of residential mortgages, accounting for 68% of our Retail
Banking loans. Houses generally account for about 22% of direct and indirect CO2 emissions in the EU. Our long-
term vision is to empower our mortgage customers to reach net-zero emissions in their homes and to achieve
the same for our mortgage portfolio by 2050. We’re therefore working with our customers to improve the
energy consumption of the houses we finance as a way of achieving our net-zero goals. However, there’s a long
way to go to help all our clients improve the energy efficiency of their homes.
Not knowing what renovations are most effective or what financing or subsidies are available to do so is one of
the factors we’ve seen that is stopping people from taking action. Here banks can play a role. In addition, the
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energy mix varies from country to country and the energy intensity of homes is quite broad. To be able to
understand how energy efficient homes are and make comparisons across markets a robust and standardised
approach to data is necessary at country and European level and ambitious regulation will be critical to
encourage a faster transition.
Our current carbon intensity measurement covers our Dutch, German, Belgian and Polish mortgage portfolios,
with a combined outstanding lending amount of roughly €232 billion (78% of total mortgage outstandings) and
more than 1.5 million financed homes. More countries will be added as the data becomes available. See our
integrated climate report on ing.com for information on the underlying measurement, which, like the rest of
Terra reporting, relates to 2020 data.
Across our mortgage markets we provide a range of products, services and advice to help homeowners make
their houses more sustainable. These include eco loans to finance renovations to improve energy efficiency such
as insulation, solar panels and double glazing. In Belgium, we offer interest-free eco renovation mortgages in
collaboration with the Flemish government. We also provide access to subsidies in countries where these are
available. In Germany, we work with development bank KfW to integrate subsidy programmes into our mortgage
offering for energy-efficient new-builds and for modernising existing homes, for example with energy-efficient
heating systems.
In the Netherlands, ING became a co-financier of the Dutch government’s ‘Warmtefonds’ (Heat fund) in May,
contributing €50 million in financing. The fund provides loans on favourable terms to make homes more
sustainable. Since 2014, it has provided around €600 million in financing for this purpose. In November, a local
hub of the European Energy Efficient Mortgages (EEM) initiative was set up in the Netherlands, with ING as a
founding member, to support and promote the acceleration of energy-
efficient housing by developing a framework for green mortgages.
To engage customers on their sustainability journeys our Dutch and German websites provide
information and advice about energy-efficient living and financing available. In the Netherlands, customers can
also check the energy profile of their homes as well as the options to improve in this area. To help them take the
first step, we provided a free energy rating for homeowners wanting to invest in upgrading their energy label.
Around 60% of our Dutch portfolio currently has an ‘A’, ‘B’ or ‘C’ energy label, with more homes moving into the
most energy-efficient ‘A’ band (17.4% compared to 15% the previous year) and fewer homes in the ‘C’ band
(27.2% v 28.3%). In addition, the CO2 intensity of this portfolio reduced from 35kg CO2/m2 to 31.3kg at end-
2020, helped by the Netherlands’ growing use of renewable energy sources in its electricity network.
Managing climate and environmental risks
Our integrated climate approach considers both how ING can impact climate change through our financing as
well as how climate change can impact our business. We’re working to be more resilient to climate risks, both
physical risks, such as the risk of flooding on our mortgage portfolio, and transition risks, such as stranded assets,
for example when carmakers don’t make electric vehicles. These risks and their financial implications can
potentially also impact our clients and ultimately our balance sheet. A critical process is therefore required to
identify and understand these risks and integrate them into our risk management framework, including credit,
market, liquidity and operational risks. Read more in ‘Risk management’.
A climate risk assessment of around 65% of our mortgage portfolio identified flooding as the biggest physical risk
where the impact would vary extensively. We have decided to develop this pilot further and increase the
geographical scope and data granularity to grow our understanding of the financial impact of climate hazards for
our portfolio management. We expect to report more on this in 2022. As part of this initiative we’re collecting
location data for the Belgian mortgage book to identify physical climate risk to our collateral. An initial
assessment of the impact on Business Banking clients on a sector level will be used as input for ING’s global
heatmap. In line with its local regulatory requirements, ING in Belgium will also collect the energy efficiency
levels of immovable property collaterals, both residential and commercial.
We apply strict social, ethical and environmental criteria in our financing and investment policies and practices to
ensure they’re in line with our sustainability goals. Every client and transaction is assessed, monitored and
evaluated against the requirements of our environmental and social risk (ESR) framework to ensure compliance
and limit negative impact on the environment and communities. That way, climate and environmental impact are
taken into account every time we make financing or investment decisions.
Sustainable investment services
ING offers sustainable investment (SI) services to its Retail Banking customers in the Netherlands, Belgium,
Luxembourg and Germany. These include brokerage, advisory and discretionary management. We provide
dedicated portfolios, structured products and investment funds and cover all asset classes. In 2021, ING’s Retail
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investment division recorded €19.2 billion in sustainability assets (from €13.2 billion in 2020). This also underlines
our clients’ appetite for products and services that integrate sustainability criteria.
To provide these clients with a portfolio that’s in line with their values and interests we use a diverse set of
environmental, social and governance criteria to assess all investments. Both companies and investment funds
are screened against these criteria. For companies we take a two-step approach. First, we look at their policies
and achievements on sustainability and score relative to their peers, choosing to invest in those companies with
the best ESG profile per sector. Second, we exclude companies whose products or services have negative impacts
or which are engaged in undesirable corporate conduct, for example conduct that infringes human rights. In
selecting investment funds, we carry out quantitative and qualitative screening to understand the ESG profile of
the asset and the asset manager. This includes interviewing fund managers and ensuring the underlying holdings
also meet our sustainability criteria. For more information on the selection process please refer to ing.com.
ING is a signatory to the UN-backed Principles for Responsible Investment as a service provider and we’ve
committed to incorporating ESG into our investment decisions, policies and processes underpinning our
investment services.
For a description of the principal and geographic markets ING operates in and related revenue categories, see
Item 5 of this Form 20-F.
Competition
ING is a global financial institution with a strong European base, offering Retail and Wholesale Banking services to
38 million customers in over 40 countries. ING’s purpose is to empower people to stay a step ahead in life and in
business.
ING’s Retail business includes the Business Banking segment and serves customers ranging from individuals to
small and medium-sized businesses and mid-corporate clients. ING offers these customers a full range of banking
products and services, covering payments, savings, mortgages, insurance, investments and secured and
unsecured lending. The Wholesale Banking business provides corporate clients (large companies and
multinationals) and financial institutions with advisory value propositions such as specialised lending, tailored
corporate finance, sustainable and sustainability-linked financing and debt and equity-market solutions. It also
offers daily banking services such as payments and cash management and trade and treasury services.
There is substantial competition in the countries in which we do business for the types of wholesale banking,
retail banking, investment banking and other products and services we provide. This competition is most
pronounced in more mature markets such as the Netherlands, Belgium and Germany, the rest of Western Europe
and Australia. Our largest market is the Netherlands, where our main competitors are ABN AMRO and Rabobank.
In recent years, competition has increased in emerging markets such as Asia and Central and Eastern Europe.
Financial services companies from more developed countries see these markets as offering higher growth
potential, while local institutions have become more sophisticated and competitive and have proceeded to form
alliances, mergers or strategic relationships with our competitors.
Our competitive landscape is transforming as society becomes increasingly digitalised and ever more reliant on
technology and the online economy – a trend amplified by the Covid-19 pandemic, which accelerated the shift to
mobile banking and contactless payments. Our main competitors are no longer just other banks.
The opening up of the European payments market under the PSD2 directive is a significant competitive
development. It is creating a more crowded, uneven playing field as third-party payment providers and fintechs
enter this lucrative area once dominated by banks. These new entrant have operating models that are not
burdened with potentially costly legacy operations. They are less regulated than banks and use technology and
advanced data and analytic tools to lower cost to serve and speed up processes.
Advances in technology are accelerating the use of new business models, for example in retail payments, peer-
to-peer lending, foreign exchange and low-cost investment advisory services. New solutions offered by rapidly
evolving incumbents, challengers and new entrants, especially with respect to payment services and products,
are disrupting the financial services sector and leading to the emergence of disintermediation.
In this competitive landscape, where banking products and services have mostly become commodified, the key
differentiator is customer experience. For consumers, this means a seamless, mobile-first digital experience
that’s safe, easy, smart and personal. Businesses too want to benefit from gains in speed, transparency, security
and efficiency created by technologies such as blockchain and artificial intelligence. Winners will be those with a
strong trusted brand and a superior digital experience, taking the effort out of managing finances and offering
personalised, real-time advice, products and services for all financial needs.
Statements regarding ING’s competitive position reflect the assessment of ING’s management about the general
competitive landscape in which ING operates.
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Regulation and Supervision
The banking and broker-dealer businesses of ING are subject to detailed and comprehensive supervision in all of
the jurisdictions in which ING conducts business.
Regulatory agencies and supervisors have broad administrative power and enforcement capabilities over many
aspects of our business, which may include liquidity, capital adequacy, permitted investments, ethical issues,
money laundering, anti-terrorism measures, privacy, recordkeeping, product and sale suitability, marketing and
sales practices, remuneration policies, personal conduct and our own internal governance practices. Also,
regulators and other supervisory authorities in the EU, the US and elsewhere continue to scrutinise payment
processing and other transactions and activities of the financial services industry through laws and regulations
governing such matters as money laundering, anti-terrorism financing, tax evasion, prohibited transactions with
countries or persons subject to sanctions, and bribery or other anti-corruption measures.
As discussed under “Item 3. Key Information — Risk Factors”, as a large multinational financial institution we are
subject to reputational and other risks in connection with regulatory and compliance matters involving these
countries.
European Regulatory framework
The Single Supervisory Mechanism (“SSM”) is the first pillar of the Banking Union and has been operational since
4 November 2014. The SSM is composed of the European Central Bank (“ECB”) and the national competent
authorities of the participating EU member states. The main aims of European banking supervision are to ensure
the safety and soundness of the European banking system, increase financial integration and stability and ensure
consistent supervision. Under the SSM, the ECB is ING Group’s and ING Bank’s principal prudential supervisor.
The ECB is amongst others responsible for tasks such as market access, compliance with capital and liquidity
requirements and governance arrangements. National competent authorities, including the Dutch Central Bank
(De Nederlandsche Bank or “DNB”) for ING Group and ING Bank, remain responsible for supervision of tasks that
have not been transferred to the ECB such as financial crime and payment supervision.
The SSM is complemented by the second pillar of the Banking Union, the Single Resolution Mechanism (“SRM”),
which comprises the Single Resolution Board (“SRB”) and the national resolution authorities. The SRM is fully
responsible for the resolution of banks within the Eurozone since 1 January 2016. ING has been engaging already
with the Dutch national resolution authorities and the SRB for a few years with the aim to support in the draw up
of a resolution plan for ING and will continue to collaborate with the resolution authorities. The rules
underpinning the SRM could have a significant impact on business models and capital structure of financial
groups in order to become resolvable.
As a third pillar to the Banking Union, the EU aims at further harmonizing regulations for Deposit Guarantee
Schemes (DGS). Main elements are the creation of ex-ante funded DGS funds, financed by risk-weighted
contributions from banks. As a next step, the EU is discussing a pan-European (or pan-banking union) DGS (the
European Deposit Insurance Scheme (EDIS)), (partly) replacing or complementing national compensation
schemes. The EDIS proposal as well as certain accompanying risk reduction measures are still being discussed in
the European Parliament and in the Council. In February 2021, the European Commission issued a public
consultation on the review of the bank crisis management and deposit insurance (CMDI) framework, with a focus
on three EU legislative texts: the Bank Recovery and Resolution Directive (BRRD), the Single Resolution
Mechanism Regulation (SRMR), and the Deposit Guarantee Schemes Directive (DGSD). The anticipated revision of
the CMDI framework is part of the debate on the completion of the Banking Union and in particular its third and
missing pillar EDIS. The consultation period ran until May 2021. It is uncertain when the next steps towards
revision of the CMDI framework, including EDIS, can be expected.
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Dutch Regulatory Framework
The Dutch regulatory system for financial supervision consists of prudential supervision – monitoring the
soundness of financial institutions and the financial sector, and conduct-of-business supervision – regulating
institutions’ conduct in the financial markets. As far as prudential supervision has not been transferred to the
ECB, it is exercised by the Dutch Central Bank (De Nederlandsche Bank or “DNB”), while conduct-of-business
supervision is performed by the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten or
“AFM”). DNB is in the lead with regard to macroprudential supervision.
Global Regulatory Environment
There is a variety of proposals for laws and regulations that could impact ING globally, in particular those made
by the Financial Stability Board and the Basel Committee on Banking Supervision at the transnational level and an
expanding series of supranational directives and national legislation in the European Union (see “Item 3. Key
Information — Risk Factors — We operate in highly regulated industries. Changes in laws and/or regulations
governing financial services or financial institutions or the application of such laws and/or regulations governing
our business may reduce our profitability). The aggregated impact and possible interaction of all of these
proposals are hard to determine, and it may be difficult to reconcile them where they are not aligned. The
financial industry has also taken initiatives by means of guidelines and self-regulatory initiatives.
Dodd-Frank Act and other US Regulations
ING Bank has a limited direct presence in the United States through the ING Bank Representative Offices in New
York, Dallas (Texas) and Houston (Texas). Although the offices’ activities are strictly limited to essentially that of a
marketing agent of bank products and services and a facilitator (i.e. the offices may not take deposits or execute
any transactions), the offices are subject to the regulation of the State of New York Department of Financial
Services and the State of Texas Department of Banking, as well as the Federal Reserve. ING Bank also has a
subsidiary in the United States, ING Financial Holdings Corporation, which through several operating subsidiaries
(one of which is registered with the CFTC as a swap dealer and the SEC as a security-based swap dealer and
another of which is registered with the SEC as a securities broker-dealer) offers various financial products,
including lending, and financial markets products. These entities do not accept deposits in the United States on
their own behalf or on behalf of ING Bank N.V.
The ING subsidiary, ING Capital Markets LLC, is registered as a swap dealer and subject to a statutory regulatory
regime and CFTC rules and oversight.. As a registered entity, it is subject to, among others, business conduct,
record-keeping and reporting requirements, as well as margin requirements and capital requirements. In
addition to the obligations imposed on registrants (such as swap dealers), other requirements relating to
reporting, clearing, and on-facility trading have been imposed for much of the off-exchange derivatives market. It
is possible that some of these compliance requirements, especially the newly-implemented capital requirements
and an increased scope of applicability for initial margin requirements, will increase the costs of and restrict
participation in the derivative markets. This could have the effect of restricting trading activity, reducing trading
opportunities and market liquidity, potentially increasing the cost of hedging transactions and the volatility of the
relevant markets. This could adversely affect the business of ING in these markets.
The Dodd-Frank Act and SEC regulations enacted thereunder, effective 1 November 2021, resulted in ING Capital
Markets LLC registering as a security-based swap dealer with the SEC. The SEC has adopted regulations, among
others, establishing registration, reporting, risk management, business conduct, and margin and capital
requirements for security-based swaps. While ING Capital Markets LLC, as a security-based swap dealer, is
required to comply with SEC rules with respect to most of these requirements, SEC rules have permitted an
“Alternative Compliance Mechanism” that allows for compliance subject to eligibility requirements , with CFTC
capital and margin rules applying to swap dealers in lieu of SEC capital and margin rules applying to security-
based swap dealers. ING Capital Markets LLC has elected to use the Alternative Compliance Mechanism.
However, should ING Capital Markets LLC in the future be ineligible for the “Alternative Compliance Mechanism”
it would be subject to SEC capital and margin security-based swap dealer rules instead of the CFTC capital and
margin security-based swap dealer rules.
ING Capital Markets LLC’s recent registration with the SEC as a security-based swap dealer along with the impact
of these regulations to the industry may increase operational costs, reduce trading activity and market liquidity,
and increase volatility of the relevant markets. It will also result in a substantial portion or all of ING’s security-
based swap activities with U.S. persons being conducted through ING Capital Markets LLC.
In addition, new position limits requirements for uncleared swaps referencing any of twenty-five commodity
futures contracts for market participants could limit ING’s position sizes in these swaps referencing specified
physical commodities and similarly limit the ability of counterparties to utilize certain of our products to the
extent hedging exemptions from the position limits are unavailable.
ING Group Annual Report 2021 on Form 20-F
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The Dodd-Frank Act also created a new agency, the Financial Stability Oversight Council (“FSOC”), an inter-agency
body that is responsible for monitoring the activities of the U.S. financial system, designating systemically
significant financial services firms and recommending a framework for substantially increased regulation of such
firms, including systemically important non-bank financial companies that could consist of securities firms,
insurance companies and other providers of financial services, including non-U.S. companies. ING has not been
designated a systemically significant non-bank financial company by FSOC and such a designation currently is
unlikely.
Dodd-Frank continues to impose significant requirements on us, some of which may have a material impact on
our operations and results, as discussed further under “Item 3. Key Information — Risk Factors—We operate in
highly regulated industries. Changes in laws and/or regulations governing financial services or financial
institutions or the application of such laws and/or regulations governing our business may reduce our
profitability”.
Basel III and European Union Standards as currently applied by ING Bank
DNB, our principal home country supervisor until the ECB took over that position in November 2014, has given
ING permission to use the most sophisticated approaches for solvency reporting under the Financial Supervision
Act, the Dutch legislation reflecting the Basel II and Basel III Frameworks. DNB has shared information with host
regulators of relevant jurisdictions to come to a joint decision. In all jurisdictions where the bank operates
through a separate legal entity that is a credit institution, ING must meet the local implementation of Basel
requirements as well. ING uses the Advanced IRB Approach for credit risk, the Internal Model Approach for its
trading book exposures and the Advanced Measurement Approach for operational risk. A small number of
portfolios including certain sovereign exposures are reported under the Standardized Approach
In December 2010, the Basel Committee on Banking Supervision announced higher global minimum capital
standards for banks, and has introduced a new global liquidity standard and a new leverage ratio. The Basel
Committee's package of reforms, collectively referred to as the “Basel III” rules, has, among other requirements,
increased the amount of common equity required to be held by subject banking institutions, has prescribed the
amount of liquid assets and the long term funding a subject banking institution must hold at any given moment,
and has limited leverage. Banks are required to hold a “capital conservation buffer” to withstand future periods
of stress. Basel III has also introduced a “countercyclical buffer” as an extension of the capital conservation
buffer, which permits national regulators to require banks to hold more capital during periods of high credit
growth (to strengthen capital reserves and moderate the debt markets). Further, Basel III has strengthened the
definition of capital that has the effect of gradually disqualifying many hybrid securities during the years 2013-
2022, including the hybrids that were issued by the Group, from inclusion in regulatory capital, as well as the
higher capital requirements associated with certain business conditions (for example, for credit value
adjustments (“CVAs”) and illiquid collateral) as part of a number of reforms to the Basel II framework. In addition,
the Basel Committee and Financial Stability Board (“FSB”) published measures that have had the effect of
requiring higher loss absorbency capacity, liquidity surcharges, exposure limits and special resolution regimes for,
and instituting more intensive and effective supervision of, “systemically important financial institutions”
(“SIFIs”), in addition to the Basel III requirements otherwise applicable to most financial institutions. One such
measure, published by the FSB in November 2015, is the Final Total -Loss Absorbing Capacity (‘TLAC’) standard for
G-SIFIs, which aims for G-SIFIs to have sufficient loss-absorbing and recapitalisation capacity available in
resolution. ING Bank has been designated by the Basel Committee and FSB as a so-called “Global Systemically
Important Bank” (“G-SIB”), since 2011, and by DNB and the Dutch Ministry of Finance as a “other SII” (“O-SII”)
since 2011. DNB requires ING Group to hold a 2.5% O-SII Buffer in addition to the capital conservation buffer and
the countercyclical buffer described above.
CRR /CRD IV
For European banks the Basel III requirements have been implemented through the Capital Requirement
Regulation (CRR) and the Capital Requirement Directive (“CRD IV”). The CRD IV regime entered into effect in
August 2014 in the Netherlands, but not all requirements were implemented all at once. Having started in 2014,
the requirements have been gradually tightened, mostly before 2019, until the Basel III migration process was
completed.
CRD IV has not only resulted in new quantitative requirements but has also led to the setting of new standards
and evolving regulatory and supervisory expectations in the area of governance, including with regard to topics
like conduct and culture, strategy and business models, outsourcing and reporting accuracy.
ING Group Annual Report 2021 on Form 20-F
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CRRII / CRD V and BRRDII
On 27 June 2019, a series of measures referred to as the Banking Reform Package (including certain amendments
to CRR and CRDIV commonly referred to as ‘CRR II’ and CRD V’) came into force, subject to various transitional
and staged timetables. The adoption of the Banking Reform Package concluded a process that began in
November 2016 and marks an important step toward the completion of the European post-crisis regulatory
reforms, drawing on a number of international standards agreed by the Basel Committee, the Financial Stability
Board and the G20. CRDV was implemented in Dutch law in 2020. The Banking Reform Package updates the
framework of harmonized rules established following the financial crisis of 2008 and introduces changes to the
CRR, CRDIV, the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation
(SRMR). The Banking Reform Package covers multiple areas, including the Pillar 2 framework, the introduction of
a leverage ratio requirement of 3% and a leverage ratio buffer requirement of 50% of the G-SIB buffer
requirement (applicable per 1 January 2023), a binding Net Stable Funding (NSFR) ratio based on the Basel NSFR
standard but including adjustments with regard to e.g. pass-through models and covered bonds issuance,
mandatory restrictions on distributions, permission for reducing own funds and eligible liabilities,
macroprudential tools, a new category of ‘non-preferred’ senior debt, the minimum requirement for own funds
and eligible liabilities (MREL) and the integration of the TLAC standard into EU legislation. Further, the EBA
obtained a mandate to investigate how to incorporate environmental, social, and governance (ESG) risks into the
supervisory process and what the prudential treatment of assets associated with environmental or social
objectives should look like.
Whilst the Banking Reform Package was being developed, the ECB introduced the Targeted Review of Internal
Models (TRIM) in June 2017 to assess reliability and comparability between banks’ models for calculating each
bank’s risk-weighted assets (‘RWA’) used for determining certain of such bank’s capital requirements. In July
2019, the ECB published the final chapters of the guide to internal models, covering credit risk, market risk and
counterparty credit risk. These risk type-specific chapters are intended to ensure a common and consistent
approach to the most relevant aspects of the regulations on internal models for banks directly supervised by the
ECB. Additionally, they provide transparency on how the ECB understands the regulations on the use of internal
models to calculate own funds requirements for the three risk types. Impact on ING is through more stringent
regulation on the end-to-end process and governance around internal models as well as an increase of risk
weighted assets (RWA).
In 2020, the last TRIM ECB inspection ended. The ECB has sent final TRIM decision letters, which include certain
obligations. Also certain limitations have been put in place until these obligations are fully addressed. ING is
working on closing the respective obligations.
Final Basel III reforms
In December 2017 the Basel Committee finalised its Basel III post-crisis reforms with the publication of the
revisions to the prudential standards for credit, operational and credit valuation adjustment (CVA) risk as well as
the introduction of an output floor. This package of reforms aims to increase consistency in risk-weighted asset
calculations and improve the comparability of banks’ capital ratios. The use of internal models will be reduced
and the standardised approaches will be made more risk-sensitive and granular.
Following a one-year deferral due to COVID-19, these reforms will take effect from 1 January 2023 and will be
phased in over five years. The implementation of the EU/Basel III reforms will have impact on ING’s risk-weighted
assets and capital ratios, but it is expected that other new banking regulations and model reviews bring forward a
significant part of this impact before the EU implementation date.
CRR “quick fix” in response to the Covid‐19 pandemic
On 26 June 2020 Regulation (EU) 2020/873 of the European Parliament and of the Council of 24 June 2020
amending Regulations CRR as regards certain adjustments in response to the COVID-19 pandemic (commonly
referred to as CRR ”quick fix”) was published.
The CRR ”quick fix” is part of a series of measures taken by European institutions to mitigate the impact of the
COVID-19 pandemic on institutions across EU Member States. In addition to the flexibility already provided in the
existing rules, the CRR ‘quick fix’ introduces certain adjustments to the CRR, including temporary measures and
measures that early adopt changes in the regulations that were intended to become effective at a future date.
This notably included reduced capital requirement for certain exposures to small- and medium sized enterprises
(SMEs), a more favourable prudential treatment for certain software assets, one year delay in the application of
the leverage ratio buffer requirement of 50% of the G-SIB buffer (to 1 January 2023). Also the following
adjustments were introduced and have an impact on disclosures:
●
frontloading from CRR2 the possibility of temporarily excluding certain exposures to central banks from
the calculation of an institution’s total exposure measure (Article 500b of CRR);
●
extending by 2 years transitional arrangements for mitigating the impact on own funds of the
introduction of IFRS 9 (Article 473a (8) of CRR).
ING Group Annual Report 2021 on Form 20-F
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CRRIII / CRD VI
On 27 October 2021, the European Commission published a legislative proposal to review the EU’s CRD/CRR
framework. The review consists of the following legislative elements: a proposal to amend CRD V, a proposal to
amend CRR II, and a separate, targeted proposal to amend CRR II in the area of resolution (the so-called ‘daisy
chain’-proposal). The package is now being negotiated by the Council of the EU and the European Parliament.
This proposed legislative review’s key aim is to implement the final Basel III framework – agreed at the end of
2017 - in the EU. It is meant to ensure banks remain resilient and capable of withstanding future crises The
proposed revisions mainly relate to the prudential standards for credit, market, operational and credit valuation
adjustment (CVA) risk as well as the introduction of an output floor. Key changes comprise the reduced use of
internal models and more risk-sensitive and granular standardised approaches. It aims to increase consistency in
risk-weighted asset calculations and improve comparability of bank capital ratios. The Commission’s proposal
remains close to the 2017 Basel agreement, but in some areas (temporarily) includes targeted measures to
account for specificities of the EU banking sector. These measures relate to topics such as the calculation of the
output floor, lending to unrated corporates, specialized lending, property lending and counterparty credit risk.
The European Commission expects that overall risk-weighted assets will not increase significantly, on average,
less than 10% for EU banks at the end of the transition period.
The proposed implementation date by the European Commission is set at 1 January 2025 for most provisions
under review, with a phase-in period for the output floor of five years. This is two years later than the BCBS’s
deadline. The European Commission also proposes a number of other targeted transitional requirements,
phasing out by 2032 at the latest.
It should be noted that final substance and timing of this review are still uncertain as the European Parliament
and Council of the EU have just started their negotiations where they can amend the European Commission
proposal before it becomes law.
Capital requirements applicable to ING Group at a consolidated level
In accordance with the CRR the minimum Pillar I capital requirements applicable to ING Group are: a Common
Equity Tier 1 (CET1) ratio of 4.5%, a Tier 1 ratio of 6% and a Total capital ratio of 8% of risk-weighted assets.
In 2020, as a reaction to the COVID-19 pandemic, relevant regulators introduced a number of changes to the
Pillar II capital requirements and the capital buffer requirements applicable to ING, including structural
reductions. The structural reductions of these capital requirements reflect the application of Art.104a in CRD V,
which allowed ING to replace CET1 capital with additional Tier 1 / Tier 2 securities to meet Pillar II requirement,
and a reduction in the overall systemic buffer (i.e. the Systemic Risk Buffer plus the highest of the O-SII and G-SII
buffer) by the Dutch National Bank from 3% to 2.5%. Similarly, various competent authorities changed or
removed their Countercyclical Buffer (CCyB) requirements. The CCyB for ING was 3 basis points at the end of
2021 (2 basis points at the end of 2020). In December 2021, the De Nederlandsche Bank (DNB) started
consultation on the revised countercyclical capital buffer framework with the intention to apply a 2% CCyB in a
standard risk environment.
As a consequence, the CET1 requirement, including buffers, for ING Group at a consolidated level was 10.51% in
2021. This requirement is the sum of a 4.5% Pillar I requirement, a 0.98% Pillar II requirement (2020: 0.98%), a
2.5% Capital Conservation Buffer (CCB), a 0.03% Countercyclical Buffer (CCyB) (based on December 2021
positions) and a 2.5% O-SII buffer that is set separately for Dutch systemic banks by the Dutch Central Bank (De
Nederlandsche Bank). This requirement excludes the Pillar II guidance, which is not disclosed.
The Maximum Distributable Amount (MDA) trigger level stood at 10.51% in 2021 for CET1, 12.33% for Tier 1
Capital and 14.77% for Total Capital (after the application of Art.104a of CRDV), based on stable Pillar II capital
requirements. In the event that ING Group breaches the MDA level, ING will face restrictions on dividend
payments, AT1 instruments coupons and payment of variable remuneration.
Covid-19 pandemic
Various countries and local governmental authorities across the world have introduced measures aimed at
preventing the further spread of Covid-19.
In addition, governments in various countries have introduced measures aimed at mitigating the economic
consequences of the outbreak. For example, the Dutch government has announced economic measures aimed at
protecting jobs, households’ wages and companies, e.g., by way of tax payment holidays, guarantee schemes and
a compensation scheme for heavily affected sectors in the economy. These announced measures and any
additional measures, including any payment holidays with respect to mortgages or other loans, have had and
may continue to have a significant impact on ING’s customers and other counterparties.
ING Group Annual Report 2021 on Form 20-F
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The various measures by governments and ING to alleviate the impact of Covid-19 also impact the loan
classification in terms of forbearance and consequently IFRS 9 staging. In light of this, the EBA has provided
guidelines that expired on 30 September 2020, which defined eligibility criteria for a payment holiday
arrangement offered to a large group of customers to be classified as a “general payment moratorium”. Based on
these guidelines, customers that were granted the payment holidays did not lead to a forbearance classification.
Therefore it did not automatically trigger recognition of lifetime Expected Credit Loss (ECL) either. ING followed
the EBA guidelines and when a payment holiday was provided to a customer as part of a “general payment
moratorium”, ING did not consider this measure to classify as forbearance. EBA further extended these
guidelines in the first week of December 2020, valid until 31 March 2021, with certain extra conditions.
Regarding these extensions, ING has taken a prudent decision to treat all payment holiday requests under new
or extended schemes (after September 2020) as stage 2 or stage 3 exposures.
Bank recovery and resolution directive
Since its adoption by the European Parliament in 2014, the Bank recovery and resolution directive (BRRD) has
become effective in all EU countries after transposition into national law, including in the Netherlands. The BRRD
aims to safeguard financial stability and minimise the use of public funds in case banks face financial distress or
fail to comply with the BRRD. Banks across the EU need to have recovery plans in place and need to cooperate
with resolution authorities to determine, and make feasible, the preferred resolution strategy. The banking
reform which came into force on 27 June 2019 includes changes to the minimum requirement for own funds and
eligible liabilities (MREL) to ensure an effective bail in process. It also includes new competences for resolution
authorities and requires G-SIBs and other banks to build up loss-absorbing and recapitalization capacity.
ING has had a recovery plan in place since 2012. The plan includes information on crisis governance, recovery
indicators, recovery options, and operational stability and communication measures. The plan enhances the
bank’s readiness and decisiveness in case of a financial crisis. The plan is updated annually to make sure it stays
fit for purpose. The completeness, quality and credibility of the updated plan is assessed each year by ING’s
regulators.
The Single Resolution Board (SRB) confirmed to ING in 2017 that a single-point-of-entry (SPE) strategy is ING’s
preferred resolution strategy, with ING Groep N.V. as the resolution entity.
In 2021, ING Group received an updated formal notification from De Nederlandsche Bank (DNB) of its MREL
requirements. The MREL requirement has been established to ensure that banks in the European Union have
sufficient own funds and eligible liabilities to absorb losses and to recapitalize bank in the case of a resolution.
The MREL requirement is set for ING Group at a consolidated level, as determined each year by the Single
Resolution Board (SRB). The following requirements replaced previously communicated total liabilities and own
funds (TLOF) requirement for ING Group as from 1-1-2022: 27.32% of RWA (M-MDA trigger) and 5.97% of LR
exposure.
Above M-MDA trigger assumes a combined buffer requirement (CBR) of 5.03% (as of 31 December 2021). In the
event that ING Group breaches the M-MDA trigger, ING may face restrictions on dividend payments, AT1
instruments coupons and payment of variable remuneration. Apart from the requirements for the Group on a
consolidated level, the internal MREL requirements are also set for individual ING subsidiaries in EU.
ING has been replacing, and will continue to replace, maturing ING Bank N.V. debt with ING Groep N.V.
instruments. In order to build up our MREL capacity, ING Groep N.V. issued multiple transactions. These
transactions will not only allow us to support business growth, but will also help to meet future MREL and TLAC
requirements with ING Groep N.V. instruments only.
CRR II implements the Financial Stability Board’s total loss absorbing (TLAC) requirement for Global Systemically
Important Institutions (G-SII), which is the EU equivalent of a G-SIB. The transitional requirement—the higher of
16% (M-MDA-trigger of 21.03% with CBR) of the resolution group’s RWA or 6% of the leverage ratio exposure
measure—applies immediately. The higher requirement—18% (M-MDA trigger of 23.03% with CBR) and 6.75%,
respectively—comes into effect as of 1 January, 2022. As a G-SII ING is expected to meet the TLAC requirement
alongside the other minimum regulatory requirements set out in EU regulation.
Stress testing
Stress testing is an integral component of our risk and capital management framework. It allows us to (i) assess
potential vulnerabilities in our businesses, business model, and/or portfolios; (ii) understand the sensitivities of
the core assumptions in our strategic and capital plans; and (iii) prepare and assess management actions that can
reduce or mitigate the impact of adverse scenarios.
ING Group Annual Report 2021 on Form 20-F
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In addition to running internal stress test scenarios to reflect the outcomes of the annual risk assessment, ING
also participates in regulatory stress test exercises. ING participated in the 2021 EU-wide stress test conducted by
the EBA in cooperation with the European Central Bank (ECB) and the European Systemic Risk Board (ESRB). The
baseline scenario was developed by the ECB and the adverse stress test scenario by the ESRB, both cover a three-
year time horizon (2021-2023).
The 2021 EU-wide stress test exercise was carried out applying a static balance sheet assumption as of December
2020, and therefore does not take into account current or future business strategies and management actions.
The results of the EBA stress test reaffirmed the resilience of our business model and the strength of ING’s capital
base. Our commitment to maintain a robust, fully-loaded Group common equity Tier 1 (CET1) ratio in excess of
prevailing requirements remains. Under the hypothetical baseline scenario and EBA’s methodological
instructions, ING Group would have a fully loaded common equity Tier 1 capital ratio (CET1) of 16.06% in 2023.
Under the hypothetical adverse scenario and EBA’s methodological instructions, ING Group would have a fully
loaded CET1 ratio of 10.99% in 2023. ING Group published an actual CET1 ratio of 15.45% per 31 December 2020.
The next EBA EU-wide stress test will be held in 2023.
An emerging topic in the area of stress testing are climate risk analyses. ING started with climate risk stress
testing in 2019 to assess the effect of transition risk and physical risk on the financial position of ING Group. In
the second half of 2021, ING started preparing for the regulatory climate risks stress test scenario, which will be
assessed in 2022 as part of the bi-annual ECB Single Supervisory Mechanism (SSM) stress test. This regulatory
stress test, combined with internal analyses done on climate risk, will be used to enhance ING’s internal climate
risk stress testing.
Deposit Schemes
In the Netherlands and other jurisdictions, deposit guarantee schemes and similar funds (‘Compensation
Schemes’) have been implemented from which compensation may become payable to customers of financial
services firms in the event the financial service firm is unable to pay, or unlikely to pay, claims against it. In many
jurisdictions in which we operate, these Compensation Schemes are funded, directly or indirectly, by financial
services firms which operate and/or are licensed in the relevant jurisdiction. ING Bank is a participant in the
Dutch Deposit Guarantee Scheme (‘DGS’), which guarantees an amount of EUR 100,000 per person per bank
(regardless of the number of accounts held). On the basis of the EU Directive on deposit guarantee schemes, ING
pays quarterly risk-weighted contributions into a DGS-fund. The DGS-fund is to grow to a target size of 0.8% of
all deposits guaranteed under the DGS, which is expected to be reached in July 2024. In case of failure of a Dutch
bank, depositor compensation is paid from the DGS-fund. If the available financial means of the fund are
insufficient, Dutch banks, including ING, may be required to pay extraordinary ex-post contributions not
exceeding 0.5% of their covered deposits per calendar year. In exceptional circumstances and with the consent
of the competent authority, higher contributions may be required. However, extraordinary ex-post contributions
may be temporarily deferred if, and for so long as, they would jeopardise the solvency or liquidity of a bank.
Since 2015, the EU has been discussing the introduction of a pan-European deposit guarantee scheme (‘EDIS’),
(partly) replacing or complementing national compensation schemes in two or three phases. Proposals contain
elements of (re)insurance, mutual lending and mutualisation of funds. The new model is intended to be ‘overall
cost-neutral’. In February 2021, the European Commission issued a public consultation on the review of the bank
crisis management and deposit insurance (CMDI) framework, with a focus on three EU legislative texts: the Bank
Recovery and Resolution Directive (BRRD), the Single Resolution Mechanism Regulation (SRMR), and the Deposit
Guarantee Schemes Directive (DGSD). The anticipated revision of the CMDI framework is part of the debate on
the completion of the Banking Union and in particular its third and missing pillar EDIS. The consultation period
ran until May 2021. It is uncertain when the next steps towards revision of the CMDI framework, including EDIS,
can be expected.
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Payment Services Directive 2 (PSD2)
PSD2 entered into force in January 2018 and responds to technical change and a variety of developments in the
payments domain. It fosters innovation and competition by promoting non-discriminatory access to payment
systems and accounts, including the newly introduced account information services and payment initiation
services. Customers benefit from greater transparency of costs and charges, PSD2's extended geographical reach
and being applicable to transactions in any currency, a reduction of the maximum liability for unauthorized
transactions and a backstop date for complaint resolution. Finally, to combat cybercrime and online fraud, PSD2
continues the trend towards enhancing the security around the making of payments, e.g. by the introduction of
strong customer authentication. It consists of two factor authentication, to be performed every time a payer
accesses its payment account online or initiates electronic remote payment transactions. The Regulatory
Technical Standards for strong customer authentication and common and secure communication provide further
requirements to implement the strict security requirements for payment service providers in the EU.
Benchmarks Regulation
Benchmarks, such as the London Interbank Offered Rate (‘LIBOR’), the Euro Overnight Index Average (‘EONIA’),
the Euro Interbank Offered Rate (‘EURIBOR’) and other interest rates, as well as commodity benchmarks or other
types of rates and indices which are deemed to be ‘benchmarks’ are the subject of ongoing national and
international regulatory reform.
In 2016, the EU adopted a Regulation (the ‘Benchmarks Regulation’ or ‘BMR’) on indices used in the EU as
benchmarks in financial contracts and financial instruments. The Benchmarks Regulation became effective on 1
January 2018.
The BMR among others requires that supervised entities may only use benchmarks in the EU if these benchmarks
are provided by administrators that are registered with the European Securities and Markets Authority (‘ESMA’).
Benchmarks that are based on input from contributors shall have a code of conduct in place designed primarily to
ensure reliability of input data, governing issues such as conflicts of interest, internal controls and benchmark
methodologies. Financial contracts and financial instruments in which benchmarks are used by supervised
entities require to have robust fall back wording included in their documentation.
For qualitative and quantitative disclosures on IBOR transition refer to “Additional information – ING Group Risk
Management – Market Risk” and Note 40 “Derivatives and hedge accounting”.
Financial Transaction Taxes
In February 2013, the EC adopted a proposal setting out the details of a financial transaction tax (‘FTT’) under the
enhanced cooperation procedure, to be levied on transactions in financial instruments by financial institutions if
at least one of the parties to the transaction is established in the financial transaction tax zone (‘FTT-Zone’) or if
the instrument which is the subject of the transaction is issued within the territory of a Member State in the FFT-
Zone. 10 Member States have indicated they wish to participate in the FTT (Austria, Belgium, France, Germany,
Greece, Italy, Portugal, Slovakia, Slovenia and Spain). The initial proposal contemplated that the FTT would enter
into effect on 1 January 2014, which would have then required us to pay a tax on transactions in financial
instruments with parties (including Group affiliates) located in such FTT-zone. However, the FTT remains subject
to negotiation between the participating Member States and currently it is uncertain whether and in what form
and by which Member States the FTT will be adopted. The implementation date of any FTT will thus depend on
the future approval by participating Member States in the Council, consultation of other EU institutions, and the
subsequent transposition into local law.
KYC Requirements
Financial institutions continue to face new and increasingly complex regulatory requirements, contributing to
increasing costs of compliance, in the context of heightened regulatory scrutiny. Generally, we expect the scope
and extent of regulations in the jurisdictions in which we operate to continue to increase.
The evolving regulatory landscape drives the need for continuous change in the various processes, procedures
and systems of the bank. Where the timeline for implementation of new or revised requirements is sometimes
quite short, this presents challenges to financial institutions in general, but especially in relation to IT
development. In addition, in some instances, the complexity of the regulatory landscape gives rise to potential
tension between applicable laws and regulations at a local and/or global level. For example, potential tension
between data privacy (GDPR) and AML/CFT and anti-corruption laws and regulations; including the requirement
to share information relating to financial crime concerns to manage risk exposure across the group, while
complying with the legislative requirements relating to data, which can differ significantly depending on
jurisdiction.
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ING is focussed on continuing to embed processes and procedures reflecting applicable requirements within the
bank, including in our IT systems and data sources, in a robust and sustainable way; driving a business
environment which is compliant by desire and design. The bank also executes ongoing training and awareness to
develop its people to have the right knowledge and skills.
In addition, ING aims to continuously monitor regulatory developments, as well as considering emerging and
evolving risks. This supports assessment of the risks that ING may be exposed to and of the associated controls
and processes ING has in place, so we can appropriately manage these risks in accordance with our risk appetite.
In particular, the rise in price and use of virtual assets, accompanied by the growth of virtual assets service
providers was a key theme in 2020 that continued to attract regulatory attention in 2021 for potential money
laundering, tax evasion and terrorist financing.
5th AML Directive and the European Commission legislative package
In 2021, ING focussed on the implementation of the requirements of the EU 5th AML Directive, as well as
considering the EBA’s MT/TF risk factor guidelines published on 1 March 2021 and other relevant guidance
documents. On 20 July 2021, the European Commission presented a package of legislative proposals (including a
proposal for a 6th AML Directive) to strengthen the EU’s anti-money laundering and countering the financing of
terrorism (AML/CFT) rules. The proposed main changes include the creation of a European AML/CTF supervisory
authority and the adoption of a “single rulebook’”, with directly applicable rules, including in the areas of
customer due diligence and beneficial ownership. The Regulation also includes the introduction of an EU-wide
limit of €10,000 to large cash payments.
ING welcomes the proposals to further strengthen the regulatory framework aimed at the prevention of money
laundering and terrorism financing. Harmonisation of key requirements is welcomed especially because of ING’s
large presence in the EU. Considering that the texts of the proposals are still in draft and relatively conceptual at
this point in time, ING is in active dialogue with internal and external stakeholders and it participates in relevant
workstreams of banking associations such as the Dutch Banking Association, to formulate its position and provide
further recommendations and feedback to the European Commission’s consultation. This assists ING in assessing
and adequately managing the impact of the AML legislative package on the bank.
Policy with respect to certain countries
As a result of frequent evaluation of all businesses from economic, strategic and risk perspective ING continues
to believe that for business reasons doing business involving certain specified countries should be discontinued.
In that respect, ING has a policy not to enter into new relationships with clients from these countries and
processes remain in place to discontinue existing relationships involving these countries. At present these
countries are Cuba, Iran, North Korea, Sudan and Syria, as well as the Crimea region.
ING Group maintains a limited legacy portfolio of guarantees, accounts, and loans that involve various entities
with a connection to Iran. These positions remain on the books but certain accounts related thereto are ‘frozen’
where prescribed by applicable laws and procedures and in all cases subject to increased scrutiny within ING
Group. ING Group may receive loan repayments, duly authorised by the relevant competent authorities where
prescribed by applicable laws. For the calendar year 2021, ING Group had revenues of approximately USD 257
thousand. ING Group estimates that it had a net profit of approximately USD 4 thousand.
Sanctions related developments
2021 saw ongoing geopolitical tensions notably between US and China, and increasing tensions between US and
EU in relation to Russia. ING and its customers are impacted by such geopolitical tensions when new sanctions
and restrictive measure are promulgated by relevant authorities. Such sanctions and restrictive measures may
impact the products, services, and customers that ING can service. Increasing sanctions and counter sanctions,
together with any notable difference in various sanctions programmes, especially between the EU and US,
increases complexities and potential reputational risks in operationalising uniform sanctions controls.
In 2021, the EU and the US continued sanctions programs with respect to several regions and countries, including
Ukraine/Russia, Iran, China, Venezuela and Syria.
The international community is leveraging their sanction tools in response to the escalation of Russia’s invasion
of Ukraine. Accordingly, as part of ING’s know your customer and compliance risk governance and procedures,
ING is continuously monitoring the situation to stay abreast on all relevant updates to implement effective and
appropriate additional control measures and to manage the increased risk and financial impacts of these
developments.
For additional information regarding regulatory developments, see also this Form 20F 2021, under “Additional
Information – ING Group Risk Management- Compliance Risk”.
ING Group Annual Report 2021 on Form 20-F
64
For a description of our segments including a breakdown of total revenues by category for the last three financial
years, refer to Item 5. “Operating and financial review and prospects - Segment reporting”.
C. Organisational structure
ING Groep N.V., a publicly-listed company, is the parent of one main legal entity: ING Bank N.V. (ING Bank).
ING
Bank is the parent company of various Dutch and foreign banking and other subsidiaries.
Reference is made to Exhibit 8 “List of subsidiaries of ING Groep N.V.” for a list of principal subsidiaries of ING
Groep. N.V. For the majority of ING’s principal subsidiaries, ING Groep N.V. has control because it either directly
or indirectly owns more than half of the voting power. For subsidiaries in which the interest held is below 50%,
control exists based on the combination of ING’s financial interest and its rights from other contractual
arrangements which result in control over the operating and financial policies of the entity.
D. Property, plants and equipment
ING predominantly leases the land and buildings used in the normal course of its business. In addition, ING has
invested in land and buildings. Management believes that ING’s facilities are adequate for its present needs in all
material respects.
For information on property, plants and equipment, reference is made to Note 9 ‘Property and equipment’, for
information on lease liabilities reference is made to Note 16 ‘Other liabilities’ and for information on investment
properties reference is made to Note 11 ‘ Other assets’ in the consolidated financial statements.
Item 4A. Unresolved Staff comments
Not applicable.
ING Group Annual Report 2021 on Form 20-F
65
Item 5. Operating and financial review
and prospects
The following operating and financial review and prospects should be read in conjunction with the consolidated
financial statements and the related Notes thereto included elsewhere herein. The consolidated financial
statements have been prepared in accordance with IFRS-IASB. Unless otherwise indicated, financial information
for ING Group included herein is presented on a consolidated basis under IFRS-IASB.
A. Operating results
Our business is shaped by events and developments in the world around us and our operating results for the
financial year should be viewed in the context of these event and developments. The biggest of these in 2021
continued to be the coronavirus pandemic, which was first and foremost a human tragedy, but which also
impacted governments, economies, supply chains and jobs.
ING has had to adapt to the practical implications this had for customers and employees, as well as to the new
market trends and stakeholder expectations. At the same time, our business continues to be affected by
regulatory changes and the persistent low interest rate environment. For further information on regulatory
changes reference is made to “Item 4. Information on the Company – Regulation and Supervision”.
ING is also closely monitoring the situation in Ukraine from a financial, operational and security perspective, with
the safety and wellbeing of employees our top priority. We strongly condemn Russia’s invasion of Ukraine in
February 2022 and are deeply concerned by its devastating impact and the threat to international stability and
security. ING has been providing Wholesale Banking services in Ukraine and Russia for almost 30 years. As of 28
February 2022, ING’s total Russia-related exposure was approximately €6.7 billion (representing around 0.9% of
our total loan book), of which around 700 million was affected by new sanctions. We have around €500 million
exposure in Ukraine. In March 2022, we decided to not do new business with Russian companies. Read more in
Risk management.
Other material events and uncertainties that have an impact on our operating results are:
●
Covid-19 and inflation
●
Macroeconomic developments
●
Climate change
●
Climate risk
●
Anti-money laundering
●
Cybersecurity and fraud
●
Fluctuations in equity markets, interest rates and foreign exchange rates
For further information on other factors that can impact ING Group’s results of operations, reference is made to
“Item 3. Key information - Risk Factors”.
Covid-19 and inflation
Economic growth picked up this year, helped by strong policy support, the deployment of vaccine programmes
and the reversal of lockdown measures, although these were reintroduced in some countries at the end of the
year prompted by an increase in infections, and the emergence of a new variant of the Covid-19 virus. The global
economy surpassed its pre-pandemic level, but many countries are still operating below pre-Covid levels,
particularly emerging markets and developing economies with lower vaccination rates and less government
support. China and Australia had already recovered in 2020; the US and the eurozone caught up in 2021.
A resurgence of Covid-19 cases and supply disruptions began to negatively impact economic momentum in the
second half of the year. In particular, US consumption softened in the third quarter and German industry had to
scale back because of shortages of key inputs. The economic impact of the Delta variant, especially in countries
with low vaccination rates, added to pressures on global supply chains and costs. Supply disruptions were often
longer than expected and fed inflation in many countries. Higher commodity prices and the rise in consumer
demand as economies thawed caused consumer price inflation to increase rapidly, most significantly in the US,
Canada and the UK, although other advanced economies in Europe and Asia also saw inflation picking up.
Against the background of economic recovery and increased inflationary pressures, the Federal Reserve started
to taper its bond buying purchasing programme. The European Central Bank (ECB) also announced a reduction in
bond purchases, but is set to move slower. The ECB plans to end its Pandemic Asset Purchase Programme by Q2
2022 and expects to have reduced asset purchases, under the Asset Purchase Programme, to € 20 billion per
month by the end of the year. Together these factors drove up longer-term interest rates and steepened yield
curves. With interest rates remaining at low levels and government policies staying growth-supportive, house
prices continued to rise.
ING Group Annual Report 2021 on Form 20-F
66
Macroeconomic developments
These were significant macroeconomic developments that impacted our own organisation as well as our
customers, employees, shareholders and other stakeholders. Despite the economic thaw, the normal flow of
business in countries where ING operates remained disrupted to a greater or lesser extent throughout 2021. The
German elections, continuing China/US tensions, continued uncertainty around the full impact of Brexit all added
to the volatility of our external environment. As a global financial services company, with our profitability,
solvency and liquidity linked heavily to the state of the economy and the market environment, we remained alert
to this volatility’s potential to impact our performance.
Climate change
Although the threat of climate change has been signalled for some time by the scientific community, its impact is
intensifying and it’s happening faster than previously predicted. The flooding, wildfires and heatwaves
experienced this year are expected to occur more frequently due to climate change. This formed the backdrop to
the 2021 report from the United Nation’s Intergovernmental Panel on Climate Change (IPCC), which flagged
climate change as a ‘code red’ for humanity, requiring urgent intervention from all sectors of society.
This urgency was underlined at the New York Climate Week in September 2021, where it was reinforced that
accelerated action now and in the coming years can positively affect our transition towards a more carbon-
neutral future. In November 2021, at the 26
th
were reached on important steps towards net-zero emissions in 2050, such as shifting away from coal and a
pledge to halt deforestation. But this is not yet enough to get us into the safe zone; these pledges add up to an
average global warming of 1.8°C at best. There was agreement on countries having to accelerate and strengthen
their 2030 targets, and a framework for a global carbon market was drawn up, which is expected to trigger a
surge of green projects. As always the proof is in the action and real impact on the ground. COP27 will be crucial
– again. Not only for limiting greenhouse gas emissions far more drastically, but also for agreements on climate
adaptation and the social impact of climate change, both of which affect developing countries
disproportionately.
We believe ING can have the biggest impact in mitigating the effect of climate change through our financing. We
work with our clients to finance and facilitate their transition to low-carbon technologies and offer a growing
suite of sustainability products and services to help them, including sustainability-linked loans and ‘green’ bonds.
The popularity of sustainability-linked financing is growing, partly fuelled by companies facing pressure from
investors and regulators to ‘go green’. To protect the integrity of this fast-growing market, which we pioneered
back in 2017, ING published a position paper in October calling for linked sustainability targets to be ambitious,
recognised industry-wide and verified by a reputable, independent party. This will help to retain the credibility of
the market by ensuring companies tackle the most difficult and urgent climate issues first. Ambition levels that
are too low will not make the impact these products are designed for.
While ING can voice its opinion on all transactions, and we can use our influence to steer clients towards credible
targets on those we structure ourselves, market dynamics don’t always allow us to put the proper structures in
place if we’re not in a leading role. We believe regulatory developments like the European Commission’s green
bond standard will help to improve the quality of the market as it evolves.
The role that regulators and governments play in supporting and facilitating the road to a net-zero emission
world cannot be underestimated. To this end, the EU presented its net-zero targets with ambitious legislative
proposals to cut emissions by 55% by 2030 (‘Fit for 55’), and we look forward to seeing ambitious national
policies that align with this goal. In the meantime, ING is working on its own action plans as new climate
scenarios and expectations emerge, and we present these, and our progress on them, in our integrated climate
report on ing.com.
Climate risk
According to the European Central Bank, climate change will be a major source of systematic risk to banks if no
action is taken. A recent ECB study showed banks in the eurozone would have an 8% higher chance of loan
defaults by 2050 if nothing is done about global warming, with the risk rising to 30% for banks in southern
Europe. The physical risk from climate change is tangible – fires, floods and rising sea levels affect people’s lives,
livelihoods, assets and businesses. There is also transition risk such as carbon pricing and shifting consumer
preferences, which can leave manufacturers with stranded assets if they don’t adapt to market demands for
greener products.
ING strives to identify and understand these risks as part of our integrated approach to climate action. We do this
to build resilience to these risks in our own organisation as well as to prepare for their potential impact on clients
and other stakeholders and this helps shape our strategy. As such, climate risk will be included in our risk
management framework in a forward-looking approach. Our climate risk programme helps measure the impact
of climate change on our loan book. We follow guidance from the ECB and the Taskforce for Climate-Related
ING Group Annual Report 2021 on Form 20-F
67
Financial Disclosure on how banks are expected to prudently manage and transparently disclose climate-related
and environmental risks under current prudential rules.
Anti-money laundering
As a gatekeeper to the financial system, we have an important role in protecting society against all types of
financial crime. Money laundering is one such crime, existing in and of itself and as a facilitator of other crimes
such as people trafficking and drug smuggling.
To be more effective in our efforts to fight financial economic crime, we work closely with our peers, regulators
and law enforcement. This includes initiatives with other banks in the Netherlands and Germany to jointly
monitor transactions and share intelligence, and further professionalising our KYC organisation by means of
internationally recognised certifications.
In June 2021, the EU presented its action plan for know your customer/anti-money laundering (AML). This aims
to increase harmonisation of rules across member states and proposes direct supervision at EU level for those
banks exposed to the highest AML risk. We welcome these reforms as they will help improve the current
framework and help us with the operationalisation of new AML measures across our network.
ING is looking into how to deal with the issue of customer tax integrity, (a process accelerated by the Pandora
Papers investigation in October), where customer transactions may be legal but are ethically undesirable. We are
exploring different approaches regarding the execution of our risk judgement processes in this area.
Cybersecurity and fraud
Digital technology has connected the world in an unprecedented way. The pandemic has highlighted just how
much people rely on the internet to work, socialise and shop. With this increased reliance, comes an increasing
risk that some of these digital interactions will be used for criminal purposes. As a result, there are growing
societal concerns about increasingly sophisticated cyberattacks as well as around data privacy and protection.
Cybercrime is a growing threat to society and companies in general, and to the financial system in particular, with
scams that aim to trick people out of their money. One such scam involves fake bank employees tricking
customers into redirecting their savings into a ‘safe’ account, while phishing scams have evolved from emails to
text messages as fraudsters become ever more inventive.
Falling victim to bank fraud can have devastating consequences for customers, not just financially but also on
their confidence, mental health and relationships. Raising awareness among customers and employees is an
important step in protecting people against crimes like, phishing, spoofing and hacking.
At ING too, there is an increased risk of criminals trying to gain unauthorised access to the bank, whether that’s
through malware, phishing attacks, identity theft or online fraud. To stay resilient to these increasingly
sophisticated crimes, we take a multi-faceted approach that aims to anticipate threats, prevent them from
becoming reality and so protect our customers. Through collaboration with governments, fintechs and our peers,
we share knowledge and facilitate security innovation for the bank, our industry and society.
Fluctuations in equity markets
Our banking operations are exposed to fluctuations in equity markets. ING maintains an internationally
diversified and mainly client-related trading portfolio. Accordingly, market downturns are likely to lead to
declines in securities trading and brokerage activities which we execute for customers and therefore to a decline
in related commissions and trading results. In addition to this, ING also maintains equity investments in its own
non-trading books. Fluctuations in equity markets may affect the value of these investments.
Fluctuations in interest rates
Our banking operations are exposed to fluctuations in interest rates. Mismatches in the interest re-pricing and
maturity profile of assets and liabilities in our balance sheet can affect the future interest earnings and economic
value of the bank's underlying banking operations. In addition, changing interest rates may impact the (assumed)
behavior of our customers, impacting the interest rate exposure, interest hedge positions and future interest
earnings, solvency and economic value of the bank’s underlying banking operations. In the current low (and in
some cases negative) interest rate environment, the stability of future interest earnings and margin also depends
on the ability to actively manage pricing of customer assets and liabilities. Especially, the pricing of customer
savings portfolios in relation to re-pricing customer assets and other investments in our balance sheet is a key
factor in the management of the bank’s interest earnings.
Fluctuations in exchange rates
ING Group is exposed to fluctuations in exchange rates. Our management of exchange rate sensitivity affects the
results of our operations through the trading activities (which includes local country versus international
transactions) and because we prepare and publish our consolidated financial statements in Euros. Because a
ING Group Annual Report 2021 on Form 20-F
68
substantial portion of our income, expenses and foreign investments is denominated in currencies other than
Euros, fluctuations in the exchange rates used to translate foreign currencies, particularly the U.S. Dollar, Pound
Sterling, Turkish Lira, Chinese Renminbi, Australian Dollar, Japanese Yen, Polish Zloty, Korean Won, Brazilian Real,
Singapore Dollar, Thai Baht and Russian Ruble into Euros can impact our reported results of operations, cash
flows and reserves from year to year. Fluctuations in exchange rates will also impact the value (denominated in
Euro) of our investments in our non-Euro reporting subsidiaries. The impact of these fluctuations in exchange
rates is mitigated to some extent by the fact that income and related expenses, as well as assets and liabilities, of
each of our non-Euro reporting subsidiaries are generally denominated in the same currencies. FX translation risk
is managed by taking into account the effect of translation results on the Common Equity Tier 1 ratio (CET1).
Consolidated result of operations
ING Group monitors and evaluates the performance of ING Group at a consolidated level and by segment using
results based on figures according to IFRS as adopted by the European Union (IFRS-EU). The Executive Board and
the Management Board Banking consider this measure to be relevant to an understanding of the Group’s
financial performance, because it allows investors to understand the primary method used by management to
evaluate the Group’s operating performance and make decisions about allocating resources. In addition, ING
Group believes that the presentation of results in accordance with IFRS-EU helps investors compare its segment
performance on a meaningful basis by highlighting result before tax attributable to ongoing operations and the
profitability of the segment businesses. IFRS-EU result is derived by including the impact of the IFRS-EU ‘IAS 39
carve out’ adjustment from IFRS-IASB.
The IFRS-EU ‘IAS 39 carve-out’ adjustment relates to fair value portfolio hedge accounting strategies for the
mortgage and savings portfolios in the Benelux, Germany and Other Challengers that are not eligible under IFRS-
IASB. As no hedge accounting is applied to these mortgage and savings portfolios under IFRS-IASB, the fair value
changes of the derivatives are not offset by fair value changes of the hedge items (mortgages and savings).
Segment Reporting
The published 2021 Annual Accounts of ING Group includes financial information in accordance with
International Financial Reporting Standards as adopted by the European Union (IFRS-EU). The segment reporting
in the annual report on Form 20-F has been reconciled with International Financial Reporting Standards as issued
by the International Accounting Standards Board (IFRS-IASB) for consistency with the other financial information
contained in this report. The difference between the accounting standards is reflected in the Wholesale Banking
segment, and in the geographical split of the segments in the Netherlands, Belgium, Germany and Other
Challengers. Reference is made to Note 1 ‘Basis of preparation and significant accounting Policies’ for a
reconciliation between IFRS-EU and IFRS-IASB.
ING Group’s segments are based on the internal reporting structure by lines of business.
The Executive Board of ING Group and the Management Board Banking (together the Chief Operating Decision
Maker (CODM)) set the performance targets, approve and monitor the budgets prepared by the business lines.
Business lines formulate strategic, commercial, and financial plans in conformity with the strategy and
performance targets set by the CODM.
Recognition and measurement of segment results are in line with the accounting policies as described in Note 1
‘Basis of preparation and significant accounting policies’. The results for the period for each reportable segment
are after intercompany and intersegment eliminations and are those reviewed by the CODM to assess
performance of the segments. Transfer prices for inter-segment transactions are set at arm’s length. Corporate
expenses are allocated to business lines based on time spent by head office personnel, the relative number of
staff, or on the basis of income, expenses and/or assets of the segment. Total assets by country, as presented in
Note 36 ‘Information on geographical areas’, does not include intercompany balances and reconciles to the total
assets in the consolidated statement of financial position of ING Group.
The following overview specifies the segments by line of business and the main sources of income of each of the
segments:
Retail Netherlands (Market Leaders)
Income from retail and private banking activities in the Netherlands, including the SME and mid-corporate
segments, and the Real Estate Finance portfolio related to Dutch domestic mid-corporates. The main products
ING Group Annual Report 2021 on Form 20-F
69
offered are current and savings accounts, business lending, mortgages and other consumer lending in the
Netherlands.
Retail Belgium (Market Leaders)
Income from retail and private banking activities in Belgium (including Luxembourg), including the SME and mid-
corporate segments. The main products offered are similar to those in the Netherlands.
Retail Germany (Challengers and Growth Markets)
Income from retail and private banking activities in Germany (including Austria). The main products offered are
current and savings accounts, mortgages and other customer lending.
Retail Other (Challengers and Growth Markets)
Income from retail banking activities in the rest of the world, including the SME and mid-corporate segments in
specific countries. The main products offered are similar to those in the Netherlands.
Wholesale Banking
Income from wholesale banking activities. The main products are: lending, debt capital markets, working capital
solutions, export finance, daily banking solutions, treasury and risk solutions, and corporate finance.
Corporate Line
In addition to these segments, ING Group reconciles the total segment results to the total result using Corporate
Line. The Corporate Line is a reflection of capital management activities and certain income and expense items
that are not allocated to the banking businesses, including the recognition of value-added tax (VAT) refunds in
the Netherlands (recorded under expenses). In 2021, income was supported by a EUR 143 million conditional
TLTRO III benefit and the recognition of a EUR 72 million receivable related to the insolvency of a financial
institution, while expenses included EUR 87 million of regulatory costs due to an incidental 50% increase in the
Dutch bank tax as well as a significantly lower VAT refund compared with the previous year. In 2020, net interest
income on the Corporate Line sharply declined, mainly due to lower interest results from foreign currency
hedging due to lower interest rate differentials. In 2019, a EUR 119 million gain from the release of a currency
translation reserve following the sale of ING’s stake in Kotak Mahindra Bank was included, and the recognition of
a EUR 79 million receivable related to the insolvency of a financial institution (both recorded under income).
Furthermore, the Corporate Line includes the isolated legacy costs (mainly negative interest results) caused by
the replacement of short-term funding with long-term funding during 2013 and 2014. ING Group applies a
system of capital charging for its banking operations in order to create a comparable basis for the results of
business units globally, irrespective of the business units’ book equity and the currency they operate in.
Total Operations
The following table sets forth the contribution of ING’s business lines and the corporate line to the net result for
each of the years 2021, 2020 and 2019.
Total operations
1 January to 31 December 2021
Amounts in millions of euros
Retail
Banking
Netherlands
Retail
Banking
Belgium
Retail
Banking
Germany
Retail
Other
Wholesale
Banking
Corporate
Line
Total
Income:
3,290
1,747
1,447
2,712
4,151
267
13,615
771
519
497
530
1,197
3
3,517
201
209
65
361
568
-45
1,359
Total income
4,262
2,475
2,009
3,602
5,916
226
18,490
Expenditure:
2,403
1,667
1,174
2,452
2,926
570
11,192
-76
225
49
202
117
0
516
Total expenditure
2,326
1,892
1,223
2,654
3,042
570
11,708
Result before taxation
1,936
583
786
949
2,874
-345
6,782
Taxation
499
146
252
212
703
65
1,877
Non-controlling interests
0
0
4
98
26
0
128
Net result IFRS-EU
1,437
437
529
639
2,144
-410
4,776
Adjustment of the EU 'IAS 39 carve-out'
1,174
1,174
Net result IFRS-IASB
1,437
437
529
639
3,318
-410
5,951
ING Group Annual Report 2021 on Form 20-F
70
Total operations
1 January to 31 December 2020
Amounts in millions of euros
Retail
Banking
Netherlands
Retail
Banking
Belgium
Retail
Banking
Germany
Retail
Other
Wholesale
Banking
Corporate
Line
Total
Income:
3,511
1,816
1,587
2,760
3,718
212
13,604
681
413
437
412
1,069
-1
3,011
279
145
93
89
609
-192
1,022
Total income
4,471
2,373
2,117
3,261
5,396
18
17,637
Expenditure:
2,236
1,737
1,110
2,469
3,218
383
11,153
157
514
57
593
1,351
2
2,675
Total expenditure
2,393
2,251
1,167
3,063
4,568
385
13,828
Result before taxation
2,078
122
950
199
827
-367
3,809
Taxation
523
51
331
105
295
-58
1,246
Non-controlling interests
-1
0
4
55
20
0
78
Net result IFRS-EU
1,556
71
615
39
512
-308
2,485
Adjustment of the EU 'IAS 39 carve-out'
-234
-234
Net result IFRS-IASB
1,556
71
615
39
278
-308
2,250
Total operations
1 January to 31 December 2019
Amounts in millions of euros
Retail
Banking
Netherlands
Retail
Banking
Belgium
Retail
Banking
Germany
Retail
Other
Wholesale
Banking
Corporate
Line
Total
Income:
3,541
1,907
1,579
2,787
3,794
470
14,079
674
374
268
423
1,135
-6
2,868
290
161
138
298
369
103
1,360
Total income
4,505
2,442
1,985
3,509
5,298
568
18,306
Expenditure:
2,210
1,609
1,080
2,210
2,937
307
10,353
91
186
-53
364
532
-0
1,120
Total expenditure
2,301
1,794
1,027
2,574
3,469
307
11,472
Result before taxation
2,204
647
957
935
1,830
261
6,834
Taxation
558
192
328
234
464
179
1,955
Non-controlling interests
-0
0
3
82
14
-0
99
Net result IFRS-EU
1,646
455
627
619
1,352
82
4,781
Adjustment of the EU 'IAS 39 carve-out'
-878
-878
Net result IFRS-IASB
1,646
455
627
619
474
82
3,903
ING Group Annual Report 2021 on Form 20-F
71
Year ended 31 December 2021 compared to year ended 31 December 2020
ING’s net result (including the adjustment of the EU ‘IAS 39 carve-out’) increased by EUR 3,701 million, or
164.5%, to EUR 5,951 million compared with EUR 2,250 million in 2020. The net result was affected by a EUR
1,174 million positive contribution of fair value changes on derivatives related to asset-liability-management
activities for the mortgage and savings portfolios in the Benelux, Germany, France and Czech Republic, versus a
EUR 234 million negative contribution in 2020. These fair value changes were mainly caused by changes in
market interest rates. No hedge accounting is applied to these derivatives under IFRS-IASB.
ING’s IFRS-EU net result (before adjustment of the EU ‘IAS 39 Carve-out’) rose to EUR 4,776 million from EUR
2,485 million in 2020. The effective tax rate in 2021 was 27.7%, down from 32.7% in 2020. The lower effective tax
rate was mainly caused by the reduced impact of non-deductible amounts, whereas 2020 had included the non-
deductible impairments on goodwill and on our stake in TTB (previously referred to as TMB).
The result before tax increased 78.1% to EUR 6,782 million in 2021 from EUR 3,809 million in 2020,
predominantly due to lower risk costs reflecting improved macroeconomic indicators, as well as higher income.
Net core lending growth (adjusted for currency impacts, and excluding Treasury and the run-off portfolios) was
EUR 30.6 billion, and net core deposits growth was EUR 10.3 billion. At year-end, the global retail customer base
declined to 38.2 million, mainly by exiting the Austrian and Czech retail banking markets. The number of primary
customers, however, rose during the year by 481,000 to 14.3 million.
Income rose 4.8% to EUR 18,490 million in 2021 from EUR 17,637 million in 2020. Income was supported by the
recognition of a EUR 483 million conditional TLTRO III benefit, which also included the impact of the retroactive
adjustment in the ECB funding rate as from 24 June 2020. The increase in income was mainly in Wholesale
Banking, due to higher revenues in all product groups, while the higher income in Corporate Line was supported
by the recognition of EUR 72 million receivable related to the insolvency of a financial institution in the
Netherlands and higher interest results from foreign currency ratio hedging. Income at Retail Banking slightly
increased as strong growth in fee income and the impact of the impairment on ING’s equity stake in TTB
recorded in 2020, was largely offset by the continued margin pressure on liabilities.
Net interest income increased 0.1% to EUR 13,615 million, and was supported by the EUR 483 million conditional
TLTRO III benefit. Higher interest results were recorded on lending products (driven by a higher total lending
margin), but also in Treasury, Financial Markets and Corporate Line. These increases were offset by lower
revenues on current accounts and savings, reflecting continued liability margin pressure. ING Bank’s overall net
interest margin declined to 1.39% from 1.43% in 2020.
Net fee and commission income increased 16.8% to EUR 3,517 million from EUR 3,011 million in 2020. In Retail
Banking, net fee and commission income rose by EUR 374 million, or 19.2%. This increase was mainly in daily
banking, reflecting higher packages fees, recovery of payment transactions and new fee introductions, as well as
higher fees from investment products due to new account openings, a higher number of trades and higher assets
under management. Total fee income in Wholesale Banking increased by EUR 128 million, or 12.0%, mainly in
Trade Commodity Finance as a result of higher average oil prices as well as increased daily banking fees and
higher fee income in Global Capital Markets and Corporate Finance.
Total investment and other income rose to EUR 1,359 million in 2021 from EUR 1,022 million in 2020. The
increase was mainly caused by the recognition of a EUR 72 million receivable (recorded in Corporate Line) related
to the expected recovery of the insolvency of a financial institution in the Netherlands, while previous year
included the EUR 230 million impairment on ING’s equity stake in TTB (recorded in Retail Banking) as well as a
EUR 58 million decrease of the NN Group indemnity receivable following the settlement of a tax dispute in
Australia, which was offset by an comparable amount in the tax line (recorded in Corporate Line).
Operating expenses increased by EUR 39 million, or 0.3%, to EUR 11,192 million. Expenses in 2021 included EUR
1,265 million of regulatory costs, up from EUR 1,105 million in previous year, among others due to an incidental
50% increase in the Dutch bank tax for 2021. Expenses in 2021 furthermore included EUR 522 million of
incidental items, mainly reflecting a EUR 180 million provision for compensation to Dutch customers with certain
consumer credit products, redundancy provisions and impairments related to the announced exit of the retail
banking markets in France and Czech Republic, the accelerated closure of branches in the Netherlands, and some
other impairments. Incidental items in 2020 amounted to EUR 673 million, mainly reflecting EUR 310 million of
goodwill impairments and several restructuring provisions and impairments related to the review of activities
and measures announced (including those on Wholesale Banking and the Maggie project). Expenses excluding
regulatory costs and incidental items increased by EUR 30 million, or 0.3%, as the impact of collective-labour-
agreement (CLA) salary increases and higher performance-related expenses and IT costs was largely offset by the
impact of continued cost-efficiency measures. The cost/income ratio was 60.5% in 2021 versus 63.2% in 2020.
ING Group Annual Report 2021 on Form 20-F
72
Net additions to loan loss provisions declined to EUR 516 million, or 8 basis points of average customer lending,
compared with EUR 2,675 million, or 43 basis points, in 2020. Risk costs in 2021 were primarily driven by
additions to Stage 3 provisions and included several model updates in Retail Belgium as well as additional
provisioning from updated recovery scenarios of existing, mainly Wholesale Banking clients, reflecting
uncertainty on recovery scenarios and valuation in certain asset classes. Provisioning in Stage 1 and 2 was
reduced, mainly due to releases from management adjustments taken in previous year. It further reflects clients
being removed from the watch list and moving back to Stage 1.
Year ended 31 December 2020 compared to year ended 31 December 2019
ING’s net result (including the adjustment of the EU ‘IAS 39 carve-out’) decreased by EUR 1,653 million, or 42.4%,
to EUR 2,250 million compared with EUR 3,903 million in 2019. The net result was affected by a EUR 234 million
negative contribution of fair value changes on derivatives related to asset-liability-management activities for the
mortgage and savings portfolios in the Benelux, Germany, France and Czech Republic, versus a EUR 878 million
negative contribution in 2019. These negative fair value changes were mainly caused by changes in market
interest rates. No hedge accounting is applied to these derivatives under IFRS-IASB.
The IFRS-EU net result (before adjustment of the EU ‘IAS 39 carve-out’) fell 48.0% to EUR 2,485 million from EUR
4,781 million in 2019. The effective tax rate in 2020 was relatively high at 32.7% (versus 28.6% in 2019) and was
mainly caused by the lower result before tax, which included higher non-deductible amounts like the
impairments on goodwill and on our stake in TTB.
The result before tax declined 44.3% to EUR 3,809 million in 2020 from EUR 6,834 million in 2019, primarily
caused by elevated risk costs reflecting the (expected) economic impact of the Covid-19 pandemic, combined
with impairments on goodwill, restructuring provisions and other impairments. Net core lending (adjusted for
currency impacts, and excluding Treasury and the run-off portfolios) declined by EUR 2.5 billion in 2020, while
net customer deposit inflow was high at EUR 41.4 billion. The global retail customer base grew to 39.3 million at
year-end, and the number of primary customers rose during the year by 578,000 to 13.9 million.
Income declined 3.7% to EUR 17,637 million from EUR 18,306 million in 2019. The decline was mainly in the
Corporate Line due to lower interest results from foreign currency ratio hedging and to some positive one-offs
recorded in 2019. Income at Retail Banking decreased due to an impairment on our equity stake in TMB, whereas
income in Wholesale Banking (mainly in Financial Markets) increased.
Net interest income decreased 3.4% to EUR 13,604 million. The decline was largely due to lower interest results
on current accounts and savings, reflecting the continued pressure on liability margins, combined with lower
interest results from foreign currency ratio hedging due to lower interest rate differentials. This decline was
largely offset by higher interest results at Treasury (supported by the introduction of the ECB’s two-tiering
system at the end of October 2019) and, to a lesser extent, on lending products, reflecting a slight increase in the
total lending margin. ING’s overall net interest margin declined to 1.44% from 1.54% in 2019.
Net fee and commission income increased 5.0% to EUR 3,011 million from 2,868 million in 2019. In Retail
Banking, net fee and commission income rose by EUR 204 million, or 11.7%. This was mainly driven by higher fee
income on investment products, predominantly in Germany, whereas daily banking fees slightly increased
supported by increased package fees, which countered the impact of a drop in payment transactions due to
lockdown measures and travel restrictions. Total fee income in Wholesale Banking declined by EUR 66 million, or
5.8%, predominantly in Trade Commodity Finance as a result of lower average oil prices as well as lower
syndicated deal activity in Lending.
Total investment and other income decreased to EUR 1,022 million 2020 from EUR 1,360 million in previous year.
The decline was mainly in Retail Banking, largely due to a EUR 230 million impairment related to ING’s stake in
TTB, and in the Corporate Line. In 2019, the latter had included a EUR 119 million one-off gain from the release of
a currency translation reserve related to the sale of ING’s stake in Kotak Mahindra Bank and a EUR 79 million
receivable related to the insolvency of a financial institution. These declines were partly offset by Wholesale
Banking, predominantly in Financial Markets due to a positive swing in valuation adjustments.
Operating expenses increased by EUR 800 million, or 7.7%, to EUR 11,153 million. Expenses in 2020 included EUR
1,105 million of regulatory costs, compared with EUR 1,021 million previous year. The increase was furthermore
caused by EUR 673 million of incidental items recorded in 2020, mainly reflecting EUR 310 million of goodwill
impairments and several restructuring provisions and impairments related to the review of activities and
measures announced (including those on Wholesale Banking and the Maggie project). Excluding regulatory costs
and these incidental items, expenses increased by EUR 43 million, or 0.5%, as the impact of collective-labour-
agreement (CLA) salary increases and higher IT expenses, was largely offset by the impact of continued cost-
efficiency measures (including lower marketing and travel costs as a result of the Covid-19 restrictions). The
cost/income ratio was 63.2% versus 56.6% in 2019.
ING Group Annual Report 2021 on Form 20-F
73
Net additions to loan loss provisions were EUR 2,675 million, or 43 basis points of average customer lending,
compared with EUR 1,120 million, or 18 basis points, in 2019. The increase was mainly due to various Individual
Stage 3 provisions, including a sizeable provision for an alleged external fraud case in 2020, and high collective
Stage 1 and Stage 2 provisioning as a result of the economic impact of the Covid-19 pandemic. Risk costs in 2020
included EUR 590 million of collective provisions related to the worsened macro-economic indicators, including
provisioning related to loans subject to a payment holiday.
Retail Netherlands
Retail Netherlands
Amounts in millions of euros
2021
2020
2019
Income:
Net interest income
3,290
3,511
3,541
Net fee and commission income
771
681
674
Investment income and other income
201
279
290
Total income
4,262
4,471
4,505
Expenditure:
Operating expenses
2,403
2,236
2,210
Additions to the provision for loan losses
–76
157
91
Total expenditure
2,326
2,393
2,301
Result before tax
1,936
2,078
2,204
Taxation
499
523
558
Non-controlling interests
0
–1
–0
Net result IFRS-IASB
1,437
1,556
1,646
Year ended 31 December 2021 compared to year ended 31 December 2020
The net result of Retail Netherlands decreased by EUR 119 million, or 7.6%, to EUR 1,437 million in 2021 from
EUR 1,556 million in 2020.
The result before tax declined 6.8% to EUR 1,936 million from EUR 2,078 million in 2020. This decline was caused
by lower income mainly due to lower margins on customer deposits combined with higher expenses which
included several incidental cost items, partly offset by lower risk costs.
Total income declined by EUR 209 million, or 4.7%, to EUR 4,262 million compared with EUR 4,471 million in
2020. Net interest income declined 6.3%, despite the recognition of a EUR 53 million conditional TLTRO III benefit
and an increased charging on negative interest rates. This decline was predominantly due to continued margin
pressure on savings and current accounts combined with lower interest results from lending products. Net core
lending (which excludes Treasury products and a EUR 1.1 billion decline in the WUB run-off portfolio) grew by
EUR 0.8 billion in 2021, of which EUR 1.5 billion was in residential mortgages and EUR -0.7 billion in other lending.
Net core deposits growth (excluding Treasury) was EUR 14.8 billion, predominantly in current accounts. Net fee
and commission income increased by EUR 90 million, or 13.2%, mainly due to higher fee income in daily banking
products, supported by increased fees for payment packages, and higher fees on investment products.
Investment and other income was EUR 78 million lower, mainly attributable to lower results from Treasury-
related products.
Operating expenses rose by EUR 167 million, or 7.5%, to EUR 2,403 million from EUR 2,236 million in 2020. The
increase was mainly due to a EUR 180 million provision for compensation to customers with certain consumer
credit products, and EUR 109 million of redundancy provisions and costs related to the retail advice organization
in the Netherlands and the accelerated closure of branches, while 2020 included EUR 29 million of provisions.
Excluding these incidental items, expenses declined by EUR 93 million, or 4.2%, mainly due to lower external staff
costs and lower allocated group overhead expenses, partly offset by increased regulatory costs.
The addition to loan loss provisions was a net release of EUR 76 million, or -5 basis points of average customer
lending, compared with a net addition of EUR 157 million, or 10 basis points, in previous year. In 2021, net
releases in the mortgage and business lending portfolios, more than offset a net addition in the consumer
lending portfolio.
Year ended 31 December 2020 compared to year ended 31 December 2019
The net result of Retail Netherlands decreased by EUR 90 million, or 5.5%, to EUR 1,556 million in 2020 from EUR
1,646 million in 2019.
The result before tax of Retail Netherlands decreased 5.7% to EUR 2,078 million from EUR 2,204 million in 2019.
This decline was mainly attributable to higher risk costs reflecting the worsened macro-economic environment
and an increase in regulatory costs.
ING Group Annual Report 2021 on Form 20-F
74
Total income declined by EUR 34 million, or 0.8%, to EUR 4,471 million, compared with EUR 4,505 million in 2019.
Net interest income declined 0.8%, mainly due to lower margins on savings and current accounts, combined with
a decline in average lending volumes, which was largely offset by higher Treasury- related revenues. Net core
lending (which excludes Treasury products and a EUR 1.1 billion decline in the WUB run-off portfolio) decreased
by EUR 3.2 billion in 2020, of which EUR 0.8 billion was in residential mortgages and EUR 2.4 billion in other
lending. Net customer deposits (excluding Treasury) grew by EUR 15.3 billion, predominantly in current accounts.
Net fee and commission income increased by EUR 7 million, or 1.0%, primarily due to higher investment product
fees. Investment and other income was EUR 11 million lower.
Operating expenses rose by EUR 26 million, or 1.2%, to EUR 2,236 million from EUR 2,210 million in 2019, of
which EUR 65 million was caused by higher regulatory costs to EUR 255 million from EUR 190 million in 2019.
Expenses excluding regulatory costs declined 1.9% as the impact of CLA salary increases, higher IT expenses as
well as provisions related to redundancies and customer claims, were more than offset by lower external staff
costs and lower marketing and travel expenses.
The net addition to loan loss provisions was EUR 157 million, or 10 basis points of average customer lending,
compared with EUR 91 million, or 6 basis points, in 2019. Risk costs in 2020 included EUR 118 million of collective
provisions related to the worsened macro-economic indicators, including provisioning related to loans subject to
a payment holiday.
Retail Belgium
Retail Belgium
Amounts in millions of euros
2021
2020
2019
Income:
Net interest income
1,747
1,816
1,907
Net fee and commission income
519
413
374
Investment income and other income
209
145
161
Total income
2,475
2,373
2,442
Expenditure:
Operating expenses
1,667
1,737
1,609
Additions to the provision for loan losses
225
514
186
Total expenditure
1,892
2,251
1,794
Result before tax
583
122
647
Taxation
146
51
192
Net result IFRS-IASB
437
71
455
Year ended 31 December 2021 compared to year ended 31 December 2020
The net result of Retail Belgium (including ING in Luxembourg) increased by EUR 366 million to EUR 437 million in
2021 from EUR 71 million in 2020.
The result before tax of Retail Belgium rose to EUR 583 million, compared with EUR 122 million in 2020. The
increase was attributable to lower risk costs, combined with higher income and lower expenses.
Income rose by EUR 102 million, or 4.3%, to EUR 2,475 million from EUR 2,373 million in 2020. Net interest
income was 3.8% lower at EUR 1,747 million, despite the recognition of a EUR 76 million conditional TLTRO III
benefit and the introduction of negative interest rates. The decline reflects lower margins on savings and current
accounts and lower interest result from lending products. Net core lending (excluding Treasury) increased by EUR
0.4 billion in 2021, of which EUR 0.9 billion was in mortgages, and EUR -0.5 billion in other lending. Net core
deposits (excluding Treasury) declined by EUR 2.6 billion, predominantly in savings and deposits. Net fee and
commission income rose by EUR 106 million, or 25.7%, mainly driven by higher daily banking fees and the strong
ING Group Annual Report 2021 on Form 20-F
75
performance in investment products. Investment and other income increased by EUR 64 million, mainly due to
positive treasury-related fair value adjustments and a EUR 25 million capital gain on the sale of an associate.
Operating expenses declined by EUR 70 million, mainly due to a EUR 43 million goodwill impairment and EUR 40
million of restructuring costs, both recorded in 2020. Excluding these incidental items, expenses increased by
0.8%, mainly due to higher regulatory costs, partly offset by lower staff expenses.
The addition to the provision for loan losses declined to EUR 225 million, or 25 basis points of average customer
lending, from EUR 514 million, or 57 basis points, in 2020. Risk costs in 2021 mainly included collective
provisioning to accommodate for an update of models and Stage 3 additions for specific files, partly offset by a
partial release of management adjustments applied in 2020.
Year ended 31 December 2020 compared to year ended 31 December 2019
The net result of Retail Belgium (including ING in Luxembourg) declined by EUR 384 million to EUR 71 million in
2020 from EUR 455 million in 2019.
The result before tax of Retail Belgium fell to EUR 122 million, compared with EUR 647 million in 2019. The
decline was attributable to higher risk costs reflecting the worsened macro-economic environment, combined
higher expenses and lower income.
Income declined by EUR 69 million, or 2.8%, to EUR 2,373 million from EUR 2,442 million in 2019. Net interest
income was 4.8% down to EUR 1,816 million, mainly reflecting lower margins on savings and current accounts,
and lower Treasury related revenues, partly offset by higher interest results from mortgages. Net core lending
(excluding Treasury) decreased by EUR 1.5 billion in 2020, evenly spread over mortgages and other lending. Net
customer deposits (also excluding Treasury) grew by EUR 4.0 billion, predominantly in current accounts. Net fee
and commission income rose by EUR 39 million, or 10.4%, mainly due to higher fee income on investment
products and mortgages. Investment and other income declined by EUR 16 million, mainly from Financial
Markets.
Operating expenses rose by EUR 128 million, of which EUR 43 million was due to a goodwill impairment related
to an acquisition in the past by ING Belgium and EUR 40 million related to restructuring costs recorded in the
fourth quarter of 2020. The remaining increase was mainly due to higher regulatory costs and IT expenses.
The net addition to the provision for loan losses increased to EUR 514 million, or 57 basis points of average
customer lending, from EUR 186 million, or 21 basis points, in 2019. Risk costs in 2020 included EUR 158 million
of collective provisions related to the worsened macro-economic indicators, including provisioning related to
loans subject to a payment holiday. The remaining risk costs were mainly related to business lending, including
provisioning on a number of individual files.
Retail Germany
Retail Germany
Amounts in millions of euros
2021
2020
2019
Income:
Net interest income
1,447
1,587
1,579
Net fee and commission income
497
437
268
Investment income and other income
65
93
138
Total income
2,009
2,117
1,985
Expenditure:
Operating expenses
1,174
1,110
1,080
Additions to the provision for loan losses
49
57
–53
Total expenditure
1,223
1,167
1,027
Result before tax
786
950
957
Taxation
252
331
328
Non-controlling interests
4
4
3
Net result IFRS-IASB
529
615
627
Year ended 31 December 2021 compared to year ended 31 December 2020
The net result of Retail Germany (including ING in Austria) decreased by EUR 86 million, or 14.0%, to EUR 529
million in 2021 from EUR 615 million in 2020.
ING Group Annual Report 2021 on Form 20-F
76
The result before tax declined 17.3% to EUR 786 million, compared with EUR 950 million in 2020, mainly due to
lower income and increased expenses.
Total income fell 5.1% to EUR 2,009 million from EUR 2,117 million in 2020. Net interest income declined 8.8% as
higher revenues from lending products and the recognition of a EUR 16 million conditional TLTRO III benefit was
more than offset by the impact of the continued margin pressure on savings and current accounts. In 2021, net
core lending growth (which excludes Treasury products, and the Austrian run-off portfolio as from the second
quarter of 2021) was EUR 7.8 billion, of which EUR 6.8 billion was in residential mortgages and EUR 0.9 billion in
consumer lending. Net core deposits declined by EUR 3.8 billion due to net outflows in the second half of the
year, primarily reflecting the impact of the introduction of negative interest rate charging to clients with liability
balances above EUR 50,000 as of November 2021. Net fee income rose by EUR 60 million, or 13.7%,
predominantly on investment products, reflecting higher assets under management, new account openings and
higher number of brokerage trades. Investment and other income declined by EUR 28 million due to a EUR 26
million one-off loss related to the transfer of the Austrian retail banking activities to bank99 in December 2021.
Operating expenses increased by EUR 64 million, or 5.8%, to EUR 1,174 million in 2021, of which EUR 36 million
was due to higher regulatory costs, which included a catch-up following the Greensill insolvency. The remaining
cost increase was mainly due to higher staff expenses and costs related to the discontinuation of the Austrian
retail banking activities.
The addition to the provision for loan losses was EUR 49 million, or 5 basis points of average customer lending,
compared with EUR 57 million, or 6 basis points, in 2020.
Year ended 31 December 2020 compared to year ended 31 December 2019
The net result of Retail Germany (including ING in Austria) decreased by EUR 12 million, or 1.9%, to EUR 615
million in 2020 from EUR 627 million in 2019.
The result before tax declined 0.7% to EUR 950 million, compared with EUR 957 million in 2019, as higher income
largely offset the impact of higher risk costs (after a net release in 2019) and increased expenses.
Total income rose 6.6% to EUR 2,117 million from EUR 1,985 million in 2019. The increase was driven by EUR 169
million higher fee income, predominantly on investment products due to higher assets under management, new
account openings and a higher number of brokerage trades in volatile markets. Net interest income increased
0.5% to EUR 1,587 million, as higher interest results from lending and accounting asymmetry in Treasury (with an
offset in other income), was largely offset by margin pressure on savings and current accounts. In 2020, net core
lending (which excludes Treasury products) increased EUR 4.5 billion, of which EUR 4.2 billion was in residential
mortgages and EUR 0.3 billion in consumer lending. Net customer deposits (excluding Treasury) increased by EUR
5.8 billion, largely in current accounts. Investment and other income declined by EUR 45 million, mainly due to
the aforementioned accounting asymmetry and lower capital gains.
Operating expenses increased by EUR 30 million, or 2.8%, to EUR 1,110 million in 2020. The increase was mainly
due to investments to support business growth as well as the consolidation of a subsidiary as from the first
quarter of 2020, while previous year included a EUR 36 million restructuring provision.
The net addition to the provision for loan losses was EUR 57 million, or 6 basis points of average customer
lending, compared with a net release of EUR 53 million in 2019, which had included model updates on
mortgages. Risk costs in 2020 included EUR 8 million of collective provisions related to the worsened macro-
economic indicators.
ING Group Annual Report 2021 on Form 20-F
77
Retail Other
Retail Other
Amounts in millions of euros
2021
2020
2019
Income:
Net interest income
2,712
2,760
2,787
Net fee and commission income
530
412
423
Investment income and other income
361
89
298
Total income
3,602
3,261
3,509
Expenditure:
Operating expenses
2,452
2,469
2,210
Additions to the provision for loan losses
202
593
364
Total expenditure
2,654
3,063
2,574
Result before tax
949
199
935
Taxation
212
105
234
Non-controlling interests
98
55
82
Net result IFRS-IASB
639
39
619
Year ended 31 December 2021 compared to year ended 31 December 2020
Retail Other consists of the Other Challengers Growth Markets, including the bank stakes in Asia. The net result
of Retail Other increased to EUR 639 million in 2021, from EUR 39 million in 2020.
Retail Others’ result before tax rose to EUR 949 million, from EUR 199 million in 2020, mainly reflecting higher
income, driven by strong fee income growth, whereas 2020 included a EUR 230 million impairment on ING’s
equity stake in TTB (Thailand) and lower risk costs.
Total income rose by EUR 341 million to EUR 3,602 million from EUR 3,261 million in 2020. Excluding the
impairment on TTB, total income increased by EUR 111 million, or 3.2%. Net interest income was down 1.7% to
EUR 2,712 million, mainly reflecting lower margins on savings and current accounts, partly offset by higher
interest results from lending products and a EUR 7 million TLTRO III benefit. Net customer lending (adjusted for
currency effects and Treasury) grew by EUR 8.5 billion in 2021, with growth in all countries, except Italy. Net core
deposits growth, also adjusted for currency impacts and Treasury as well as the Czech Republic run-off portfolio,
was EUR 4.4 billion, driven by net inflows in the non-eurozone countries with the largest increase in Poland. Net
fee and commission income rose by EUR 118 million, or 28.6%, to EUR 530 million in 2021. The increase was
mainly due to higher fee income from daily banking, investment and insurance products, and was mainly visible
in Spain, Poland and Romania. Excluding the aforementioned impairment on TTB in 2020, investment and other
income increased by EUR 42 million, mainly due to higher revenues from Financial Markets-related products.
Operating expenses declined by EUR 17 million, or 0.7%, to EUR 2,452 million from EUR 2,469 million in 2020. In
2021, expenses included EUR 166 million of incidental items, mainly consisting of restructuring provisions and
impairments related to the announcements that ING will exit the retail banking markets in France and the Czech
Republic, while 2020 included EUR 167 million of impairments and restructuring provisions mainly related to the
Maggie programme. Excluding these incidental items, expenses declined by EUR 16 million as higher staff
expenses and legal provisions, were more than offset by among others lower IT and marketing expenses as well
as lower regulatory costs.
The addition to loan loss provisions declined by EUR 391 million on 2020 to EUR 202 million, or 20 basis points of
average customer lending. The 2021 risk costs mainly reflect net additions in Poland and Spain, partly offset by a
net release in Australia.
Year ended 31 December 2020 compared to year ended 31 December 2019
Retail Other consists of the Other Challengers Growth Markets, including the bank stakes in Asia. The net result
of Retail Other decreased to EUR 39 million in 2020, from EUR 619 million in 2019.
Retail Others’ result before tax fell to EUR 199 million, from EUR 935 million in 2019, mainly reflecting
impairments on TTB and the Maggie project as well as higher risk costs.
Total income declined by EUR 248 million to EUR 3,261 million in 2020, of which EUR 230 million related to an
impairment on ING’s equity stake in TTB. Excluding this impairment, total income decreased by EUR 18 million, or
-0.5%. Net interest income was down 1.0% to EUR 2,760 million, reflecting margin pressure on savings and
current accounts, largely offset by higher interest results from lending products and Treasury. Net customer
lending (adjusted for currency effects and Treasury) grew by EUR 2.6 billion in 2020, with growth in all countries,
except Italy. The net inflow in customer deposits, also adjusted for currency impacts and Treasury, was EUR 11.9
billion, with largest increases in Poland and Spain. Net fee and commission income declined 2.6% to EUR 412
million, largely due to a decline in Turkey, which was partly offset by increases in most of the other countries.
Excluding the aforementioned impairment, investment and other income rose by EUR 21 million.
ING Group Annual Report 2021 on Form 20-F
78
Operating expenses increased by EUR 259 million, or 11.7%, to EUR 2,469 million from EUR 2,210 million in 2019,
of which EUR 140 million related to an impairment on capitalised software following the decision to stop the
Maggie transformation programme (previously called Model Bank) and EUR 27 million of restructuring provisions
and impairments related to the project and some other countries. Excluding these incidental items, expenses
increased by EUR 92 million, or 4.2%, mainly due to higher regulatory costs, investments in business growth and
lower capitalization of costs following the decision on Maggie. These increases were partly offset by lower legal
provisions as well as lower marketing and travel expenses.
The net addition to loan loss provisions increased by EUR 229 million on 2019 to EUR 593 million, or 61 basis
points of average customer lending. Risk costs in 2020 included EUR 114 million of collective provisions related to
the worsened macro-economic indicators, including provisioning related to loans subject to a payment holiday,
as well as a EUR 59 million Stage 3 provision for expected losses on CHF-indexed mortgages in Poland. The
increase versus 2019 was mainly visible in Poland, Romania and Australia, whereas risk costs in Turkey declined.
Wholesale Banking
Wholesale Banking
Amounts in millions of euros
2021
2020
2019
Income:
Net interest income
4,151
3,718
3,794
Net fee and commission income
1,197
1,069
1,135
Investment income and other income
568
609
369
Total income
5,916
5,396
5,298
Expenditure:
Operating expenses
2,926
3,218
2,937
Additions to the provision for loan losses
117
1,351
532
Total expenditure
3,042
4,568
3,469
Result before tax
2,874
827
1,830
Taxation
703
295
464
Non-controlling interests
26
20
14
Net result IFRS-EU
2,144
512
1,352
Adjustment of the EU 'IAS 39 carve-out'
1,174
–234
–878
Net result IFRS-IASB
3,318
278
474
Year ended 31 December 2021 compared to year ended 31 December 2020
The net result of Wholesale Banking increased to EUR 3,318 million in 2021 compared with EUR 278 million in
2020. The adjustment of the EU ‘IAS 39 carve-out’, included in the net result, was EUR 1,174 million in 2021,
compared with EUR -234 million in 2020, due to fair value changes on derivatives related to asset-liability-
management activities for the mortgage and savings portfolios in the Benelux, Germany, France and Czech
Republic. These fair value changes were mainly a result of changes in market interest rates. No hedge accounting
is applied to these derivatives under IFRS-IASB.
The 2021 result of Wholesale Banking also strongly recovered from the previous year when results were
negatively affected by the impact of the Covid-19 pandemic. The IFRS-EU net result, which is before the
adjustment of the EU ‘IAS 39 carve-out’, increased to EUR 2,144 million from EUR 512 million in 2020. The result
before tax rose 247.5% to EUR 2,874 million from EUR 827 million in 2020. The increase was predominantly due
to lower risk costs and higher income, while operating expenses declined due to lower incidental cost items.
ING Group Annual Report 2021 on Form 20-F
79
Tota l income rose 9.6% to EUR 5,916 million in 2021, compared with EUR 5,396 million in 2020, reflecting higher
revenues in all product groups, with the largest increases in Lending, and Daily Banking Trade Finance. Net
interest income increased by EUR 433 million, or 11.6%, and was supported by a EUR 188 million conditional
TLTRO III benefit. The increase was mainly due to higher margins on lending products and increased interest
results from Treasury and Financial Markets, while the margin on customer deposits stabilised due to the
increased charging of negative interest rates. The net core lending book (adjusted for currency impacts and
excluding Treasury and the Lease run-off portfolio) grew by EUR 13.1 billion in 2021, mainly in Lending, primarily
reflecting growth in term loans, and higher short-term facilities in Financial Markets. Net core deposits (excluding
currency impacts and Treasury) decreased by EUR 2.6 billion. Net fee and commission income rose by EUR 128
million, or 12.0%, on 2020, mainly due to higher fee income in Trade Commodity Finance on the back of higher
oil prices, various fee and pricing initiatives in Payments Cash Management and higher deal flows in Global
Capital Markets and Corporate Finance. Investment and other income decreased by EUR 41 million, primarily due
to lower valuation results in Financial Markets, partly offset by higher income in Corporate Investments.
Operating expenses declined 9.1% to EUR 2,926 million from EUR 3,218 million in 2020. Expenses in 2021
included a EUR 44 million impairment on Payvision, while 2020 included a EUR 260 million goodwill impairment
and EUR 124 million of restructuring provisions and impairments. Excluding these incidental items, expenses
increased 1.7%, mainly due to higher performance-related staff expenses and increased costs for legal provisions
and IT, partly offset by the impact of continued cost-efficiency measures.
The net addition to loan loss provisions fell to EUR 117 million, or 7 basis points of average customer lending,
compared with EUR 1,351 million, or 75 basis points, in 2020. Risk costs in 2021 mainly reflect individual Stage 3
provisioning for existing files, including the impact of updated scenarios reflecting uncertainty in recovery
scenarios and valuations in certain asset classes. This was partly offset by releases in management adjustments
caused by improved macroeconomic indicators.
Lending posted a result before tax of EUR 2,141 million, up from EUR 691 million in 2020, predominantly due to
lower risk costs compared with the elevated level in 2020. Lending income rose by EUR 231 million, or 8.0%, and
was supported by the recognition of a EUR 100 million conditional TLTRO III benefit. The increase was mainly due
to higher lending margins and increased syndicated deal activity. Expenses increased 0.4% to EUR 983 million as
higher performance-related staff expenses were offset by the impact of cost-efficiency measures.
The result before tax from Daily Banking Trade Finance rose to EUR 375 million from EUR 246 million in 2020.
This increase was due to higher income, supported by the recognition of a EUR 24 million conditional TLTRO III
benefit, partly offset by higher expenses and risk costs. Income increased 13.3%, mainly in Trade Commodity
Finance on the back of higher average oil prices and in Payments Cash Management following various fee and
pricing initiatives. Expenses rose 2.6%, mainly due to higher regulatory costs, partly offset by lower staff and IT
expenses.
Financial Markets recorded a result before tax of EUR 278 million, compared with EUR 230 million in 2020. The
increase was mainly due to higher income, which was supported by the recognition of a EUR 60 million
conditional TLTRO III benefit and higher net fee income, partly offset by lower valuation results. The increase in
income was partly offset by higher expenses, mainly due to higher performance-related staff expenses.
The result before tax of Treasury Other was EUR 80 million compared with a loss of EUR 339 million in 2020.
The improvement was mainly due to lower expenses, as 2020 included a EUR 260 million goodwill impairment
and EUR 95 million of restructuring provisions and related impairments following the announced refocusing of
activities. Excluding these incidental items, result before tax rose by EUR 64 million, mainly due to higher
Treasury income as well as higher income in Corporate Investments, which was supported by a EUR 28 million
gain on an investment in an associate, and Corporate Finance.
Year ended 31 December 2020 compared to year ended 31 December 2019
The net result of Wholesale Banking declined to EUR 278 million in 2020 compared with EUR 474 million in 2019.
The adjustment of the EU ‘IAS 39 carve-out’, included in the net result, was EUR -234 million in 2020, compared
with EUR -878 million in 2019, due to fair value changes on derivatives related to asset-liability-management
activities for the mortgage and savings portfolios in the Benelux, Germany, France and Czech Republic. These fair
value changes were mainly a result of changes in market interest rates. No hedge accounting is applied to these
derivatives under IFRS-IASB.
The IFRS-EU net result, which is before the adjustment of the EU ‘IAS 39 carve-out’, declined to EUR 512 million
from EUR 1,352 million in 2019.
The full-year 2020 results for Wholesale Banking were also strongly affected by the impact of the Covid-19
pandemic. The result before tax dropped 54.8% to EUR 827 million, down from EUR 1,830 million in 2019. The
ING Group Annual Report 2021 on Form 20-F
80
decline was predominantly due to elevated risk costs and higher expenses (including impairments and
restructuring provisions), partly offset by higher income.
Total income rose 1.8% to EUR 5,396 million in 2020, compared with EUR 5,298 million in 2019, reflecting higher
revenues in Financial Markets and Treasury Other, partly offset by lower income in Daily Banking Trade
Finance and Lending. The net core lending book (adjusted for currency impacts and excluding Treasury and the
Lease run-off portfolio) declined by EUR 4.9 billion in 2020. The inflow in net customer deposits (excluding
currency impacts and Treasury) was EUR 4.4 billion. Net interest income decreased 2.0%, mainly due to lower
margins on current accounts and lower average lending volumes. This decline was largely offset by higher
interest results from Treasury (with an offset in other income). Net fee and commission income decreased 5.8%
on 2019, mainly due to lower syndicated deal activity in Lending and lower fees in Trade Commodity Finance.
Investment and other income rose by EUR 240 million, primarily due to higher valuation results in Financial
Markets, partly offset by Treasury.
Operating expenses rose 9.6% to EUR 3,218 million from EUR 2,937 million in 2019, mainly due to a EUR 260
million goodwill impairment and EUR 124 million of restructuring provisions and impairments recorded in the
fourth quarter of 2020, following the announced refocusing of activities, including an additional impairment on
Payvision. Excluding the aforementioned incidental items, expenses decreased 3.5%, mainly due to lower
regulatory costs and the impact of continued cost-efficiency measures as well as lower travel expenses as a result
of the Covid-19 restrictions.
The net addition to loan loss provisions rose to EUR 1,351 million, or 75 basis points of average customer lending,
compared with EUR 532 million, or 29 basis points, in 2019. The increase was predominantly due to various
Individual Stage 3 provisions, including a sizeable provision for an alleged external fraud case in 2020, and high
collective Stage 1 and Stage 2 provisions as a result of the economic impact of the Covid-19 pandemic, including
EUR 192 million of collective provisions related to the worsened macro-economic indicators.
Lending posted a result before tax of EUR 691 million, down 56.7% compared with EUR 1,597 million in 2019,
predominantly due to elevated risk costs. Risk costs in 2020 were primarily impacted by various large individual
files, including a sizeable provision for an alleged external fraud case, as well as the economic impact of the
Covid-19 pandemic. Lending income declined 3.2%, reflecting lower lending margins and lower syndicated deal
activity. Expenses declined 3.1%, mainly due to lower regulatory costs.
The result before tax from Daily Banking Trade Finance fell to EUR 246 million from EUR 476 million in 2019.
This decline was due to lower income and higher expenses, partly offset by lower risk costs as previous year
included a sizeable provision for an external fraud case. The decline in income mainly reflect lower margins on
current accounts as well as lower fee income, mainly in Trade Commodity Finance as a result of lower average
oil prices. Expenses rose 9.8%, mainly due to impairments on Payvision’s intangible assets.
Financial Markets recorded a result before tax of EUR 230 million, compared with a loss of EUR 121 million in
2019. The increase was predominantly due to higher income, which included EUR 73 million of positive valuation
adjustments versus EUR -228 million in 2019, and lower expenses in part due to lower staff expenses and
regulatory costs. Excluding valuation adjustments, pre-tax result rose by EUR 50 million compared with 2019,
mainly in the Global Capital Markets business.
The result before tax of Treasury Other was EUR -339 million compared with EUR -123 million in 2019. This
decline was mainly explained by a EUR 260 million goodwill impairment and EUR 95 million of restructuring
provisions and related impairments following the announced refocusing of activities, partly offset by higher
Treasury income.
B. Liquidity and capital resources
ING believes that its working capital is sufficient for its present requirements.
For information regarding our material short and long- term cash requirements from known contractual and
other obligations, see “Additional information – ING Group Risk Management section Funding and liquidity risk”
and “Note 51 – Capital Management” in the consolidated financial statements.
For information on legal or economic restrictions on the ability of subsidiaries to transfer funds to the company
in the form of cash dividends, loans or advances, see “Note 19 – Equity” in the consolidated financial statements.
For information on the maturity profile of borrowings and a further description of the borrowings, please see
“Note 17 - Debt securities in issue”, “Note 18 - Subordinated Loans” and “Note 42 – Liabilities and off-balance
sheet commitments by maturity” in the consolidated financial statements.
ING Group Annual Report 2021 on Form 20-F
81
For information on currency and interest rate structure, see “Additional information – ING Group Risk
Management section Market risk” and “Additional information – ING Group Risk Management section Funding
and liquidity risk”.
For information on the use of financial instruments for hedging purposes, please see “Note 40 - Derivatives and
hedge accounting” in the consolidated financial statements.
ING Group Consolidated Cash Flows
cash and cash equivalents
Amounts in millions of euros
2021
2020
2019
Treasury bills and other eligible bills
23
0
43
Amounts due from/to banks
1,122
478
786
Cash and balances with central banks
106,520
111,087
53,202
Cash and cash equivalents at end of year
107,665
111,566
54,031
Year ended 31 December 2021 compared to year ended 31 December 2020
Net cash flow from operating activities amounts to EUR -14,943 million for the year-end 2021, compared to EUR
101,243 million at 31 December 2020. The decrease in cash flow from operating activities of EUR 116,186 million
in 2021 is explained by lower cash inflows from Loans and advances to/from banks (EUR 44,378 million), higher
cash outflows to loans and advances to customers (EUR 30,736 million), lower cash inflows from customer
deposits (EUR 29,401 million) and higher cash outflows to Trading assets and liabilities (EUR 8,186 million).
Net cash flow from investing activities amounts to EUR 6,220 million for the year-end 2021 compared to EUR -
8,487 million in 2020. The net cash flow from investing activities increased by EUR 14,707 million and is explained
by a net increase from Securities at amortised costs of EUR 7,592 million and from Financial assets at fair value
through OCI of EUR 6,942 million.
Net cash flow from financing activities amounts to EUR 5,387 million in 2021, compared to EUR -34,796 million in
2020. The increase of EUR 40,183 million is explained by a net increase of EUR 42,867 million of debt securities
offset by higher dividend payments of EUR 2,379 million and the share buyback programme for an amount of
EUR 1,604 million at year-end 2021.
The operating, investing and financing activities described above result in a decrease of EUR 3,335 million in cash
and cash equivalents to EUR 107,665 at year end 2021 including exchange rate effect on cash and cash
equivalents of EUR -565 million.
Year ended 31 December 2020 compared to year ended 31 December 2019
Net cash flow from operating activities amounts to EUR 101,243 million for the year-end 2020, compared to EUR
13,055 million at 31 December 2019. The increase in cash flow from operating activities of EUR 88,187 million is
explained by higher cash inflows from Loans and advances to banks (increase of EUR 56,989 million to EUR
53,078 million in 2020 due to new TLTRO III as the ECB modified the terms and conditions of its TLTRO programm
to further support the provision of credit to households and firms in view of the COVID-19 pandamic) and
Customer deposits (increase of EUR 21,700 million to EUR 39,740 million in 2020) as well as lower cash outflows
of Loans and advances to Customers (decrease of EUR 19,563 million to EUR 2,876 in 2020) and Trading assets
and liabilities (decrease of EUR 5,134 million to EUR 2,566 in 2020). The increases are partly offset by lower cash
inflows from (reverse) repurchase transactions (decrease EUR 12,041 to EUR -933 million in 2020).
Net cash flow from investing activities amounts to EUR -8,487 million compared to EUR -2,495 million in 2019 the
net cash flow from investing activities decreased by EUR 5,992 million. The movement is explained by a net
increase in Securities at amortised costs of EUR 6,337 million.
Net cash flow from financing activities amounts to EUR -34,796 million in 2020, compared to EUR -4,154 million
in 2019. The decrease of EUR 30,642 million is explained by a net decrease of EUR 30,200 million of debt
securities and EUR 3,117 million of subordinated loans offset by lower dividend payments of EUR 2,676 million.
The operating, investing and financing activities described above result in an increase of EUR 57,960 million in
cash and cash equivalents to EUR 111,566 at year end 2020. The increase in cash and cash equivalent was
supported by the combination of lower demand for credit and the continued inflow of customer deposits as
result of Covid-19, as well as the TLTRO III participation.
C. Research and development, patents and licenses, etc.
Not applicable.
ING Group Annual Report 2021 on Form 20-F
82
D. Trend information
For information regarding trend information, see Item 5.A of this Form 20-
F.
E. Critical Accounting Estimates
Reference is made to Note 1 ‘Basis of preparation and significant accounting policies' to the consolidated
financial statements for detailed information on Critical Accounting Estimates.
ING Group Annual Report 2021 on Form 20-F
83
Item 6. Directors, Senior Management and
Employees
A. Directors and senior management
Executive Board
Roles and responsibilities
The Executive Board is entrusted with the management of ING. This includes the day-to-day management of the
business and strategy of ING (including long-term value creation), which responsibility is vested in the members
of the Executive Board collectively. The organisation, main roles and responsibilities of the Executive Board are
set out in the Management Board Charter, available on ing.com.
The Executive Board performs its activities under the supervision of the Supervisory Board. The Articles of
Association, the Management Board Charter and the Supervisory Board Charter outline which resolutions of the
Executive Board are subject to approval by the Supervisory Board.
ING Group indemnifies the members of the Executive Board against direct financial losses in connection with
claims from third parties filed, or threatened to be filed, against them by virtue of their service as a member of
the Executive Board, as far as permitted by law, on the conditions laid down in the Articles of Association and
their commission contract. ING Group has taken out liability insurance for the members of the Executive Board.
Composition and diversity
ING’s Executive Board consists of the chief executive officer (CEO), the chief financial officer (CFO) and the chief
risk officer (CRO). The Executive Board is composed to be adequate and balanced, with a diverse selection of
persons with knowledge, skills and executive experience, preferably gained in the banking sector, experience in
corporate governance of large stock-listed companies and experience in the political and social environment in
which such companies operate. In addition, there should be a good balance in the experience of and affinity with
the desired nature and culture of the business of ING. ING also takes account of factors such as nationality,
gender, age and education for the composition of the Executive Board.
The Supervisory Board is responsible for selecting and nominating candidates to the General Meeting for
appointment or reappointment to the Executive Board, among others based on the Executive Board profile,
which is available on ing.com. The Supervisory Board regularly assesses the composition of the Executive Board.
As part of this:
(i)
bench strength and succession planning for Executive Board positions are continuous attention
points, as part
of which the career development of potential internal candidates for such a role is complemented with
potential talent from outside the bank.
(ii)
a long-term view is taken including steps to improve the appointment of women in senior positions
throughout the bank, in line with the adopted diversity and inclusion principle.
The above was also applied when looking at the Executive Board composition changes in 2021, when the CRO
position became vacant with the position change of Steven van Rijswijk – from CRO to CEO – on 1 July 2020. The
Supervisory Board initiated the succession planning for a new CRO, resulting in Ljiljana Čortan being appointed as
the CRO of ING Bank and member of the Management Board Banking as of 1 January 2021. Furthermore, the
Supervisory Board proposed to appoint her as member of the Executive Board at the General Meeting 2021. The
General Meeting approved this proposal. In terms of the dimensions of diversity, Ljiljana Čortan added both
nationality and gender diversity to the Executive Board and Management Board Banking.
The Gender Diversity Act, which entered into force in the Netherlands on 1 January 2022, requires ING to set
appropriate and ambitious targets for gender diversity in its Executive Board and senior management. ING’s
target for gender diversity in the Executive Board is set at 30%.
ING Group Annual Report 2021 on Form 20-F
84
Appointment, suspension and dismissal
(Proposed) members of the Executive Board are appointed, suspended and dismissed by the General Meeting.
Candidates for appointment to the Executive Board are assessed by the Dutch Central Bank and European Central
Bank (DNB and ECB) for suitability and reliability and must continue to meet these criteria while in function.
For the appointment of Executive Board members, the Supervisory Board may draw up a binding list of
candidates, which may be rendered non-binding by the General Meeting. A resolution of the General Meeting to
render this list non-binding, or to suspend or dismiss Executive Board members without this being proposed by
the Supervisory Board, requires an absolute majority of the votes cast. Additionally, this majority must represent
more than half of the issued share capital. The quorum requirement cannot be waived in a second General
Meeting. This ensures that significant shareholder proposals cannot be adopted in a General Meeting with a low
attendance rate and can only be adopted with substantial support of ING Group’s shareholders.
Remuneration and share ownership
Details of the remuneration of members of the Executive Board, including shares granted to them, are set out in
the ‘Remuneration report’.
Members of the Executive Board are permitted to hold shares in the share capital of ING Group for long-term
investment purposes. Transactions by members of the Executive Board in these shares need to comply with the
ING regulations for insiders, which are available on ing.com.
Ancillary positions
Members of the Executive Board may hold other positions. No member of the Executive Board has corporate
directorships at listed companies outside ING.
Transactions involving actual or potential conflicts of interest
In accordance with the DCGC, transactions with members of the Executive Board in which there are significant
conflicts of interest are disclosed in the Annual Report.
If a member of the Executive Board obtains financial products and services, other than loans, which are provided
by ING Group subsidiaries in the ordinary course of business on terms that apply to all employees, this is not
considered a significant conflict of interest and is not reported. Banking and financial products in which the
granting of credit is of a secondary nature, e.g., credit cards and overdrafts in current account, are not considered
a loan for this purpose and therefore not reported.
For an overview of loans granted to members of the Executive Board, see the ‘Remuneration report’.
ING Group Annual Report 2021 on Form 20-F
85
Information on the members of the Executive Board on 31 December 2021
Steven van Rijswijk was appointed as CEO and chairman of the Executive Board and the Management Board
Banking with effect from 1 July 2020. He has been a member of the Executive Board since 8 May 2017. Before
his appointment as CEO, he was ING’s CRO. The Supervisory Board proposed to the shareholders to reappoint
him as member of the Executive Board of ING Group at the General Meeting 2021, since his term of
appointment as a member of the Executive Board expired at the end of the General Meeting 2021. He is
responsible for the proper functioning of the Executive Board and Management Board Banking; formulating,
communicating and delivering ING’s strategy, including environment, social and governance (ESG); and the
communication with the Supervisory Board.
Steven van Rijswijk joined ING in 1995 in the Corporate Finance department holding various positions in the
areas of Mergers and Acquisitions and Equity Markets. Before becoming a member of the Executive Board, he
was global head of Client Coverage at Wholesale Banking.
Steven holds a master’s degree in business economics from Erasmus University Rotterdam (the Netherlands).
Relevant positions pursuant to CRD IV
CEO and chairman of the Executive Board of ING Groep N.V. and the Management Board Banking of ING Bank
N.V.
Other relevant ancillary positions
Member of the management board of the Dutch Banking Association (Nederlandse Vereniging van Banken),
member of the board of directors of the Institute of International Finance, Inc.
Tanate Phutrakul was appointed as CFO and member of the Management Board Banking with effect from 7
February 2019 and as a member of the Executive Board of ING Groep N.V. at the General Meeting 2019. He is
responsible for formulating and communicating ING’s financial strategy (including internal and external
financial reporting), budgeting, cost control and the financing of the company; business performance reporting
and analysis, among which measuring adherence to financial targets; capital and liquidity management;
investor relations; regulatory international affairs; global economic research; and the communication to the
Audit Committee and Supervisory Board on the aforementioned topics.
Before his appointment to the Executive Board, he was ING Group controller in Amsterdam and between
2015-2018 he was the chief financial officer of ING in Belgium.
Tanate holds a master’s degree in Engineering from Imperial College, University of London, and an MBA from
Harvard Business School.
Relevant positions pursuant to CRD IV
CFO and member of the Executive Board of ING Groep N.V. and the Management Board Banking of ING Bank
N.V.
Other relevant ancillary positions
None.
ING Group Annual Report 2021 on Form 20-F
86
Ljiljana Čortan was appointed as CRO and member of the Management Board Banking with effect from 1
January 2021. At the General Meeting 2021, Ljiljana Čortan was appointed as a member of the Executive
Board. She is responsible for formulating ING’s risk framework and risk appetite; assessing, creating and
maintaining risk awareness; developing financial and non-financial risk governance, policies, methodologies
and guidance; managing risk model landscape and developing analytics capabilities; monitoring compliance,
risk management, the execution of control activities and risk behaviour; and risk reporting.
Prior to her appointment at ING, she was a member of the management board and chief risk officer at
HypoVereinsbank (HVB) - UniCredit Bank in Germany.
Ljiljana holds a master’s degree in business finance from the University of Zagreb.
Relevant positions pursuant to CRD IV
CRO and member of the Executive Board of ING Groep N.V. and the Management Board Banking of ING Bank
N.V.
Other relevant ancillary positions
None.
Supervisory Board
Roles and responsibilities
The Supervisory Board supervises (i.e. assesses, oversees, monitors, constructively challenges, scrutinises and
discusses) the policy
(beleid)
connected with it. The Supervisory Board provides the Executive Board with advice. The responsibility for
supervising and advising the Executive Board is vested in the Supervisory Board collectively. The organisation,
powers and
modus operandi
available on ing.com.
In performing their duties, the members of the Supervisory Board are required to:
•
be guided by the interest of ING and the business connected with it, thereby carefully balancing the interests
of all stakeholders of ING and in this consideration give paramount importance to the customer’s interest, as
set out in the Dutch Banker’s Oath;
•
foster a culture focused on long-term value creation, financial and non-financial risk awareness, compliance
with ING’s risk appetite, responsible and ethical behaviour and stimulate openness and accountability within
ING and its subsidiaries;
•
act without mandate and independent of any interest in the business of ING; and
•
ensure that the Supervisory Board functions effectively.
The Articles of Association, the Management Board Charter and the Supervisory Board Charter outline which
resolutions of the Executive Board are subject to approval by the Supervisory Board.
In accordance with the Articles of Association ING Group indemnifies the members of the Supervisory Board as
far as legally permitted against direct financial losses in connection with claims from third parties filed or
threatened to be filed against them by virtue of their service as a member of the Supervisory Board.
ING Group Annual Report 2021 on Form 20-F
87
Composition and diversity
ING’s Supervisory Board is composed to be adequate and balanced, with a mix of persons with knowledge, skills
and executive experience, preferably gained in the banking sector, experience in corporate governance of large
stock-listed companies and experience in the political and social environment in which such companies operate.
In the selection of Supervisory Board members, ING strives for a balance in nationality, gender, age, and
educational and work background. In addition, there should be a balance in the experience and affinity with the
nature and culture of the business of ING and its subsidiaries.
The Supervisory Board is responsible for selecting and nominating candidates for appointment or reappointment
to the Supervisory Board, among others based on the Supervisory Board profile, which is available on ing.com.
The Supervisory Board regularly assesses the composition of the Supervisory Board.
ING believes that former members of the Executive Board can make a valuable contribution to the Supervisory
Board. It has therefore been decided, also taking into account the size of the Supervisory Board and ING’s wide
range of activities, that they may become members of the Supervisory Board of ING Group, but not in the
position of chairman or vice-chairman. Former Executive Board members must wait at least one year before
becoming eligible for appointment to the Supervisory Board.
After a former member of the Executive Board has been appointed to the Supervisory Board, this member may
also be appointed to one of the Supervisory Board’s committees. Appointment to the Audit Committee is only
possible if the individual in question resigned from the Executive Board at least three years prior to such
appointment.
In 2021, three out of nine members of the Supervisory Board were female. We believe the Supervisory Board is
also well-balanced in terms of other relevant diversity aspects. Overall, the preferred emphasis on members with
a financial or banking background has been maintained. In terms of nationality, the ratio between Dutch and
non-Dutch nationalities in 2021 was 56 - 44%.
According to the Gender Diversity Act, which entered into force in the Netherlands on 1 January 2022, ING is
required to comply with a gender diversity quota of one third male and one third female for its Supervisory
Board. Currently, the Supervisory Board is compliant.
Appointment, suspension and dismissal
Members of the Supervisory Board are appointed, suspended and dismissed by the General Meeting.
Candidates for appointment to the Supervisory Board are assessed by DNB and the ECB for suitability and
reliability and must continue to meet these criteria while in function.
For the appointment of Supervisory Board members, the Supervisory Board may draw up a binding list of
candidates, which may be rendered non-binding by the General Meeting. A resolution of the General Meeting to
render this list non-binding, or to suspend or dismiss Supervisory Board members without this being proposed by
the Supervisory Board, requires an absolute majority of the votes cast. Additionally, this majority must represent
more than half of the issued share capital. The quorum requirement cannot be waived in a second General
Meeting. This ensures that significant proposals of shareholders cannot be adopted in a General Meeting with a
low attendance rate and can only be adopted with substantial support of ING Group’s shareholders.
Term of appointment of the Supervisory Board members
As a general rule, Supervisory Board members step down from the Supervisory Board in the fourth, eighth, tenth
or twelfth year after their initial appointment. They are eligible for re-appointment in the fourth year after their
initial appointment and, with explanation, also in the eighth and tenth years.
The Supervisory Board may deviate from this general rule under special circumstances and with explanation, for
instance to maintain a balanced composition of the Supervisory Board and/or to preserve valuable expertise and
experience. The retirement schedule is available on ing.com.
Ancillary positions/conflicting interests
Members of the Supervisory Board may hold other positions, including directorships, either paid
or unpaid.
CRD IV restricts the total number of supervisory board positions or non-executive directorships with commercial
organisations that may be held by a Supervisory Board member to four, or to two, if the Supervisory Board
member also has an executive board position. The ECB may, under special circumstances, permit a Supervisory
Board member to fulfil an additional supervisory board position or non-executive directorship. Positions with,
inter alia, subsidiaries or qualified holdings are not taken into account in the application of these restrictions.
ING Group Annual Report 2021 on Form 20-F
88
Such positions may not conflict with the interests of ING Group. It is the responsibility of the individual member
of the Supervisory Board and the Supervisory Board collectively to ensure that the directorship duties are
performed properly and are not affected by any other positions that the individual may hold outside ING Group.
Members of the Supervisory Board are to disclose any potential conflicts of interest (including potential conflicts
of interest) and to provide all relevant information relating to them. The Supervisory Board – excluding the
member concerned – decides whether a conflict of interest exists.
In case of a conflict of interest, the relevant member of the Supervisory Board abstains from discussions and
decision-making on the topic or the transaction in relation to which he or she has a conflict of interest with ING
Group.
Transactions involving actual or potential conflicts of interest
In accordance with the DCGC, transactions with members of the Supervisory Board in which there are material
conflicting interests will be disclosed in the Annual Report.
If a member of the Supervisory Board obtains financial products and services, other than loans, which are
provided by ING Group subsidiaries in the ordinary course of business on terms that apply to all employees, this
is not considered to be a material conflicting interest. Banking and financial products in which the granting of
credit is of a secondary nature, e.g., credit cards and overdrafts in current account are not considered a loan for
this purpose and are therefore not disclosed.
For an overview of loans granted to members of the Supervisory Board, see the ‘Remuneration report’.
Independence
The members of the Supervisory Board are requested to assess annually whether or not they are independent as
set out in the DCGC and to confirm this in writing. On the basis of these criteria, all members of the Supervisory
Board are to be regarded as independent on 31 December 2021. On the basis of the NYSE listing standards, all
members of the Supervisory Board are also to be regarded as independent.
Permanent committees of the Supervisory Board
On 31 December 2021, the Supervisory Board had four permanent committees: the Risk Committee, the Audit
Committee, the Nomination and Corporate Governance Committee and the Remuneration Committee.
Separate charters have been drawn up for the Risk Committee, the Audit Committee, the Nomination and
Corporate Governance Committee and the Remuneration Committee. These charters are available on ing.com.
Read more about the composition and the duties of the committees in ‘Supervisory Report’ and on ing.com.
Remuneration and share ownership
Remuneration of the members of the Supervisory Board is determined by the General Meeting and does not
depend on the results of ING Group. Details of remuneration are set out in the ‘Remuneration report’. Members
of the Supervisory Board are permitted to hold shares in the share capital of ING Group for long-term investment
purposes. Details are given in the ‘Remuneration report’. Transactions by members of the Supervisory Board in
these shares need to comply with the ING insider regulations, which are available on ing.com.
ING Group Annual Report 2021 on Form 20-F
89
Information on the members of the Supervisory Board on 31 December 2021
Relevant positions pursuant to CRD IV
Chairman of the Supervisory Board of ING Groep N.V./ING Bank N.V. and supervisory board member of HAL Holding N.V.
Other relevant ancillary positions
Member of the Temasek European Advisory Panel of Temasek Holdings Private Limited and Chairman of the Supervisory Council of
SEO Amsterdam Economics.
Relevant positions pursuant to CRD IV
Vice-chairman of the Supervisory Board of ING Groep N.V./ING Bank N.V., non-executive chairman of Athla Capital Management
Limited, non-executive chairman of Travelex Topco Limited and non-executive chairman of the board of Satsanga Fintech Holdings.
Other relevant ancillary positions
Non-executive chairman of Mauritius Africa FinTech Hub.
Relevant positions pursuant to CRD IV
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. and non-executive member of the board of directors and
member of the audit committee, the compensation committee and the risk committee of Credit Suisse Group AG and Credit
Suisse AG.
Other relevant ancillary positions
None.
Relevant positions pursuant to CRD IV
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. and non-executive director of ContourGlobal Plc.
Other relevant ancillary position
Member of the Advisory Council of the Bucharest Academy of Economic Studies, Romania, member of the board of Envisia –
Boards of Elite and member of the board of Teach for Romania.
ING Group Annual Report 2021 on Form 20-F
90
Relevant positions pursuant to CRD IV
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V., member of the supervisory board and chairwoman of the
audit committee of Fraport AG, member of the supervisory board and member of the audit committee of AMS AG, and member
of the supervisory board of Marquard Bahls AG.
Other relevant ancillary positions
Chairwoman of the Employers Association of Kölnmetall and member of the German Corporate Governance Commission.
Relevant positions pursuant to CRD IV
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V., deputy chairman of the supervisory board of HAL Holding
N.V., chairman of the supervisory board of BE Semiconductor Industries N.V. and non-executive chairman of the board of
directors of Fortino Capital Partners N.V.
Other relevant ancillary positions
Chairman of the board of Utrecht University Fund (the Netherlands), chairman of the executive committee of Vereniging Aegon
and external advisor to the management committee of De Brauw Blackstone Westbroek N.V.
Relevant positions pursuant to CRD IV
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V.
Other relevant ancillary positions
None.
Relevant positions pursuant to CRD IV
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V., CEO of Cardano Risk Management B.V. and CFO of Cardano
Holding Limited.
Other relevant ancillary positions
Chairman of the Curatorium VU Amsterdam “Risk Management for Financial Institutions”.
Relevant positions pursuant to CRD IV
Member of the Supervisory Board of ING Groep N.V./ING Bank N.V. and CEO of PostNL N.V.
Other relevant ancillary positions
Member of the supervisory board, member of the audit committee of Het Concertgebouw N.V, member of the advisory council
of Goldschmeding Foundation and member of the Board of VNO-NCW (inherent to her position at Post NL N.V.).
ING Group Annual Report 2021 on Form 20-F
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B. Compensation
Remuneration report
FOR INFORMATION ONLY
Covid-19 continued to affect our business and our customers throughout 2021, despite signs of
economic recovery. Towards the end of the year, new waves of outbreaks brought new
uncertainties. This, along with developments such as supply chain disruptions, rising energy prices
and rising inflation, all had an influence on our customers, our employees and our performance.
Yet ING achieved good results.
Both financial and non-financial performance are important factors in our assessment of recognition and rewards
for our employees, including our senior management and Executive Board. To the latter, ING welcomed Ljiljana
Čortan as chief risk officer in 2021. Ljiljana joined ING on 1 January from HypoVereinsbank-Unicredit in Germany
and was formally appointed by shareholders at the Annual General Meeting in April. We’re delighted to have her
in our Executive Board.
Our view on remuneration
ING’s remuneration approach is designed to attract, motivate and retain colleagues who have the skills, abilities,
values and behaviours needed to deliver on our purpose and strategy. We seek to effectively reward success and
avoid rewarding for failure.
We aim to offer well-balanced remuneration that focuses on creating short- and long-term value for our
stakeholders and on contributing to the long term performance of the company, where achieving targets in areas
such as customer centricity, risk and regulatory, sustainability, and people, are just as important as financial
results. Achieving the balance between our function as a bank and managing the inherent risks this brings is also
reflected in our remuneration approach.
To ensure our approach to remuneration is aligned with the views of our stakeholders, we have an ongoing
dialogue with regulators, customers, shareholders, works councils and other stakeholder groups about our
remuneration approach, strengthening the link between performance and remuneration outcomes. In 2021,
these discussions included the application of ING’s remuneration approach in relation to the impact of Covid-19
on ING and its stakeholders. We also consider the feedback received as part of our regular contacts with our
stakeholders, for example around increased transparency on how performance impacts variable remuneration.
These interactions will continue in 2022, also in relation to determining the topics that are most material to our
stakeholders.
Environmental, social and governance
One topic gaining increasing prominence in these stakeholder dialogues, is ING’s environmental, social and
governance (ESG) approach and performance. Recognising the urgency to accelerate climate action, and building
on our experience in the field, we are working on plans to align the targets for our lending portfolio to our net-
zero ambition and to fully embed climate risk into our risk framework.
These are also two of the 2021 performance indicators on which the Executive Board members are assessed.
Other environmental performance indicators in 2021 relate to increasing the number of green and sustainable
transactions and growing the sustainable part of the investment portfolio. Of course, ESG is more than just
climate, and for 2022 we’ve created an ESG target that incorporates sustainability, risk and regulations and
people metrics.
Diversity
As an employer, ING strives to create a diverse workplace where everyone feels included and has access to the
same opportunities. Collectively, ING meets the core principle of our diversity policy for no group or level to
comprise more than 70% of the same gender, nationality or age. However, within individual teams and on a
country level there are different and complex challenges in achieving the diversity we aim for. Finding the right
people for leadership positions is especially challenging – not only for ING.
New legislation in the Netherlands will require listed companies to improve the gender diversity in their
boardrooms. From 1 January 2022, there are quota for new Supervisory Board appointments to ensure men and
women each hold at least one third of seats. The second measure requires companies to set ‘appropriate and
ING Group Annual Report 2021 on Form 20-F
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ambitious’ targets for improving gender diversity on their management boards and at senior management levels
and to report annually on their progress.
At Board level, we look at diversity in a broad sense. After the appointment of Ljiljana Čortan as chief risk officer,
our Executive Board is now 33% female. At Supervisory Board and Executive Board level, ING is one of only 16
companies in the Dutch Female Board index to achieve this, and the highest-ranking Dutch bank.
At Management Board Banking level, 25% of members are women following the restructuring of the board in
2021 to split the roles of operations and technology, which introduced an additional (male) board member. More
broadly, the number of women in management remained stable at 37% of managers and 30% managers of
managers – similar to 2020. ING is committed to redressing the imbalances that still exist, for example by
accelerating the development of internal successors and attracting more diverse candidates from the external
market. Going forward, ING will report on gender diversity for senior management at job levels 22 and above in
its new global job architecture (GJA) classification introduced at the end of 2021.
On the topic of equal pay, the GJA will support us in our analysis to ensure men and women are paid the same for
doing work of equal value. It’s a principle of ING’s Remuneration Regulations Framework. Further in this report
we explain our Gender Pay Project. The gender pay gap is a societal issue that has long affected women in the
workplace, and policies alone will not bring about change. There needs to be a greater understanding of the
social dynamics behind the reasons for the differences in earning power in order to bring about real change.
ING’s new GJA will help us to compare and match capabilities across the organisation and provide greater
transparency into remuneration. ING is also committed to analysing gender pay and disclosing annually on
progress towards closing the gap starting in our 2022 Annual Report.
This report
The 2021 Remuneration Report reflects the remuneration policies introduced in 2020 for the Executive Board
and Supervisory Board members. These were drawn up in close consultation with our various stakeholder groups
and approved by shareholders at the 2020 AGM. The policies are in line with the Dutch Banking Code. Total
direct compensation of the Executive Board is below the median of the peer group of eight comparable Dutch
companies and eight relevant European financial services providers.
In preparing this report, we took notice of the draft (non-binding) ‘Guidelines on the standardised presentation
of the remuneration report’ from the European Commission published in March 2019.
The 2021 Remuneration Report is subject to an advisory vote at the Annual General Meeting in April 2022. In it,
we look back on the year 2021 and report on ING’s performance, as well as the factors that influenced its
business results and subsequently remuneration. We explain how we implement the remuneration policies for
members of the Executive and Supervisory Boards and share details of the remuneration awarded to these
members in 2021. We also set out the key performance indicators for the year ahead, particularly with regard to
non-financial performance in ESG areas.
In line with ING’s commitment to increase transparency and accountability, we provide insight into the
organisational and personal performance objectives of the Executive Board members. We aim to clarify the
performance metrics used for awarding variable remuneration, how targets are set and achievements are
measured, as well as the risk assessment process pre- and post-award, which can influence remuneration.
In addition, we set out the remuneration approach that applies to all other ING employees, including the
principles for remuneration, the performance management process and how it links to remuneration.
Performance year 2021
Despite challenging conditions, commercial lending margins improved in 2021, and we saw strong fee growth in
daily banking activities and investment products. We were able to release some of the Covid-19-related
provisions taken earlier and resumed capital distribution to shareholders via dividends and a share buyback
programme. At the same time, we decided to discontinue several activities we believe will not achieve the
required scale in a reasonable time and to exit the Retail markets in Austria, Czech Republic and France. This was
part of an ongoing assessment to ensure we’re using our capital effectively in areas with the most growth
potential and viable returns. Overall, ING’s full-year 2021 result before tax rose 78%.
The Supervisory Board agreed that the Executive Board did well to deliver these results, while also growing
primary customer numbers and executing on making ING safe, secure and compliant, a healthy business, data-
driven digitalisation and sustainability. Based on a thorough and balanced assessment of the performance of
each Executive Board member against their objectives, ING’s results, their behaviour and risk and compliance
matters, the Supervisory Board decided to award variable remuneration at 17% of the maximum 20% cap to the
chief executive office and chief risk officer and 18% for the chief financial officer. No increase is proposed to their
fixed remuneration for 2022, in context of the broader workforce dynamics and taking into consideration our
stakeholder perspectives.
ING Group Annual Report 2021 on Form 20-F
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For all other eligible staff, variable remuneration can be discretionary or collective and is awarded based on
criteria for overall group performance, business line and individual performance. At least half of these targets
must be non-financial. In 2021, the total amount awarded was higher than the previous year, reflecting ING’s
good results amidst growing confidence in the economy.
Looking ahead at 2022, we will continue to engage with stakeholders on the topic of remuneration, and in
particular with regard to variable compensation and the achievement of ESG-related non-financial targets.
In closing, I want to thank all ING employees for their continuing support and dedication to ING, our customers
and other stakeholders. It hasn’t always been easy, yet they remain the power behind ING’s purpose.
Herna Verhagen
Chair of the Supervisory Board Remuneration Committee
ING Group Annual Report 2021 on Form 20-F
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Remuneration report Executive Board and Supervisory Board
FOR ADVISORY VOTE AT 2022 ING GROEP N.V. ANNUAL GENERAL MEETING (AGM)
About this report
This Remuneration Report is based on the remuneration policies for the Executive Board and Supervisory
Board. This section of the report is the Remuneration Report as referred to in the Dutch act implementing the
Shareholder Rights Directive II (SRD II). It will be presented to shareholders at the 2022 AGM for an advisory
vote. An explanation of how the results of this vote are taken into account will be included in the 2022
Remuneration Report.
With this Remuneration Report we provide greater transparency compared to previous years on the non-
financial performance elements of the Executive Board members and their variable remuneration awards
related to performance year 2021. We also disclose the target setting for non-financial performance KPIs (key
performance indicators) for the Executive Board members and weightings of 2022 financial and non-financial
measures.
2021 AGM
The 2020 Remuneration Report was presented for an advisory vote at the AGM held on 26 April 2021
(hereafter called the 2021 AGM). The outcome was that 98.19% of shareholders were in favour of the report.
There were no specific requests from shareholders.
We recognise that remuneration is an important topic for many stakeholder groups and that viewpoints on the
topic may vary. The Supervisory Board is fully committed to ensuring that our approach to remuneration
achieves a balance between the best interests of ING and the viewpoints of our stakeholders. Stakeholder
engagement is a key element in the formulation of our remuneration policies. The Supervisory Board will
continue to foster a transparent dialogue on remuneration and future policy amendments.
Board changes and business events in 2021
Steven van Rijswijk was reappointed as a member of the Executive Board at the 2021 AGM for another four-
year period lasting until the end of the 2025 AGM.
Ljiljana Čortan was appointed as chief risk officer (CRO) of ING Bank N.V. and a member of the Management
Board Banking from 1 January 2021.
At the 2021 AGM, shareholders appointed Ljiljana Čortan to the Executive
Board for a four-year period
.
Following this appointment, she also became the chief risk officer of ING Group.
Her remuneration package is in line with the Executive Board remuneration policy and is similar to the
remuneration package of the previous CRO.
Shareholders at the 2021 AGM also approved the reappointment of Hans Wijers and Margarete Haase to the
Supervisory Board for another four-year period. In addition, shareholders approved the appointment of
Lodewijk Hijmans van den Bergh as a new member to the Supervisory Board for a four-year period.
Main decisions on the remuneration of the Executive Board and Supervisory
Board for 2022
The following decisions were taken in relation to remuneration for 2022:
no changes to the Executive Board and Supervisory Board remuneration policies will be proposed;
the Supervisory Board and Executive Board jointly agreed that the Executive Board would forgo an
increase in their fixed remuneration for 2022, taking into consideration our various stakeholder
perspectives as well as the broader workforce dynamics. At the same time, the Supervisory Board is
aware this will be the second year of no increase and will keep a close eye on this in 2023, also in the
context of broader inflationary and economic developments; and
no changes to the applicable fees for the Supervisory Board members will be made for 2022.
ING Group Annual Report 2021 on Form 20-F
95
Remuneration Executive Board
Executive Board remuneration policy
The Executive Board remuneration policy complies with applicable laws and regulations and is in line with the
remuneration principles that apply to all ING employees.
The Executive Board remuneration policy, which was adopted by shareholders during the 2020 AGM, is
disclosed in full on ing.com under the section ‘Remuneration’. In line with this policy, the remuneration of the
Executive Board members is designed to attract, motivate and retain leaders. Retention is an important goal
since this contributes to long-term performance.
Should policy changes be proposed, we will first consult with our stakeholders about the proposed changes,
after which a revised version of the Executive Board remuneration policy will be submitted for adoption by
shareholders at the General Meeting before it becomes effective. For 2022, no changes are proposed. Please
note that the following paragraphs, present a brief summary of the current applicable Executive Board
remuneration policy.
Total direct compensation
Total direct compensation is the total of fixed and variable remuneration, excluding benefits such as pension
and allowances.
Total direct compensation for the Executive Board members is determined and reviewed annually by the
Supervisory Board. In line with the Executive Board remuneration policy, the Executive Board’s total direct
compensation for 2021 was compared to a peer group as formulated in the Executive Board remuneration
policy. The peer group is based on five guiding principles, reflecting ING’s current profile, and further explained
in the Executive Board remuneration policy. In short, these principles can be described as follows.
Guiding principle
Short description
Geography
ING is headquartered in the Netherlands and has an international profile
Talent market
ING is increasingly experiencing a cross-pollination of talent across
sectors/industries, not limited to traditional banking competitors
Size
ING acknowledges the importance of including companies that are broadly
comparable in terms of size and complexity
Governance framework
ING is subject to the Dutch (financial services) regulatory framework and
operates within a Dutch stakeholder environment
Balancing
ING acknowledges the importance of retaining sight of relevant peer companies
that do not match on the other criteria
In line with the Dutch Banking Code, the peer group consists of both financial and non-financial companies,
taking into account the relevant international context. In addition, the Supervisory Board decided to exclude
the UK and Switzerland from our peer group, due to different pay structures in their financial sectors.
Substantially smaller banks and companies were also excluded because these are less complex compared to
large financial institutions like ING. The composition of the peer group is explicitly not included in the Executive
Board remuneration policy. Following an external and independent review in line with the Executive Board
remuneration policy in 2021, the current peer group composition remains unchanged and comprised:
1
ABN AMRO
Ahold Delhaize
BBVA
Deutsche Bank
Aegon
ASML
Banco Santander
Intesa Sanpaolo
NN Group
Heineken
BNP Paribas
Société Générale
Rabobank
Philips
Crédit Agricole
UniCredit
In line with the requirements laid down in the Dutch Banking Code the actually earned total direct
compensation of the Executive Board members under the Executive Board remuneration policy should be
below the market median of the peer group. The calculation of pay positioning of the Executive Board
members against the peer group is performed on that basis (i.e. actual fixed salary plus actual variable
remuneration). The Executive Board members are paid well below the median.
1 The exact composition of the peer group is disclosed in the Annual Report retroactively.
ING Group Annual Report 2021 on Form 20-F
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Deferred element (60%)
Up-front award (40%)
40% is awarded up front with five-
year holding period
Vesting
Award Vesting
Deferred 60% vests pro-rata
(12%) each year
One-year holding period
Vesting
Vesting
Vesting
Vesting
Fixed remuneration
The individual base salaries are set according to the role, responsibilities and experience of each Executive
Board member with reference to market practice. The Remuneration Committee reviews the individual base
salaries of the Executive Board members annually and advises the Supervisory Board on this. The Supervisory
Board has the discretion to increase the individual base salaries. The below factors are given consideration in
determining their base salaries:
the individual’s level of skill and performance;
internal pay ratios and salary increases for other employees within ING;
remuneration level at the external peer group;
public indexation reference points (e.g. consumer price index); and
stakeholder views.
Variable remuneration
Variable remuneration for Executive Board members is limited to a maximum of 20% of base salary in line with
legislative requirements. At least 50% of this is based on non-financial performance criteria. The Executive
Board remuneration policy provides for an at target variable remuneration of 16% of base salary. If
performance criteria are exceeded, the Supervisory Board can increase the variable component to the
maximum. If performance is below target, the variable component will be decreased, potentially down to zero.
All variable remuneration is awarded fully in shares. There is a minimum holding period of five years from the
award date plus an additional holding year as of the vesting date. This combination (i.e. all shares plus a long
holding period) fosters alignment with shareholders and a focus on the long term.
The Supervisory Board pre-determines the performance criteria for the Executive Board each year to ensure
alignment between ING's strategy, performance objectives and long-term interest.
For further details on the pay-out of variable remuneration please see the Executive Board remuneration policy
which is disclosed in full on ing.com under the section ‘Remuneration’.
On the right side the pay-out scheme of variable remuneration for Executive Board members is illustrated.
* Fully delivered in shares.
Performance
year awarded
Total variable remuneration relating to performance year 2021 comprises *
2021
2022
2023
2024
2025
2026
2028
2027
ING Group Annual Report 2021 on Form 20-F
97
Pension
All members of the Executive Board participate in the Collective Defined Contribution pension plan, which is
accrued on an annual salary of up to €112,189 for 2021. This is the same as for all employees working in the
Netherlands without a supplementary pension scheme. Executive Board members are compensated for the
lack of pension accrual above this amount by means of a savings allowance (see 'Benefits'), to be determined
annually, on the same terms that apply to other participants in the Dutch pension scheme. The set-up of this
compensation for the lack of pension accrual is in line with best practices in the Netherlands.
Benefits
Executive Board members are eligible for additional benefits, such as:
the use of a company car or driver service;
contributions to company savings plans;
individual savings allowance;
expatriate allowances (if applicable);
banking and insurance benefits from ING (on the same terms as for other employees of ING in the
Netherlands);
tax and financial planning services to ensure compliance with the relevant legislative requirements.
Tenure
Members of the Executive Board are appointed by shareholders at the General Meeting for a maximum period
of four years. They may be reappointed by shareholders at the General Meeting in line with ING’s Articles of
Association and applicable rules and regulation. Executive Board members have a commission contract for an
indefinite period. ING has the option to terminate the contract if a member is not reappointed by shareholders
at the General Meeting, or if their membership of the Executive Board is terminated. There is a three-month
notice period for individual board members and a six-month notice period for ING. During this time the board
member continues to work and in principle remains eligible for all agreed remuneration components.
In the event of an involuntary exit, Executive Board members are eligible for an exit arrangement. If
termination of the contract is based on mutual agreement, the Executive Board member is eligible for a
severance payment. These arrangements are subject to specific requirements (e.g. limited to a maximum of
one year of fixed base salary and under the condition that there should be no reward for failure). Should an
Executive Board member depart voluntarily or in circumstances involving fraud, gross negligence, wilful
misconduct or any activity detrimental to ING, no severance payment or award of variable remuneration over
the performance year will be made and outstanding deferrals will lapse.
Periodic review of the Executive Board remuneration policy and the remuneration
awarded
In accordance with the Executive Board remuneration policy, the Supervisory Board annually determines the
actual remuneration for members of the Executive Board, based on advice from the Remuneration Committee
of the Supervisory Board.
The Remuneration Committee’s responsibilities include preparing the Supervisory Board for decisions
regarding the individual remuneration of members of the Executive Board. In performing it’s tasks the
Remuneration Committee takes note of the views of individual Executive Board members with regard to the
amount and structure of their own remuneration. Remuneration proposals for individual Executive Board
members are drawn up in accordance with the Executive Board remuneration policy and cover the following
aspects: remuneration structure, peer group review, the amount of the fixed and variable remuneration
components, the performance criteria used, scenario analyses that were carried out and, if and when
considered appropriate stakeholder engagement, the pay ratios within the company and its affiliated
enterprises. In the performance of its tasks the Remuneration Committee works together with the Risk
Committee.
Special employment conditions
In line with the Executive Board remuneration policy, the Supervisory Board may decide to temporarily apply
special employment conditions, for example to secure the recruitment of new executives in exceptional
circumstances when this is necessary to serve the long-term interests and sustainability of ING as a whole, or to
assure its viability. In 2021, there were no such employment conditions granted.
2021 Remuneration Executive Board
This section includes details of remuneration for Executive Board members relating to the period served on the
Executive Board in 2021.
ING Group Annual Report 2021 on Form 20-F
98
In anticipation of the new Dutch Corporate Governance Code and in line with the recommendation of the
Monitoring Commission Corporate Governance, ING calculates an internal ratio of remuneration for the chief
executive officer (CEO) compared to ING staff, which in 2021 included contractors for the first time. Using the
CEO’s total remuneration compared to all ING staff, the ratio in 2021 was 1:28, which is similar to what we
disclosed for 2020.
For transparency sake, we also calculated the average ratio of total remuneration for the chief financial officer
(CFO) and CRO compared to ING staff. On that basis the average ratio in 2021 for the CFO and CRO was 1:21.
The higher ratios for 2021 compared to 2020, is mainly caused by the fact that in 2020 no variable
remuneration was awarded.
Remuneration versus company performance and average employee remuneration
Table 1 shows the link between directors’ remuneration (Executive Board and Supervisory Board members),
company performance and the average remuneration of an ING employee. This is carried out by showing the
development of the remuneration for Executive Board and Supervisory Board members over the last five years
presented in percentages.
With respect to the remuneration of the Supervisory Board, it should be noted that there is no link to company
performance in order to safeguard its independent role. No component of the remuneration of the Supervisory
Board members is linked to company performance, since this is all and only dependant on attendance.
The relative performance of the company is presented on three different metrics over the last five years. The
metrics consist of:
Retail primary relationships
Profit before tax for ING Group
Return on equity based on IFRS-EU equity.
Finally, we present the development of the remuneration on average (per employee). For this number we use
the same data as for the internal ratio.
ING Group Annual Report 2021 on Form 20-F
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1. Development of directors’ remuneration, company performance and employee remuneration ¹
Amount in thousands of euros unless otherwise stated
FY 2021
FY 2021 vs FY 2020
FY 2020 vs FY 2019
FY 2019 vs FY 2018
FY 2018 vs FY 2017
FY 2017 vs FY 2016
Directors remuneration (Executive Board)
2, 3, 4, 5, 6
Steven van Rijswijk
2,077
38.6%
7.2%
16.2%
-
-
Tanate Phutrakul
1,440
17.9%
25.6%
-
-
-
Ljiljana Čortan
7
982
-
-
-
-
-
Company’s performance
Retail primary relationships (in mln)
14.3
3%
5%
7%
10%
9%
Profit before Tax ING Group (in mln)
6,782
78%
-44%
0%
-6%
23%
Return on equity based on IFRS-EU equity
9.2%
92%
-49%
-4%
-3%
6%
Average employee remuneration
8
Average fixed and annual variable remuneration
70
4%
-
-
-
-
Directors remuneration (Supervisory Board)
9, 10
Hans Wijers
184
-11.9%
3.5%
9.2%
-
-
Mike Rees
129
0%
-
-
-
-
Jan Peter Balkenende
31
-
-2.0%
0.0%
-
-
Juan Colombás
94
-
-
-
-
-
Mariana Gheorghe
102
-5.6%
-8.5%
12.4%
11.7%
-4.1%
Margarete Haase
104
-1.0%
7.1%
55.6%
-
-
Lodewijk Hijmans van den Bergh
60
-
-
-
-
-
Herman Hulst
95
-
-
-
-
-
Harold Naus
95
-
-
-
-
-
Herna Verhagen
100
-17.4%
-
-
-
-
1. For consistency reasons this table only makes a comparison between two full financial years in which the respective Executive Board or Supervisory Board member served in their role.
2. The remuneration of the Executive Board consists of base salary and variable remuneration (total direct compensation).
3. Variable remuneration for the Executive Board is included in the year in which the performance was delivered i.e. prior to the year in which it is paid out.
4. Fixed remuneration for the Executive Board did not change in 2019. The relative total compensation increase from 2018 to 2019 is fully attributable to the fact that no variable remuneration was awarded for performance year 2018.
5. Fixed remuneration for Executive Board members is not linked to company performance but is predominantly based on a benchmark exercise. Total direct compensation of Executive Board members should stay below the median of the benchmark, in line with the Dutch Banking Code. This has a
mitigating effect on the correlation with company performance.
6. The relative total compensation increase from 2020 to 2021 is mainly caused by the fact that no variable remuneration was awarded for the performance year 2020.
7. The amount included reflects the period as of her appointment as CRO at the AGM on 26 April 2021.
8. In 2021, the methodology to calculate the average employee remuneration has been updated. Comparatives have been updated accordingly.
9. There is no correlation between Supervisory Board remuneration and company performance. Supervisory Board members do not receive any variable remuneration. Their remuneration is based on fixed fees related to their role and number of meetings. The high fluctuations are caused by role changes
during the year and differences in the number of meetings.
10. The comparison FY 2021 vs FY 2020 for the Supervisory Board is influenced due to the fact the VAT regime has changed after the first quarter of 2021. VAT is no longer due for remuneration of Dutch based Supervisory Board members.
ING Group Annual Report 2021 on Form 20-F
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Check-ins
during the financial
year
Year-end review
after the end of the
financial year
Risk assessment
after the end of the
financial year
Target setting
before
the start of the
financial year
2021 Executive Board performance assessment reward process
The Executive Board performance assessment reward process includes a number of key steps. This process
serves as the foundation to determine the variable remuneration for Executive Board members.
At the start of the performance year, the Supervisory Board approves the financial, non-financial and risk
performance targets applicable to Executive Board members for that year:
Financial performance target areas
include profit-based and return-based targets.
Non-financial performance target areas
include customer, risk and regulatory, people, strategy and
sustainability targets
Each performance target area is weighted and together they total 100%. The Dutch Remuneration Policy for
Financial Enterprises Act (Wet Beloningsbeleid Financiële Ondernemingen, WBFO) specifies that at least 50% of
variable remuneration metrics must be based on non-financial targets. The performance targets for the CEO and
CFO are based on group performance. The non-financial targets for the CRO are predominantly based on key
performance indicators (KPIs) that are linked to the role.
The target areas, targets and weighting are included in the performance target cards for each Executive Board
member. The performance target card consists of both quantitative and qualitative-based targets in order to
achieve a balanced and holistic assessment. Quantitative-based targets are measured primarily on a formulaic
basis where the expected target performance level must be achieved before the on-target pay-out can be
earned. Qualitative targets are clearly defined with descriptors of levels of what is expected of the performance,
for example speed of delivery, quality of delivery, ways of working. Qualitative targets are assessed using a
standard three-point rating scale:
1 = maximum = exceeding expectations; 2 = target = meeting expectations; 3 = threshold = not meeting
expectations.
The overall outcome of the performance target card assessment described above is the ‘starting point’ for
determining the variable remuneration of the Executive Board members. Each member of the Executive Board
has a starting target variable remuneration of 16% of their annual base salary for a given performance year.
Throughout the year, regular conversations take place between the Supervisory Board and the Executive Board
to review their performance. While no formal assessments are completed, progress of performance measures is
discussed and the extent to which progress is on track.
The Nomination and Corporate Governance Committee also takes an active role in assessing the performance of
individual Management Board members, and reports on this to the Supervisory Board.
At the end of the year, the Risk Committee and Remuneration Committee are responsible for providing input and
assessing the performance of the Executive Board members to determine the variable remuneration to be
awarded. They jointly advise the Supervisory Board on the recommendations to get final approval of the awards.
This follows a multi-step and integrated process that closely aligns with the way that variable remuneration is
determined for the wider ING workforce. The process covers an assessment of their performance, based on
individual performance target cards. It includes targets and ranges agreed at the beginning of the performance
year, along with risk assessments measured on an ex-ante and ex-post risk adjustment basis.
The integrated performance assessment process for determining variable remuneration also takes into account
financial and operational performance, risk and compliance, as well as behaviour and conduct of each Executive
Board member. This is supported by a robust framework for considering risk and conduct, which is in line with
regulations. It includes the following elements:
ING Group Annual Report 2021 on Form 20-F
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Performance hurdles
remuneration if both of the performance hurdles are met. This is in line with all employees who are
eligible for discretionary variable remuneration. See
addition, where capital (CET1) is below risk appetite a downward adjustment may be considered at the
discretion of the CRO to reduce the variable remuneration up to zero.
Risk and regulatory adjustments
performance target cards are made including an assessment of financial risks, non-financial risks and
regulatory targets measured on an ex-ante basis. The targets and ranges are set at the beginning of the
financial year, taking into account ING’s risk appetite statement framework. Performance against these
risk and regulatory targets may lead to a downward or upward modification in variable remuneration.
Additional risk adjustments
remuneration based on broader risk management performance not within risk appetite, including
additional ex-ante risk performance that needs to be considered and/or ex-post risk events that may
lead to a financial or reputational impact on ING. Risk and Human Resources also assess potential
holdbacks or clawbacks impacting variable remuneration.
The CRO is responsible for recommending any risk-adjustments to variable remuneration awards for the CEO and
CFO. The Risk Committee is responsible for recommending this for the CRO. The final decision is made by the
Supervisory Board. The Supervisory Board, based on the advice of the Remuneration Committee and Risk
Committee, decides on any risk adjustments (potentially to zero) to variable remuneration for Executive Board
members.
As a final step in the process, in exceptional circumstances the Supervisory Board may apply its discretion to
adjust upwards or downwards the variable remuneration of Executive Board members.
2021 Executive Board base salary
The base salary for all roles of the Executive Board remained unchanged for 2021 as disclosed in our 2020
Remuneration Report.
2021 Executive Board performance evaluation
The Executive Board is evaluated on the following performance target areas:
Financial
Profit before tax
Return on equity
Operational expenses
Cost control (FTE)
Non-financial
Customer (except the CRO)
Risk and regulatory
Strategy
Sustainability
People
This section includes more details on the financial and non-financial performance of the Executive Board
members. Key financial achievements, collectively accomplished by the Executive Board in 2021 in the
predefined target areas are summarised in one table. This has been discussed and approved by the Supervisory
Board. The non-financial, individual performance of each Executive Board member is summarised in a separate
overview per board member.
2. Financial performance
Measure
Target - minimum
Target - maximum
Performance
Profit before tax (CEO/CFO weight 12.5%, CRO 6.3%)
4,187
6,280
6,782
Return on equity (CEO/CFO weight 12.5%, CRO 6.3%)
5.6%
8.4%
9.2%
Operational expenses (CEO/CFO weight 12.5%, CRO 6.3%)
11,207
10,140
11,192
Cost control (FTE) (CEO/CFO weight 12.5%, CRO 6.3%)
68,026
61,547
62,132
* FTE numbers include externals. CRO target relates to risk organisation.
ING Group Annual Report 2021 on Form 20-F
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ING Group Annual Report 2021 on Form 20-F
103
ING Group Annual Report 2021 on Form 20-F
104
ING Group Annual Report 2021 on Form 20-F
105
3. Outcome performance assessment
CEO
CFO
CRO
Weighting
Assessment
Outcome
Weighting
Assessment
Outcome
Weighting
Assessment
Outcome
(%)
(%)
(%)
(%)
(%)
(%)
(%)
(%)
(%)
Profit before tax
12.5%
100%
12.5%
12.5%
100%
12.5%
6.3%
100%
6.3%
Return on equity
12.5%
100%
12.5%
12.5%
100%
12.5%
6.3%
100%
6.3%
Operational expenses
12.5%
60.6%
7.6%
12.5%
60.6%
7.6%
6.3%
60.6%
3.8%
Cost control (FTE)
12.5%
96.4%
12.0%
12.5%
96.4%
12.0%
6.3%
100%
6.3%
Customer
2.5%
60.0%
1.5%
2.5%
60.0%
1.5%
-
-
-
Risk and regulatory
15.0%
83.3%
12.5%
15.0%
91.1%
13.7%
50.0%
84.7%
42.3%
Strategy
17.5%
83.3%
14.3%
17.5%
90.0%
17.0%
10.0%
80.0%
8.0%
Sustainability
5.0%
80.0%
4.0%
5.0%
80.0%
4.0%
5.0%
80.0%
4.0%
People
10.0%
79.2%
7.9%
10.0%
85.0%
8.5%
10.0%
91.7%
9.2%
Total
100%
85%
100%
89%
100%
86%
* Due to rounding, percentages presented in the table may not add up precisely to the total percentages provided.
2021 variable remuneration outcome
In 2021, ING continued to be impacted by Covid-19 and other challenges affecting customers and society, such as
rising energy prices and inflation. Despite this, there was significant progress in our business performance. Our
financial results – especially profit before tax and return on equity – outperformed both the business plan and
the prior year, mainly due to higher revenues, moderate risk costs from having a good quality credit book, and a
focus on underlying cost management. In addition, non-financial performance is evidenced by effective risk
management and solid progress on the digitalisation and innovation initiatives.
Variable remuneration awarded to Executive Board members reflects the Supervisory Board’s assessment of the
performance of each of the Executive Board member against the objectives in their performance target cards, as
outlined in the previous section.
Both CEO Steven van Rijswijk and CFO Tanate Phutrakul served in their roles for the full year. The variable
remuneration award for Ljiljana Čortan is for the period since her appointment as CRO at the AGM on 26 April
2021.
Following achievement against the performance hurdles, the Supervisory Board conducted a thorough and
balanced performance assessment. Based on the outcomes of this and their overall achievements, the
Supervisory Board concluded that the Executive Board members had delivered strong results in 2021.
Furthermore, the Supervisory Board considered whether any discretionary adjustment was required and
determined both the financial and non-financial results speak for themselves in the current environment. The
Supervisory Board also considered the behaviour of the Executive Board members and saw no reason to apply
any discretionary adjustments.
In the final step, the Supervisory Board took into consideration the feedback of the CRO and Risk Committee on
risk and compliance matters. Here, there was no reason to apply any individual additional risk adjustments in
accordance with ING’s Remuneration Regulations Framework (IRRF).
2
Following this performance assessment process the resulting variable remuneration award for Steven van
Rijswijk is €301,199; for Tanate Phutrakul €218,151; and for Ljiljana Čortan €144,121 (for the period she’s been
an Executive Board member).
For the CEO, this equates to a variable remuneration award at 17% of the maximum 20% cap. For the CFO it
represents 18% of the maximum 20% cap and for the CRO it represents 17% of the maximum 20% cap.
2
majority owned entities have to adhere to. Furthermore, it consists of our general remuneration principles that apply to all staff globally
working under the responsibility of ING.
ING Group Annual Report 2021 on Form 20-F
106
2021 Executive Board remuneration
ING Group Annual Report 2021 on Form 20-F
107
As recognised in the profit or loss statement of 2021, the expenses for each Executive Board member (active on
31 December 2021), relating to their role on the Executive Board, amount to €2.3 million for the CEO, €1.6
million for the CFO and €1.2 million for the CRO. These amounts include deferred elements from previous years,
paid out in 2021.
The following paragraphs (i.e. total direct compensation, pension costs and other emoluments) show the
remuneration awarded to individual Executive Board members with respect to the performance years 2021 and
2020.
3
All Executive Board remuneration is paid directly by ING.
4. Total direct compensation for (active) Executive Board members
2021
2020
Amounts in euros (rounded figures)
Amount
Number of shares
Amount
Number of shares
Steven van Rijswijk
Base salary
1
1,776,300
1,498,900
Variable remuneration (fully in shares)
2
301,199
22,975
-
-
Tanate Phutrakul
Base salary
1,221,700
1,221,700
Variable remuneration (fully in shares)
2
218,151
16,641
-
-
Ljiljana Čortan
Base salary
3
837,600
-
Variable remuneration (fully in shares)
2
144,121
10,994
-
-
Total aggregated base salary
3,835,600
2,720,600
Total aggregated variable remuneration
4
663,471
-
-
Total aggregated number of shares
2
50,610
1. The base salary in 2020 reflects the aggregated base salary earned in his capacity as CRO and CEO.
2. The number of shares is based on the average ING share price (€13,11) on the day the year-end results were published.
3. The base salary reflects the period as of her appointment as CRO at the AGM on 26 April 2021.
4. The variable remuneration percentage for the Executive Board members are as follows: CEO 17%, CFO 18% and CRO 17%. Thus the ratio between
base salary and total direct compensation is as follows: CEO 85.5%, CFO 84,8% and CRO 85.3%.
Pension costs
Members of the Executive Board participate in the Collective Defined Contribution (CDC) pension plan. In 2021,
pension accrual applied to salary up to an amount of € 112,189. In addition, the individual members of the
Executive Board received a savings allowance to compensate for the loss of pension above € 112,189. The table
below shows the pension costs of the individual members of the Executive Board in 2021 and 2020.
5. Pension costs for individual Executive Board members
Amounts in euros (rounded figures)
2021
2020
Steven van Rijswijk
2
23,700
23,300
Tanate Phutrakul
23,700
23,300
Ljiljana Čortan
3
16,200
-
1. Pension accrual only applies to salary up to an annually set amount (i.e. €110,111 for 2020 and €112,189 for 2021).
2. In 2020 the pension accrual reflects the aggregated costs in his capacity as CRO and CEO.
3. The pension accrual reflects the period as of the appointment of CRO at the AGM dated 26 April 2021.
Benefits
The individual members of the Executive Board receive other emoluments. The other emoluments in 2021 and
2020 amounted to the following costs.
6. Other emoluments
Amounts in euros (rounded figures)
2021
2020
Steven van Rijswijk
1
495,500
411,000
Tanate Phutrakul
349,800
358,500
Ljiljana Čortan
2
382,200
-
1. The amount of emoluments in 2020 reflects the aggregated amount in his capacity as CRO and CEO.
2. The amount of emoluments reflects the period as of her appointment as CRO at the AGM on 26 April 2021.
3 In addition, ING Group offers a Directors Officers indemnity (please refer to ‘Executive Board – Roles and responsibilities’ and article 26
of our Articles of Association), under which genuine expenses are provided.
ING Group Annual Report 2021 on Form 20-F
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7. Breakdown of other emoluments paid in 2021
Amounts in euros (rounded figures)
Steven van Rijswijk
Tanate Phutrakul
Ljiljana Čortan
Contribution individual savings
62,200
42,800
29,300
Individual savings allowance
385,900
257,300
176,500
Travel and accident insurance
15,000
15,000
10,200
Other amounts
2
32,500
34,800
166,100
1. The amount of emoluments reflects the period as of her appointment as CRO at the AGM on 26 April 2021.
2. This includes amongst others: housing, school/tuition fees, international health insurance, relocation costs and tax and financial planning.
Long-term incentives awarded in previous years
Long-term incentives awarded to the Executive Board members in previous years (prior to 2019) are disclosed in
the table ‘ING shares held by Executive Board members’. In line with the current Executive Board remuneration
policy we no longer operate long-term incentive plans.
Employee stock options
All unexercised options lapsed in 2020 when the applicable stock option plans reached the end of their 10-year
lifespan. Therefore we have no outstanding employee stock options to report for this year.
Shares
Deferred shares are shares conditionally granted subject to a tiered vesting over a period of five years (for
awards in 2021 and before), with the ultimate value of each deferred share based on ING’s share price on the
vesting date. This is conditional on there being no holdback.
The main condition for vesting is that these require continued employment through vesting date.
8. Shares vested for Executive Board members during 2021
Number of shares
Shares
1
Grant date
Vesting date
End date of
retention
period
No. of
shares
granted
2
No. of
shares
vested
Vesting
price in
euros
No. of
unvested
shares
remaining
Steven van Rijswijk
LSPP
27 March
2018
27 March
2021
27 March
2022
3,460
346
10.1
692
LSPP
10 May 2018
11 May 2021
10 May 2023
6,584
790
10.82
1,580
LSPP
11 May 2020
11 May 2021
11 May 2025
18,858
2,263
10.82
9,052
Tanate Phutrakul
LSPP Units
27 March
2017
27 March
2021
N/A
6,032
482
10.1
967
LSPP Units
27 March
2018
27 March
2021
N/A
4,972
397
10.1
1,195
LSPP
27 March
2019
27 March
2021
27 March
2022
2,837
227
10.1
681
LSPP
11 May 2020
11 May 2021
11 May 2025
17,694
2,123
10.82
8,493
Ljiljana Čortan
-
-
-
-
-
-
-
-
1. All current Executive Board members participate in the ING Group Long-term Sustainable Performance Plan (LSPP) and receive their shares under
its plan rules.
2. Number of shares granted includes both the deferred and upfront part awarded at the granting date.
9. Total value of vested and unvested shares of Executive Board members - 2021
Amounts in euros (rounded figures)
Vested shares
Unvested shares
Share price in euros
1
Total value in euros
Steven van Rijswijk
3,399
11,324
12.26
180,504
Tanate Phutrakul
3,229
11,336
12.26
178,567
Ljiljana Čortan
-
-
-
-
1. The opening share price on 31 December 2021.
ING Group Annual Report 2021 on Form 20-F
109
Loans and advances to Executive Board members
Executive Board members may obtain banking and insurance services from ING Group (and) its subsidiaries in the
ordinary course of their business and on terms that are customary in the sector. The Executive Board members
do not receive privileged financial services. On 31 December 2021, there were no loans and advances
outstanding to the Executive Board members.
ING shares held by Executive Board members
Executive Board members are encouraged to hold ING shares as a long-term investment to maintain alignment
with ING. The table below shows an overview of the shares held by members of the Executive Board on 31
December 2021 and 2020.
10. ING shares held by Executive Board members
Numbers of shares
2021
2020
Steven van Rijswijk
77,324
75,490
Tanate Phutrakul
14,529
13,251
Ljiljana Čortan
-
-
2022 Executive Board remuneration
The Supervisory Board decided not to increase the base salary of the Executive Board members from 1 January
2022.
For 2022 the following target areas will be taken into account:
Financial
Profit before tax
Return on equity
Operational expenses
Cost control (FTE)
Non-financial
Customer (except the CRO)
o
Increase number of primary customers, as it leads to deeper relationships, greater customer
satisfaction and, ultimately, customers choosing ING for more of their financial needs.
o
Increase customer satisfaction by increasing NPS.
Risk and regulatory
o
Manage credit, market and non-financial risk within risk appetite
o
Deliver on regulatory programs including KYC
Strategy
o
Deliver on digitalisation initiatives
o
Deliver on data initiatives
ESG
o
Sustainability
◾
Increase level of sustainable loans
◾
Development and introduction of sustainable products for our retail customers
◾
Reach net-zero emissions for ING’s own footprint
o
People
◾
Strengthen organisational health with a focus on four priority areas: strategic clarity,
shared vision, employee involvement role clarity
◾
Increase gender balance in ING’s leadership cadre
ING Group Annual Report 2021 on Form 20-F
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A new combined environment, social and governance (ESG) target area will be created consisting of people,
KYC/regulatory requirements and sustainability targets.
ING’s ESG focus supports a future proof ING and drives long-term value creation:
Environmental: A focused approach to the environmental and social transition enables us to capture
opportunities and manage risk related to climate change and human rights
Social: A diverse and engaged workforce makes us more adaptive and inventive, and enables us to better
serve our diverse customer base
Governance: A strong governance structure drives the right behaviour, delivers on evolving regulatory
requirements and protects our employees, customers and society.
ING Group Annual Report 2021 on Form 20-F
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Remuneration Supervisory Board
Supervisory Board remuneration policy
The Supervisory Board remuneration policy is disclosed in full on ing.com in the section ‘Remuneration’.
The Supervisory Board remuneration levels for 2021, similar to 2020, are shown below:
11. Supervisory Board remuneration structure
Annual fees in euros
2021
Chair
125,000
Vice-chair
95,000
Member
70,000
Committee fees (annual amounts)
Committee chair
20,000
Committee member
10,000
Attendance fees (per event)
Attendance fee outside country of residence
2,000
Attendance fee outside continent of residence
7,500
All fees are paid fully in cash. No variable remuneration is provided to ensure that the Supervisory Board
members remain independent. The Supervisory Board members are not eligible for retirement benefits nor any
other benefits in relation to their position on the Supervisory Board. Members of the Supervisory Board are
reimbursed for their travel and ING-related business expenses.
2021 Remuneration Supervisory Board
The image on the right side shows the remuneration, including attendance fees for each Supervisory Board
member. All fees for the Supervisory Board are paid directly by ING.
1. Jan-Peter Balkenende retired after the AGM on 26 April 2021. The remuneration figures for 2021 reflect a partial year as a member of the
Supervisory Board.
2. Lodewijk Hijmans van den Bergh was appointed to the Supervisory Board by the AGM on 26 April 2021 with effect from that date.
3. The VAT regime changed after the first quarter of 2021. VAT is no longer due for remuneration of Dutch based Supervisory Board members.
ING Group Annual Report 2021 on Form 20-F
112
Compensation of former members of the Supervisory Board not included in the image on the previous page
amounted to nil in 2021 and €86,000 in 2020.
Loans and advances to Supervisory Board members
Supervisory Board members may obtain banking and insurance services from ING and its subsidiaries in the
ordinary course of their business and on terms that are customary in the sector. The Supervisory Board members
do not receive privileged financial services. On 31 December 2021, there were no loans and advances
outstanding to Supervisory Board members.
ING shares and employee stock options held by Supervisory Board members
Supervisory Board members are permitted to hold ING shares as a long-term investment. The table below shows
the holdings by members of the Supervisory Board on 31 December 2021 and 2020.
12. ING shares held by Supervisory Board members
Numbers of shares
2021
2020
Herman Hulst
3,650
3,650
Harold Naus
1,645
1,645
2022 Remuneration Supervisory Board
The fee levels of the Supervisory Board have been benchmarked to ensure they are in line with the peer group.
The Supervisory Board decided not to change the fees for 2022.
ING Group Annual Report 2021 on Form 20-F
113
General information for all staff
FOR INFORMATION ONLY AT 2022 ING GROEP N.V. ANNUAL GENERAL MEETING (AGM)
The primary objective of ING’s remuneration principles is to attract, motivate and retain qualified and expert
leaders as well as senior staff (including Executive Board members) and other highly qualified staff who have the
desired Orange Code values and behaviours, skills and knowledge to deliver on ING’s purpose in a sustainable
way.
The remuneration principles are an integral part of ING’s strategy and risk profile. They maintain a sustainable
balance between short and long-term value creation and build on ING’s long-term responsibility towards its
employees, customers, shareholders and other stakeholders. Our approach to the remuneration principles did
not change in 2021.
Our remuneration principles apply to all staff and are embedded in ING’s Remuneration Regulations Framework
(IRRF) and our people offer (OPO). Introduced in 2020, OPO sets out ING’s differentiating offer as an employer in
the job market and states what we ask from our people in return. It gives guidance to our global people practices,
while supporting our strategy. The IRRF and OPO comply with relevant international and local legislation and
regulations.
Global job architecture
The Global Job Architecture (GJA), categorises all 1,425 jobs within ING in a standardised and simple way, using
common language that makes it easier to compare and match capabilities across borders and business lines. Each
profile has a job purpose and a clear description of its responsibilities and required competencies, education and
experience. The GJA is classified according to Korn Ferry Hay methodology and job profiles are linked to global
career groups to enable to common understanding for our employees of job sizes across ING.
The GJA is foundational for integrating our people activities. It also supports our remuneration structure in terms
of benchmarking and providing consistency, specific to each country, for compensation and benefit programmes.
These structures ultimately provide our employees with greater transparency into how they are remunerated,
which in turn instils a sense of fairness in our remuneration programmes.
Gender-neutral pay project
The gender pay gap is a prevalent societal issue and represents the average difference between the
remuneration of men and women, whereby women are generally considered to earn less than men. Following
the implemenation of the GJA, ING introduced the gender-neutral pay project, which aims to define, build and
deliver going forward a standardised, replicable, annual process and accompanying tool for ING countries to
determine whether men and women in the same job family and at the same job level are earning equal pay for
equal work. All employees in the same job family and at the same job level within a country will be compared
using gender-neutral characteristics (e.g., tenure, education, etc). When all of these are equal but the
remuneration is not, this will be flagged and the reason investigated. If there is no gender-neutral explanation for
the remuneration difference, ING will take appropriate measures. This tool will also calculate ING’s annual global
gender pay gap. ING is committed to publishing the average pay of all men vs. the average pay of all women,
expressed in the form of a percentage, in the 2022 Annual Report.
ING Group Annual Report 2021 on Form 20-F
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Our remuneration principles
Our remuneration principles apply to all employees and comprise the following:
Aligned with business strategy
ING’s remuneration principles are aligned with the business strategy and company goals.
Creates long-term value
ING’s remuneration principles contribute to long-term value creation and support a focus on the long-term interests of its
stakeholders, including employees, customers and shareholders.
Responsible and fair
In line with our Orange Code values and behaviours, ING acts responsibly and treats staff fairly across the globe.
Mitigates risk
Risk management is an enabler of long-term value creation. ING ensures its remuneration principles are properly correlated with its
risk profile and stakeholder interests.
Performance driven
ING operates a fair, objective and transparent performance management process linked to remuneration to steer and motivate all
employees to deliver on its strategic goals, aiming to reward success and prevent rewarding for failure.
Gender-neutral
All staff members will be equally remunerated for equal work or work of equal value, irrespective of their gender.
Sustainable
ING supports the sustainable recruitment, engagement and retention of all employees.
Performance management
We aim to reward for success and avoid rewarding for failure. That is why ING’s remuneration approach is
strongly linked to a robust and transparent performance management process. Outcomes of performance
evaluations (including collective and individual risk assessments) provide input for remuneration. As not all
employees are eligible for variable remuneration there is not necessarily a link to financial performance. In the
Netherlands, for example the vast majority of the employees do not receive any individual variable
remuneration.
Step Up Performance Management is our global performance management approach applicable to almost all
employees. It aims to improve people’s individual performance and thereby team performance and ultimately
ING's performance. Step Up Performance Management is one of our people practices that help to increase focus,
alignment and transparency. We do this through continuous conversations between managers, employees and
teams. To support these conversations, there are three formal moments to discuss performance during the year:
target setting, mid-year review and year-end evaluation.
The Step Up Performance Management approach consists of three dimensions:
Job:
such as qualitative job description, dynamic planning and specific selected quantitative priorities.
Orange Code behaviours:
professional and colleague. We expect all employees to act in line with ING’s Orange Code.
Stretch ambitions:
at ING, we believe high performance requires stretch and investment (to achieve the
stretch). Therefore we ask people to set ambitions, describing how to contribute beyond the day-to-day
role, focusing on the main priorities and long-term success of ING.
All targets are agreed between the employee and their manager, as well as within management teams, to ensure
consistency across the organisation. ING uses three labels to evaluate performance: excellent, well done and
improvement required.
Step Up Performance Management does not prescribe the targets employees should set. However, the following
regulatory requirements apply to specific groups:
For employees eligible for variable remuneration, a minimum of 50% non-financial priorities.
For all employees in control functions (Risk, Compliance and Audit), no individual (commercial) financial
KPIs are allowed, unless required by local law.
For identified risk takers, risk mitigation measures may lead to a downwards adjustment of the
performance outcome and negatively affect variable remuneration (a risk modifier can be applied).
Total direct compensation
ING aims to provide total direct compensation for expected business and individual performance which, on
average, are at the median of the markets in which we operate, benchmarked against relevant peer groups.
Fixed remuneration represents a sufficiently high proportion, in line with the level of expertise and skills, and
allows a fully flexible variable remuneration award. When no variable remuneration is awarded, the
compensation level is still enough for a decent standard of living. Variable remuneration is performance driven,
subject to regulatory caps and prevents excessive risk taking.
ING Group Annual Report 2021 on Form 20-F
115
The comprehensive process around variable remuneration
The awarding of variable remuneration, where applicable, is based on group, business line and individual
performance criteria unless local legislation prescribes otherwise. In all ING countries, we adhere to the
applicable variable remuneration caps.
For Identified Staff (i.e. staff considered to have a material impact on ING’s risk profile), at least 40% of variable
remuneration is deferred over a period of four or five years (depending on the level of seniority) with a tiered
vesting schedule. Furthermore, at least 50% of variable remuneration is awarded in equity (or equity-linked
instruments unless local legislation prescribes otherwise).
The award of discretionary variable remuneration is based on a clear, transparent and verifiable mechanism for
measuring performance and applying adjustments for risks (the Variable Remuneration Accrual Model or VRAM).
The VRAM construct follows a five-step process leading to risk-adjusted variable remuneration pools determined
at a Group and business line level. The 2021 VRAM set-up was approved by the Management Board and
Supervisory Board.
Step one of the VRAM is an aggregate of the individual target variable remuneration amounts for all eligible
employees across ING, which provides the ‘’starting point’’ or target VR pool baseline.
Step two of the VRAM are the performance hurdles, which must be met in order to unlock the discretionary
variable remuneration pools. These are:
The Common Equity Tier 1 (CET1) ratio must be at or above the threshold established by applicable
regulations;
The return on equity (reported RoE) is equal to or higher than the percentage determined at the
beginning of each performance year by the Management Board Banking and the Supervisory Board.
Underlying RoE, in line with the VRAM Policy and approved by governing bodies, can be adjusted due to
one-time charges or infrequent occurrences not linked to the normal course of business, such as but not
limited to macro-economic events and pandemic events, during a given performance year.
An additional assessment of whether CET1 is within risk appetite is also undertaken in step two to ensure
protection of a sound capital base before variable remuneration is paid out. In the situation where CET1 falls
below ING’s risk appetite level, the CRO can recommend reducing the variable remuneration pools (potentially
down to zero). The hurdles and results are defined in the VRAM policy and subject to Supervisory Board approval.
Step three is based on a holistic assessment of financial and non-financial and risk performance. Within each of
these dimensions specific measures are used to assess a balanced mix of performance. Financial measures (e.g.
profit, return on equity) are used to drive long-term growth, financial strength and affordability. In addition,
different types of non-financial performance measures (e.g. customer, strategy, financial and non-financial risks)
are also taken into consideration. Here, ESG related measures are also a key area of focus in the target cards and
include people, sustainability and regulatory commitments with a combined weighting around 40%. Risk and
regulatory measures are also assessed across both financial and non-financial risks on an ex-ante basis and can
lead to downward or upward modifications to the variable remuneration pools.
Step four relates to CEO discretion to adjust the proposed variable remuneration pool. The CEO considers several
performance factors when making this decision. This discretion is checked by the Supervisory Board and requires
its approval.
The last step is a final and independent, multi-stage approach to assess whether risk adjustments are made by
the CRO to the variable remuneration pools and/or individual variable remuneration awards.
The CRO may recommend risk adjustments to variable remuneration pools (and potentially to zero) at a group,
business line, entity and country level across additional ex-ante and ex-post risk adjustment measures. All
relevant financial and non-financial risks will be considered within this step, both on a current and future risk
basis, to ensure the VRAM outcome is appropriate in the context of overall risk performance. In addition, ex-post
risk adjustments including collective or one-off risk events are a key element in the process of determining
variable remuneration pools. The ex-ante and/or ex-post risk adjustments require Supervisory Board approval,
taking into account the input of the Risk and Finance functions and the advice of the Risk Committee and
Remuneration Committee.
The final risk adjustment measure lies in the individual performance assessment itself. An employee’s
performance is extensively assessed before variable remuneration is proposed and awarded. Every manager
carefully assesses the performance delivered by their individual team members on the basis of pre-agreed
performance priorities and in line with the Step Up Performance Management framework. In addition, managers
have discretion to lower the proposed variable remuneration if risk-taking is perceived as inappropriate. In this
way, variable remuneration is aligned with any additional risks identified on an individual basis during the
performance year.
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Additional risk requirements apply to Identified Staff who are considered risk takers in accordance with Capital
Rights Directive IV. These risk requirements set the minimum standards to be met during the performance year.
Deviation from these standards may lead to downward adjustment of the variable remuneration, a so-called risk
modifier. This process is run independently by the Risk function for which the CRO is ultimately responsible.
Within the Executive Board, risk modifiers are only applicable for the CEO as neither the CFO nor CRO are
considered risk takers. The Supervisory Board, advised by its Risk Committee, is responsible for risk modifiers
within the Management Board Banking.
Finally, a post-award risk assessment can be applied. This assessment analyses whether any events or findings
occurred that should lead to a downward adjustment of variable remuneration of previous years by applying a
holdback (i.e., forfeiture of up to 100% of the awarded, but unvested, variable remuneration) or clawback
(surrender of up to 100% of the paid or vested variable remuneration).
ING’s remuneration policies comply with international and local legislation and regulations. Under the Dutch
WBFO (which sets various requirements on remuneration), financial institutions are permitted to set a variable
remuneration cap higher than 100% (but not higher than 200%) of fixed remuneration for employees outside of
the European Economic Area (EEA), provided that the higher cap is approved by shareholders and does not
conflict with ING’s capital adequacy requirements.
At the 2021 AGM, shareholders approved to apply an increased maximum percentage of up to 200% for
employees outside the EEA for a period of five performance years until end-2026. For 2021, it was applied to 12
employees worldwide. This is a renewal of the mandate obtained at the 2017 AGM for five performance years.
This mandate is rarely used by ING and in 2018, 2019 and 2020 applied to zero employees worldwide.
2021 specifics
ING awards variable remuneration across the global organisation in line with our remuneration principles, global
and local legislation and market practices. The awarding of variable remuneration, where applicable, is based on
group, business line and individual performance criteria, both financial, non-financial and risk based, and comes
in the form of both discretionary and collective variable remuneration.
Collective variable remuneration is based on collective labour agreements and/or profit sharing schemes that are
driven by regulation, law and/or workers council agreements in various countries. Over the past years the total
amount of collective variable remuneration has been relatively stable and typically accounts for around 25% of
the total spend on variable remuneration.
In 2021 the impact of Covid-19 continued to present challenges for ING. Despite this, there was significant
progress in business performance. In contrast to 2020, financial results – especially profit before tax and return
on equity – outperformed the business plan and prior year mainly due to improvement in revenues, moderate
risk costs due to good credit book quality, as well as focus on underlying cost management. Non-financial
performance was also good with effective risk management and positive employee engagement outcomes.
Overall, this resulted in a risk-adjusted discretionary Group VR pool at €312.8million, equating to a 5.2% increase
from target discretionary VR baseline (“starting point’’) and 41.7% versus the previous performance year.
The total actual amount of both discretionary and collective variable remuneration awarded to all eligible
employees globally for 2021 was €417.8 million (€105.0 million in collective variable remuneration), compared to
total staff expenses of €5,941 million. For 2020, the total amount was €314.2 million (€93.6 million in collective
variable remuneration) on €5,812 million staff expenses.
In 2021, five
employees – excluding members of the Management Board Banking – were awarded total annual
remuneration (including employer pension contributions and excluding severance payments made) of €1 million
or more. Please see our CRR disclosure for further details on ing.com under the section ‘Annual reports’.
ING Group Annual Report 2021 on Form 20-F
117
C. Board practices
For information regarding board practices, see Item 6.A
Severance payments to members of the Executive Board
The contracts entered into with the members of the Executive Board provide for severance payments that
become due upon termination of the applicable Executive Board member’s contract, including if termination
occurs in connection with a public bid as defined in section 5:70 of the Dutch Financial Supervision Act. For
purposes of calculating the amounts due, it is not relevant whether or not termination of the employment or
commission contract is related to a public bid. Severance payments to the members of the Executive Board are
limited to a maximum of one year’s fixed salary, in line with the Dutch Financial Supervision Act and the
Corporate Governance Code.
D. Employees
The average number of internal employees at a full time equivalent basis was 57,660 at the end of 2021, of which
15,138 or 26%, were employed in the Netherlands. Substantially all of the Group’s Dutch employees are subject
to a collective labor agreement covering ING in the Netherlands.
The distribution of employees with respect to the Group’s continuing operations for the years 2021, 2020 and
2019 were as follows:
Number of employees
Netherlands
Rest of the world
Total
2021
2020
2019
2021
2020
2019
2021
2020
2019
Total average number
of internal employees at full time
equivalent basis
15,138
15,201
14,415
42,523
40,701
39,016
57,660
55,901
53,431
The Group employs a significant numbers of temporary employees. The average number of temporary
employees, not included in the table above, at a full time equivalent basis was 5,376 at the end of 2021.
E. Share ownership
For information regarding share ownership, see Item 6.B of this Form 20-F and Note 27 ‘Staff expenses’ to the
consolidated financial statements.
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Item 7. Major shareholders and related
party transactions
A. Major shareholders
ING Group ordinary shares are listed on the stock exchanges of Amsterdam (Euronext Amsterdam) and
Brussels (Euronext Brussels). ING Group American Depositary Shares (“ADSs”) are listed on the New York Stock
Exchange (NYSE). Options on ING Group ordinary shares or in the form of American depository receipts (ADRs)
are traded on the Euronext Amsterdam Derivative Markets and the Chicago Board Options Exchange.
Major shareholders as filed with SEC
According to the U.S. Securities and Exchange Commission, shareholders in a company which have registered a
class of their equity securities under the Exchange Act, are required to file beneficial owner reports if the
ownership exceeds more than 5% of the outstanding shares of that class. The shareholder is obliged to file
Schedule 13D or 13G until their holdings drop below 5%.
To the best of our knowledge, as of 31 December 2021, no holder of ordinary shares or ADSs, other than
BlackRock Inc. and Capital Research Global Investors held 5% or more of ING Group’s issued share capital.
On 5 February 2020, BlackRock, Inc. disclosed by way of a Schedule 13G filed with the SEC, beneficial
ownership of 259,231,767 ordinary shares of ING Group as of 31 December 2019, representing 6.7% of ING
Group’s issued share capital. On 29 January 2021, BlackRock, Inc. disclosed by way of a Schedule 13G filed with
the SEC, beneficial ownership of 289,185,500 ordinary shares of ING Group as of 31 December 2020,
representing 7.4% of ING Group’s issued share capital. On 1 February 2022, BlackRock, Inc. disclosed by way of
a Schedule 13G filed with the SEC, beneficial ownership of 292,129,468 ordinary shares of ING Group as of 31
December 2021, representing 7.5% of ING Group’s issued share capital. On 11 February 2022, Capital Research
Global Investors disclosed by way of a Schedule 13G filed with the SEC, beneficial ownership of 224,540,855
ordinary shares of ING Group as of 31 December 2021, representing 5.8% of ING Group’s issued share capital.
Major shareholders as filed with AFM
Pursuant to section 5.3 of the Dutch Financial Supervision Act (“Major Holdings Rules”), any person who,
directly or indirectly, acquires or disposes of an interest in the voting rights and/or the capital of (in short) a
public limited company incorporated under the laws of the Netherlands with an official listing on a stock
exchange within the European Economic Area, as a result of which acquisition or disposal the percentage of his
voting rights or capital interest - whether through ownership of shares, American depositary receipts (ADRs) or
any other financial instrument, whether stock-settled or cash-settled, such as call or put options, warrants,
swaps or any other similar contract - reaches, exceeds or falls below the threshold levels of 3%, 5%, 10%, 15%,
20%, 25%, 30%, 40%, 50%, 60%, 75% and 95% is required to provide updated information on its holdings and
are recorded in the Dutch AFM (Authority for the Financial Markets) register (
http://www.afm.nl/nl-
en/professionals/registers/meldingenregisters/substantiele-deelnemingen
).
Based on the AFM register shareholders with holdings of 3% or more are BlackRock, Inc. (5.07% interest and
6.06% voting rights reported on 13 July 2020) and Capital Research and Management Company (5.09% voting
rights reported on 3 September 2021). The AFM register also shows a notification by ING Group on 20
December 2021 of a holding of 3.10% in its own share capital (no voting rights).
As a result, other than based on information available from public filings available under the applicable laws of
any other jurisdiction, ING Groep N.V. is not aware of any changes in the ownership of ordinary shares or ADSs
between the thresholds levels mentioned in the previous sentence.
On 31 December 2021, ING Groep N.V. and its subsidiaries held 128,301,231 ordinary shares or ADSs,
representing 3.29% of ING Group’s issued share capital. ING Groep N.V. does not have voting rights in respect
of shares and ADSs it holds or which are held by its subsidiaries.
ING Group Annual Report 2021 on Form 20-F
119
On 31 December 2021, no person is known to ING Groep N.V. to be the owner of more than 10% of the
ordinary shares or ADSs. As of 31 December 2021, members of the Supervisory Board and their related third
parties held 5,295 Ordinary Shares. Members of the Supervisory Board do not hold ING options.
As at 31 December 2021, members of the Executive Board and their related third parties held 91,853 ordinary
shares.
As at 31 December 2021 ING Groep N.V. was not a party to any material agreement that becomes effective, or
is required to be amended or terminated in case of a change of control of ING Groep N.V. following a public bid
as defined in the Dutch Financial Supervision Act. ING Groep N.V.’s subsidiaries may have customary change of
control arrangements included in agreements related to various business activities, such as joint venture
agreements, letters of credit and other credit facilities, ISDA-agreements, hybrid capital and debt instruments,
reinsurance contracts and futures and option trading agreements. Following a change of control of ING Groep
N.V. (as the result of a public bid or otherwise), such agreements may be amended or terminated, leading, for
example, to an obligatory transfer of the interest in the joint venture, early repayment of amounts due, loss of
credit facilities or reinsurance cover and liquidation of outstanding futures and option trading positions.
As of 31 December 2021 ING Groep N.V. was not aware of any arrangements the operation of which may result
in a change of control of ING Groep N.V.
B. Related Party Transactions
In the normal course of business, ING Group enters into various transactions with related parties. Parties are
considered to be related if one party has the ability to control or exercise significant influence over the other
party in making financial or operating decisions. Related parties of ING Group include, among others, its
subsidiaries, associates, joint ventures, key management personnel, and various defined benefit and
contribution plans. Transactions between related parties include rendering or receiving of services, leases,
transfers under finance arrangements and provisions of guarantees or collateral. There are no significant
provisions for doubtful debts or individually significant bad debt expenses recognised on outstanding balances
with related parties.
ING Group has entered into various transactions with related parties. For more information, reference is made
to Note 50 “Related parties”
in the consolidated financial statements.
As described under “Item 6. Directors, Senior Management and Employees”, some members of the Supervisory
Board are current or former senior executives of leading multi-national corporations based primarily in the
Netherlands. ING Group may at any time have lending, investment banking or other financial relationships with
one or more of these corporations in the ordinary course of business on terms which we believe are no less
favorable to ING than those reached with unaffiliated parties of comparable creditworthiness.
C. Interests of experts and counsel
This item does not apply to annual reports on Form 20-F.
ING Group Annual Report 2021 on Form 20-F
120
Item 8. Financial information
A. Consolidated statements and other financial information
Consolidated statements
For information regarding consolidated statements and other financial information, see Item 18 of this Form
20-F.
Legal Proceedings
For a description of ING’s legal proceedings, see Note 46 ‘Legal proceedings’ in the consolidated financial
statements.
Policy on dividend distribution
ING’s distribution policy is a pay-out ratio of 50% of resilient net profit and additional return of structural
excess capital. For detailed information on ING’s 2021 dividend, reference is made to Note 51 ‘Capital
Management’.
Cash distributions on ING Groups ordinary shares are generally paid in Euros. However, the Executive Board
may decide, with the approval of the Supervisory Board, to declare dividends in the currency of a country other
than the Netherlands in which the shares are traded. Amounts payable to holders of ADSs that are paid to the
Depositary in a currency other than dollars will be converted to dollars and subjected to a charge by the
Depositary for any expenses incurred by it in such conversion.
If the Executive Board has been designated as a body authorised to resolve to issue shares, it may decide, with
the approval of the Supervisory Board, that a distribution on ordinary shares shall be made in the form of
ordinary shares instead of cash or to determine that the holders of ordinary shares shall be given the choice of
receiving the distribution in cash or in the form of ordinary shares on such terms as the Executive Board, with
the approval of the Supervisory Board, may decide.
The right to dividends and distributions in respect of the ordinary shares will lapse if such dividends or
distributions are not claimed within five years following the day after the date on which they were made
available.
There are no legislative or other legal provisions currently in force in the Netherlands or arising under ING
Groups’ Articles of Association restricting the remittance of dividends to holders of ordinary shares, or ADSs
not resident in the Netherlands. Insofar as the laws of the Netherlands are concerned, cash dividends paid in
Euro may be transferred from the Netherlands and converted into any other currency, except that for
statistical purposes such payments and transactions must be reported by ING Group to DNB and, further, no
payments, including dividend payments, may be made to jurisdictions or persons, that are subject to certain
sanctions, adopted by the Government of the Netherlands, implementing resolutions of the Security Council of
the United Nations, or adopted by the European Union.
Dividends are subject to withholding taxes in the Netherlands as described under Item 10, “Additional
Information - Taxation - Netherlands Taxation”.
ING’s distribution policy may be changed at any time and there is no guarantee that any dividends or other
distributions will be made in accordance with the distribution policy in effect from time to time or at all.
B. Significant changes
For information on subsequent events reference is made to Note 52 ‘Subsequent events’ of the consolidated
financial statements.
Since 31 December 2021, until the filing of this report, no other significant changes have occurred in the
financial statements of the Group included in “Item 18 Consolidated Financial Statements” of this document.
ING Group Annual Report 2021 on Form 20-F
121
Item 9. The offer and listing
A. Offer and listing details
Ordinary Shares (nominal value EUR 0.01 per share) are traded on Euronext Amsterdam, the principal trading
market for the Ordinary Shares, under the symbol “INGA”. The Ordinary Shares are also listed on the stock
exchange of Euronext Brussels, under the symbol “INGA”. ADSs, representing an equal number of Ordinary
Shares, are traded on the New York Stock Exchange under the symbol “ING”.
B. Plan of distribution
This item does not apply to annual reports on Form 20-F.
C. Markets
For information regarding markets, see Item 9.A of this Form 20-
F.
D. Selling shareholders
This item does not apply to annual reports on Form 20-F.
E. Dilution
This item does not apply to annual reports on Form 20-F.
F. Expenses of the issue
This item does not apply to annual reports on Form 20-F.
ING Group Annual Report 2021 on Form 20-F
122
Item 10. Additional information
A. Share capital
This item does not apply to annual reports on Form 20-F.
B. Memorandum and articles of association
For a description of ING’s memorandum and articles of association, please see Exhibit 2.1 “Description of
Securities Registered under Section 12 of the Exchange Act”, which is incorporated by reference herein.
Reference is made to Exhibit 1.1 to this Form 20-F for the articles of association.
C. Material contracts
There have been no material contracts outside the ordinary course of business to which ING Groep N.V. or any
of its subsidiaries is a party in the last two years.
D. Exchange controls
Cash distributions, if any, payable in Euros on Ordinary Shares and ADSs may be officially transferred from the
Netherlands and converted into any other currency without violating Dutch law, except that for statistical
purposes such payments and transactions must be reported by ING Groep
N.V.
to the Dutch Central Bank and,
further, no payments, including dividend payments, may be made to jurisdictions or persons subject to certain
sanctions, adopted by the government of the Netherlands
or the European Union.
E. Taxation
The following is a summary of certain Netherlands tax consequences, and the United States federal income tax
consequences, of the ownership of our Ordinary Shares or American Depositary Shares (“ADSs”) by U.S.
Shareholders (as defined below) who hold Ordinary Shares or ADSs as capital assets.
For the purposes of this summary, a “U.S. Shareholder” is a beneficial owner of Ordinary Shares or ADSs that is:
◾
an individual citizen or resident of the United States,
◾
a corporation organized under the laws of the United States or of any state of the United States, or any
entity taxable as United States corporation,
◾
an estate, the income of which is subject to United States federal income tax without regard to its
source, or
◾
a trust if a court within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the authority to control all
substantial decisions of the trust.
Further, this summary is limited to U.S. Shareholders who are not, and are not deemed to be, a resident of the
Netherlands for Dutch tax purposes.
This summary is based on the United States Internal Revenue Code of 1986 and the laws of the Netherlands,
each as amended, their legislative history, existing and proposed regulations, published rulings and court
decisions, and the tax treaty between the United States and the Netherlands for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (“Treaty”), all as of the date
hereof. These laws are subject to change, possibly on a retroactive basis. The information provided below is
neither intended as tax advice nor purports to describe all of the tax considerations that may be relevant to
investors and prospective investors. It should not be read as extending to matters not specifically discussed,
and investors should consult their own advisors as to the tax consequences of their ownership and disposal of
Ordinary Shares or ADSs. In particular, the summary does not take into account the specific circumstances of
particular investors (such as tax-exempt organizations, banks, insurance companies, dealers in securities,
traders in securities that elect to mark-to-market their securities holdings, investors liable for alternative
minimum tax, investors whose functional currency is not the U.S. dollar, investors that actually or
constructively own 10% or more of the combined voting power of the voting stock or of the total value of ING
Groep N.V., investors that hold Ordinary Shares or ADSs as part of a straddle or a hedging or conversion
transaction, investors that acquired or dispose of Ordinary Shares or ADSs as part of a wash sale, or investors
that own Ordinary Shares or ADSs through a partnership), some of which may be subject to special rules.
Moreover, this summary does not discuss the Dutch tax treatment of a holder of Ordinary Shares or ADSs that
is an individual who receives income or capital gains derived from the Ordinary Shares and ADSs if such income
ING Group Annual Report 2021 on Form 20-F
123
received or capital gains derived is attributable to the past, present or future employment activities of such
holder.
The summary is based in part upon the representations of the Depositary and the assumption that each
obligation in the Deposit Agreement and any related agreement will be performed in accordance with its
terms. In general, for United States federal income tax and Netherlands tax purposes, holders of ADSs will be
treated as the owners of the Ordinary Shares underlying the ADSs, and exchanges of Ordinary Shares for ADSs,
and exchanges of ADSs for Ordinary Shares, will not be subject to United States federal income tax or
Netherlands income tax. References to Ordinary Shares in this section include references to ADSs.
It is assumed, for purposes of this summary, that a U.S. Shareholder is eligible for the benefits of the Treaty and
that a U.S. Shareholder’s eligibility is not limited by the limitation on benefits provisions of the Treaty.
Netherlands Taxation
Withholding tax on dividends
The Netherlands imposes a withholding tax on a distribution of a dividend at the statutory rate of 15%.
Dividends include:
i.
dividends paid in cash and in kind;
ii.
deemed and constructive dividends;
iii.
the consideration for the repurchase or redemption of shares in excess of the qualifying average paid-
in capital unless such repurchase is made for temporary investment purposes or is exempt by law;
iv.
any (partial) repayment of paid-in capital not qualifying as capital for Dutch dividend withholding tax
purposes;
v.
liquidation proceeds in excess of the qualifying average paid-in capital for Dutch dividend withholding
tax purposes; and
vi.
stock dividends up to their nominal value (unless distributed out of ING Groep N.V.’s qualifying paid-in
capital).
Reduction of Dutch dividend withholding tax based on Dutch law
Under certain circumstances, a reduction of Dutch dividend withholding tax can be obtained based on Dutch
law:
i.
An exemption at source is available if the Dutch participation exemption applies and the Ordinary
Shares or ADSs are attributable to a business carried out in the Netherlands. To qualify for the Dutch
participation exemption, the U.S. Shareholder must generally hold at least 5.0 percent of our nominal
paid-in capital and meet certain other requirements.
ii.
An exemption at source is available for dividend distributions to certain qualifying corporate U.S.
Shareholders owning our Ordinary Shares or ADSs if such shareholder would have been able to apply
the Dutch participation exemption if it would have been resident of the Netherlands, unless such
shareholder holds the Ordinary Shares or ADSs with the primary aim or one of the primary aims to
avoid the levy of Dutch dividend withholding tax at the level of another person and the Ordinary
Shares or ADSs are not held for valid commercial reasons that reflect economic reality.
iii.
Certain tax exempt organizations (e.g. pension funds and excluding collective investment vehicles) may
be eligible for a refund of Dutch dividend withholding tax upon their request. Based on domestic law
not yet entered into force, in those circumstances, an exemption at source may also become available
upon request.
iv.
Upon request and under certain conditions, certain qualifying individual and corporate U.S
Shareholders of Ordinary Shares or ADSs which are not subject to personal or corporate income tax in
the Netherlands may request a refund of Dutch dividend withholding tax insofar the withholding tax
withheld on the gross dividend is higher than the personal or corporate income tax which would have
been due on the net dividend if they were resident or established in the Netherlands. This refund is
however not applicable when, based on the Treaty, the Dutch dividend withholding tax can be fully
credited in the United States by the U.S. Shareholder. However, it is unclear whether (i) which
(financing) costs can be taken into account when determining the hypothetical personal or corporate
income tax due on the net income (ii) or how the Netherlands would determine whether, based on the
double taxation convention, a full credit is available in the country of residence of the holder for
purposes of this refund. See “United States Taxation—Taxes on dividends” for more information. The
provision in essence is intended to be a codification of certain judgments by both the European Free
Trade Association Court of Justice and the European Court of Justice that already indicated that in
certain circumstances a refund should be available prior to the introduction of the provision in Dutch
law. It is possible that this provision is an insufficient codification of these judgments and that based
on EU law a larger refund should be provided.
ING Group Annual Report 2021 on Form 20-F
124
Reduction of Dutch dividend withholding tax based on the Treaty
Pursuant to the provisions of the Treaty, certain corporate U.S. Shareholders owning directly at least 10% of
our voting power are eligible for a reduction to 5% Dutch dividend withholding tax provided that the U.S.
Shareholder is the beneficial owner of the dividends received and does not have an enterprise or an interest in
an enterprise that is, in whole or in part, carried on through a permanent establishment or permanent
representative in the Netherlands to which the dividends are attributable. The Treaty also provides for a
dividend withholding tax exemption on dividends, but only for a shareholder owning directly at least 80.0
percent of our voting power and meeting all other requirements.
Provided that certain conditions are met, under the Treaty dividends paid to qualifying exempt pension trusts
and other qualifying exempt organizations, as defined in the Treaty, are exempt from Dutch dividend
withholding tax. To obtain a refund of the tax withheld such qualifying exempt pension trusts are required to
file a request. Only if certain conditions are fulfilled, such qualifying exempt pension trusts may be eligible for
relief at source upon payment of the dividend. Qualifying exempt organizations (other than qualifying exempt
pension trusts) can only file for a refund of the tax withheld.
Anti-dividend stripping rules
Pursuant to the Dutch anti-dividend stripping rules, in the case of dividend-stripping, the 15% dividend
withholding tax cannot be reduced or refunded. Dividend-stripping is deemed to be present if the recipient of a
dividend is, contrary to what has been assumed above, not the beneficial owner thereof and is entitled to a
larger credit, reduction or refund of dividend withholding tax than the beneficial owner of the dividends. Under
these rules, a recipient of dividends will not be considered the beneficial owner thereof if as a consequence of
a combination of transactions a person other than the recipient wholly or partly benefits from the dividends,
whereby such person retains, whether directly or indirectly, an interest similar to the shares on which the
dividends were paid.
Credit for ING Groep N.V.
ING Groep N.V. may, with respect to certain dividends received from qualifying non-Netherlands subsidiaries,
credit taxes withheld from those dividends against the Netherlands withholding tax imposed on certain
qualifying dividends that are redistributed by ING Groep N.V., up to a maximum of the lesser of:
3% of the amount of qualifying dividends redistributed by ING Groep N.V.; and
3% of the gross amount of certain qualifying dividends received by ING Groep N.V.
The reduction is applied to the Dutch dividend withholding tax that ING Groep N.V. must pay to the Dutch tax
authorities and not to the Dutch dividend withholding tax that ING Groep N.V. must withhold.
Tax es on income and capital gains
Income and capital gains
Income and capital gains derived from the Ordinary Shares or ADSs by an individual or corporate U.S.
Shareholder are generally not subject to Netherlands income tax or corporation tax, unless:
i.
such income and gains are attributable to a (deemed) permanent establishment or (deemed)
permanent representative in the Netherlands of the U.S. Shareholder; or
ii.
the shareholder is entitled to a share in the profits of an enterprise or (in case of a non-Dutch resident
corporate shareholder only) a co-entitlement to the net worth of an enterprise, that is effectively
managed in the Netherlands (other than by way of securities) and to which enterprise the Ordinary
Shares or ADSs are attributable; or
iii.
such income and capital gains are derived from a direct, indirect or deemed substantial interest in the
share capital of ING Groep N.V. (such substantial interest not being a business asset), and in the case
of a non-Dutch resident corporate shareholder only, that substantial interest is being held with the
primary aim or one of the primary aims to avoid the levy of income tax from another person and is put
in place without valid economic reasons that reflect economic reality;
iv.
in case of a non-Dutch resident corporate shareholder, such shareholder is a resident of Aruba,
Curacao or Saint Martin with a permanent establishment or permanent representative in Bonaire,
Eustatius or Saba to which the Ordinary Shares or ADS are attributable, while the profits of such
shareholder are taxable in the Netherlands pursuant to Article 17(3)(c) of the Dutch Corporate Tax Act
1969; or
v.
in case of a non-Dutch resident individual, such individual derives income or capital gains from the
Ordinary Shares or ADSs that are taxable as benefits from ‘miscellaneous activities’ in the Netherlands
(‘resultaat uit overige werkzaamheden’, as defined in the Dutch Income Tax Act 2001), which includes
the performance of activities with respect to the Ordinary Shares or ADSs that exceed regular portfolio
management.
ING Group Annual Report 2021 on Form 20-F
125
Substantial interest
Generally speaking, for Dutch tax purposes, an interest in the share capital of ING Groep N.V., should not be
considered a substantial interest if the holder of such interest, and, in case of an individual, his or her spouse,
registered partner, certain other relatives or certain persons sharing the holder’s household, alone or together,
does or do not hold, either directly or indirectly, the ownership of, or certain rights over, shares or rights
resembling shares representing 5% or more of the total issued and outstanding capital, or the issued and
outstanding capital of any class of shares, of ING Groep N.V.
Gift or inheritance tax
No Netherlands gift or inheritance tax will be imposed on the transfer or deemed transfer of the Ordinary
Shares or ADSs by way of a gift by or on the death of a U.S. Shareholder if, at the time of the gift or the death of
that shareholder, such shareholder is not a (deemed) resident of the Netherlands.
Netherlands inheritance or gift taxes (as the case may be) are due, however, if the transfer of the Ordinary
Shares or ADSs is construed as an inheritance or as a gift made by or on behalf of a person who, at the time of
the gift or death, is deemed to be a resident of the Netherlands. For the purposes of Netherlands gift or
inheritance tax, an individual of Dutch nationality is deemed to be a resident of the Netherlands if he or she
has been a resident thereof at any time during the ten years preceding the time of the gift or death. For the
purposes of Netherlands gift tax, any person is deemed to be a resident of the Netherlands if he or she has
resided therein at any time in the twelve months preceding the gift.
United States Taxation
Taxes on dividends
The tax treatment of owning Ordinary Shares or ADSs will depend in part on whether or not ING Groep N.V. is
classified as a passive foreign investment company, or PFIC, for United States federal income tax purposes.
Except as discussed below under “-PFIC Rules”, this discussion assumes that we are not classified as a PFIC for
United States federal income tax purposes.
Under the United States federal income tax laws, a U.S. Shareholder will be required to include in gross income
the full amount of a cash dividend (including any Netherlands withholding tax withheld) as ordinary income
when the dividend is actually or constructively received by the U.S. Shareholder. For this purpose, a “dividend”
will include any distribution paid by ING Groep N.V. with respect to the Ordinary Shares or ADSs, but only to
the extent such distribution is not in excess of ING Groep N.V.’s current and accumulated earnings and profits
as determined for United States federal income tax purposes. Distributions in excess of current and
accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated
as a non-taxable return of capital to the extent of a U.S. Shareholder’s basis in the Ordinary Shares or ADSs and
thereafter as capital gain. Because ING Groep N.V. does not keep account of its earnings and profits, as
determined for United States federal income tax purposes, U.S. Shareholders should generally expect to treat
any distribution as a dividend for U.S. federal income tax purposes.
For foreign tax credit purposes, dividends will generally be income from sources outside the United States and
will, depending on the circumstances of the U.S. Shareholder, generally be “passive” income for purposes of
computing the foreign tax credit allowable to the shareholder. A dividend will not be eligible for the dividends
received deduction generally allowed to U.S. corporations in respect of dividends received from other U.S.
corporations. Dividends paid to a non-corporate U.S. Shareholder that are considered qualified dividend
income will be taxable to the shareholder at preferential rates applicable to long-term capital gains provided
that the shareholder holds the Ordinary Shares or ADSs for more than 60 days during the 121-day period
beginning 60 days before the ex-dividend date and meets other holding period requirements. Dividends paid
by ING Groep N.V. with respect to the Ordinary Shares or ADSs generally will be qualified dividend income,
provided that, in the year that you receive the dividend, we are eligible for the benefits of the Treaty. We
believe that we are currently eligible for the benefits of the Treaty and we therefore expect that dividends on
the Ordinary Shares or ADSs will be qualified dividend income, but there can be no assurance that we will
continue to be eligible for the benefits of the Treaty.
Subject to certain limitations, a U.S. Shareholder may generally deduct from income, or credit against its
United States federal income tax liability, the amount of any Netherlands withholding taxes under the Treaty.
The Netherlands withholding tax will likely not be creditable against the U.S. Shareholder’s United States tax
liability, however, to the extent that ING Groep N.V. is allowed to reduce the amount of dividend withholding
tax paid over to the Netherlands Tax Administration by crediting withholding tax imposed on certain dividends
paid to ING Groep N.V. In addition, special rules apply in determining the foreign tax credit limitation with
respect to dividends that are subject to preferential rates. To the extent a reduction or refund of the tax
withheld is available to you under Dutch law or under the Treaty, the amount of tax withheld that could have
been reduced or is refundable will not be eligible for credit against your United States federal income tax
liability. In addition, to the extent an amount of Dutch tax withheld is contingent on the availability of a credit
against the amount of income tax owed to another country, that amount of Dutch tax withheld will not be
ING Group Annual Report 2021 on Form 20-F
126
eligible for a credit against your United States federal income tax liability. It is unclear whether or how the
Netherlands would apply this rule in determining whether, based on the Treaty, a credit is available in the
United States for purposes of the dividend withholding tax refund provision described in Section IV under
“Netherlands Taxation—Withholding tax on dividends—Reduction of Dutch dividend withholding tax based on
Dutch law”.
Since payments of dividends with respect to Ordinary Shares or ADSs will be made in Euros, a U.S. Shareholder
will generally be required to determine the amount of dividend income by translating the Euro into United
States dollars at the “spot rate” on the date the dividend is distributed, regardless of whether the payment in
in fact converted into U.S. dollar. Generally, any gain or loss resulting from currency exchange fluctuations
during the period from the date the dividend is distributed to the date such payment is converted into U.S.
dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to
qualified dividend income. Such gain or loss will generally be income or loss from sources within the United
States for foreign tax credit limitation purposes.
Taxes on capital gains
Gain or loss on a sale or exchange of Ordinary Shares or ADSs by a U.S. Shareholder will generally be a capital
gain or loss for United States federal income tax purposes. If such U.S. Shareholder has held the Ordinary
Shares or ADSs for more than one year, such gain or loss will generally be long-term capital gain or loss. Long-
term capital gain of a non-corporate U.S. Shareholder is generally taxed at preferential rates. In general, gain or
loss from a sale or exchange of Ordinary Shares or ADSs by a U.S. Shareholder will be treated as income or loss
from sources within the United States for foreign tax credit limitation purposes.
PFIC rules
ING Groep N.V. believes it is not a PFIC for United States federal income tax purposes, and it does not expect to
become a PFIC in the foreseeable future. However, this conclusion is a factual determination that must be
made annually and thus may be subject to change. It is therefore possible that we could become a PFIC in a
future taxable year
If ING Groep N.V. were to be treated as a PFIC, unless a U.S. Shareholder made an effective election to be taxed
annually on a mark-to-market basis with respect to the Ordinary Shares or ADSs, any gain from the sale or
disposition of Ordinary Shares or ADSs by a U.S. Shareholder would be allocated ratably to each year in the
holder’s holding period and would be treated as ordinary income. Tax would be imposed on the amount
allocated to each year prior to the year of disposition at the highest rate in effect for that year, and interest
would be charged at the rate applicable to underpayments on the tax payable in respect of the amount so
allocated. The same rules would apply to “excess distributions”, defined generally as distributions in a single
taxable year exceeding 125% of the average annual distribution made by ING Groep N.V. over the shorter of
the three preceding taxable years or the portion of the holder’s holding period that preceded the current
taxable year. Dividends received by a U.S. Shareholder will not be eligible for the special tax rates applicable to
qualified dividend income if ING Groep N.V. were to be treated as a PFIC with respect to the shareholder either
in the taxable year of the distribution or the preceding taxable year, but instead will be taxable at rates
applicable to ordinary income.
A U.S. Shareholder who owns Ordinary Shares or ADSs during any year that ING Groep N.V. is a PFIC may be
required to file Internal Revenue Service Form 8621.
ING Group Annual Report 2021 on Form 20-F
127
F. Dividends and paying agents
This item does not apply to annual reports on Form 20-F.
G. Statement by experts
This item does not apply to annual reports on Form 20-F.
H. Documents on display
ING Groep N.V. is subject to the informational requirements of the Securities Exchange Act of 1934, as
amended. In accordance with these requirements, ING Groep N.V. files reports and other information with the
Securities and Exchange Commission (”SEC”). These materials, including this Annual Report and its exhibits,
may be inspected and copied on the SEC’s website at www.sec.gov. You may also inspect ING Groep N.V.’s SEC
reports and other information on the website of ING Groep N.V. (www.ing.com).
I. Subsidiary information
This item does not apply to annual reports on Form 20-F.
ING Group Annual Report 2021 on Form 20-F
128
Item 11. Quantitative and Qualitative
Disclosure of Market Risk
See “Item 5. Operating and Financial Review and Prospects – Factors Affecting Results of Operations” and
“Additional information - ING Group Risk Management” for these disclosures, including disclosures relating to
operational, compliance and other non-market-related risks.
ING Group Annual Report 2021 on Form 20-F
129
Item 12. Description of Securities Other
Than Equity Securities
A. Debt securities
This item does not apply to annual reports on Form 20-F.
B. Warrants and rights
This item does not apply to annual reports on Form 20-F.
C. Other securities
This item does not apply to annual reports on Form 20-F.
D. American depositary shares
Fees and Charges Payable by a Holder of ADSs
JPMorgan Chase Bank, N.A., as ADR depositary, may collect fees for, among other things, the delivery and
surrender of ADSs directly from investors, or from intermediaries acting for them, depositing Ordinary Shares
or surrendering ADSs for the purpose of withdrawal.
The charges of the ADR depositary payable which may be payable by investors are as follows:
Type of Service
ADR Depositary Actions
Fee Payable
Depositing or
substituting the
underlying Ordinary
Shares
Issuance of ADSs against the deposit of Ordinary Shares,
including deposits and issuances in respect of:
$5.00 for each 100 ADSs (or portion
thereof) issued, delivered or upon
which a share distributive or elective
distribution is made or offered. The
ADR depositary may sell sufficient
securities or property received in
respect of share distributions, rights
and other distributions prior to such
deposit to pay such charge.
Receiving or
distributing cash
dividends
Distribution of cash dividends or other cash distributions, or
offering of elective cash/stock dividends.
$0.05 or less per ADS held.
Selling or exercising
rights
An amount equal to the fee for the
execution and delivery of ADSs which
would have been charged as a result
of the deposit of such securities.
Withdrawing an
underlying Ordinary
Share
Acceptance of ADSs surrendered for withdrawal of deposited
Ordinary Shares
$5.00 for each 100 ADSs (or portion
thereof) reduced, cancelled or
surrendered.
ING Group Annual Report 2021 on Form 20-F
130
Type of Service
ADR Depositary Actions
Fee Payable
Transferring,
splitting or grouping
of ADRs
Registration, registration of transfer, combination and split-up
of ADRs in the ADR register as evidenced by the ADRs
surrendered or upon delivery of proper instruments of transfer
$1.50 per ADR.
General depositary
services, particularly
those charged on an
annual basis
Other services performed by the ADR depositary in
administering the ADR program
$0.05 per ADS per calendar year (or
portion thereof), which may be
charged on a periodic basis during
each calendar year against holders of
the record date(s) set by the ADR
depositary and shall be payable at
the sole discretion of the ADR
depositary by billing such holders or
deducting such charge from one or
more cash distributions.
Reimbursement of
fees, charges and
expenses of the ADR
depositary
The ADR depositary and/or any of its agents may incur fees,
charges and expenses (including expenses incurred on behalf
of holders of ADRs in connection with compliance with foreign
exchange control regulations or any law or regulation relating
to foreign investment) in connection with the servicing of the
underlying Ordinary Shares or other deposited securities, the
sale of securities (including, without limitation, deposited
securities), the delivery of deposited securities or otherwise in
connection with the ADR depositary’s compliance with
applicable law, rule or regulation.
Fees and charges shall be assessed
on a proportionate basis against
holders of ADRs as of the record date
or dates set by the ADR depositary
and shall be payable at the sole
discretion of the ADR depositary by
billing such holders of ADRs or by
deducting such charge from one or
more cash dividends or other cash
distributions.
Type of Service
ADR Depositary Actions
Fee Payable
Other charges and
expenses of the ADR
depositary
The ADR depositary may incur charges and expenses on behalf
of holders in connection with:
Payable by holders or persons
depositing Ordinary Shares.
Payable by persons depositing, or
holders of ADRs delivering underlying
Ordinary Shares, Ads or deposited
securities.
Payable by persons depositing or
withdrawing deposited securities.
Fees and Payments made by the ADR depositary to ING
In consideration for acting as depositary, the ADR depositary has agreed to provide ING with certain amounts
on an annual basis. In the year ended 31 December 2021, the ADR depositary paid aggregate fees and made
other direct and indirect payments to ING in an amount of USD 10,498,456.
Under certain circumstances, including removal of the ADR depositary or termination of the ADR program by
ING, ING is required to repay the ADR depositary certain amounts reimbursed and/or expenses paid to or on
behalf of ING.
ING Group Annual Report 2021 on Form 20-F
131
PART II.
Item 13. Defaults, Dividend Arrearages and
Delinquencies
None.
Item 14. Material Modifications to the
Rights of Security Holders and Use of
Proceeds
None.
Item 15. Controls and Procedures
Internal control over financial reporting
Due to the listing of ING shares on the New York Stock Exchange, ING Group is required to comply with the SEC
regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act (SOX 404). These regulations require that
the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) of ING Group report and certify on an
annual basis on the effectiveness of ING Group’s internal control over financial reporting. Moreover, the external
auditors are required to provide an opinion on the effectiveness of ING Group’s internal control over financial
reporting.
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 is in the position to publish an unqualified
statement that the Company’s internal control over financial reporting was effective as of 31 December 2021.
The SOX 404 statement by the Executive Board is included on this page, followed by the report of the external
auditor as issued on Form 20-
F.
Disclosure Controls and Procedures
The Company’s management, under the supervision and with the participation of the CEO and CFO, has
performed an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls
and procedures. Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls
and procedures were effective as of December 31, 2021, the end of the period covered by the 2021 Form 20-F.
Report of the Executive Board on Internal Control Over Financial Reporting
The Executive Board is responsible for establishing and maintaining adequate internal control over financial
reporting. ING’s internal control over financial reporting is a process designed under the supervision of our
principal executive and principal financial officers to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that:
◾
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of assets of ING;
ING Group Annual Report 2021 on Form 20-F
132
◾
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorisations of our management and
directors; and
◾
Provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use
or disposition of our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
The Executive Board assessed the effectiveness of internal control over financial reporting as of 31 December
2021. In making this assessment, the Executive Board performed tests based on the criteria of the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Reporting – Integrated Framework
(2013 Framework). Based on the Executive Board’s assessment and those criteria, the Executive Board concluded
that the Company’s internal control over financial reporting was effective as of 31 December 2021.
Attestation Report of the Registered Public Accounting Firm
Our independent registered public accounting firm has audited and issued their report on ING’s internal control
over financial reporting, which appears on the page below.
Changes in Internal Controls over Financial Reporting
There have been no changes in the Company’s internal controls over financial reporting during the period
covered by this Annual Report that have materially affected or are reasonably likely to materially affect, our
internal control over financial reporting.
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Supervisory Board
ING Groep N.V.:
Opinion on Internal Control Over Financial Reporting
We have audited ING Groep N.V. and subsidiaries’ (the Company) internal control over financial reporting as of
December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated statements of financial position of the Company as of December 31,
2021 and 2020, the related consolidated statements of profit or loss, comprehensive income, changes in equity,
and cash flows for each of the years in the three-year period ended December 31, 2021, the related notes and
the specific disclosures described in Note 1 as being part of the consolidated financial statements (collectively,
the consolidated financial statements), and our report dated March 7, 2022 expressed an unqualified opinion on
those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Report of the Executive Board on Internal Control over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
ING Group Annual Report 2021 on Form 20-F
133
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company; and (3)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ KPMG Accountants N.V.
Amstelveen, The Netherlands
March 7, 2022
Item 16A. Audit Committee Financial Expert
The Supervisory Board has determined that Margarete Haase, who is a member of the Supervisory Board,
qualifies as an “audit committee financial expert” as defined by the SEC pursuant to section 407 of the Sarbanes-
Oxley Act of 2002. The Supervisory Board has further determined that Margarete Haase is “independent”, as
defined in Rule 10A-3 under the U.S. Securities Exchange Act of 1934. She was appointed as a member of the
Supervisory Board at the General Meeting in May 2017 and her appointment became effective as per 1 May
2018, as decided by the Supervisory Board in January 2018. Margarete Haase is chairwoman of the Audit
Committee.
Item 16B. Code of Ethics
How we work
Our culture, including our risk culture, starts with the Orange Code values and behaviours we share across our
organisation, helping us to make responsible decisions – for ourselves and for our customers. A sound risk culture
is paramount at ING as it determines the way in which employees identify, understand, discuss and act on the
risks we are confronted with and the risks we take. The proper embedding of our Global Code of Conduct,
Orange Code and the Whistleblower policy into our processes is key to managing our culture and ethics risk.
The Orange Code
The Orange Code is a declaration of who we are. It describes what we can expect from each other when we turn
up to work each day. It is a set of standards that we collectively value, strive to live up to, and invite others to
measure us by. The Orange Code is the sum of two parts, the ING values and ING behaviors, with “
Integrity
above all
” being the overarching principle.
Our values.
The non-negotiable promises we make to the world no matter what.
◾
We are honest.
◾
We are responsible.
◾
We are prudent.
ING Group Annual Report 2021 on Form 20-F
134
Our behaviours.
The commitments we make to each other and the standards by which we measure each other’s
performance:
◾
You take it on and make it happen.
◾
You help others to be successful.
◾
You are always a step ahead.
Our business centers on people and trust. People trust us with their money and with their data. Maintaining this
trust is crucial. Everything we do at ING is guided by our Orange Code, a declaration that describes our way of
working, putting integrity above all. We expect everyone to demonstrate our Orange Code standards, values and
behaviours every day. Not doing so could potentially put our customers at risk, erode the public’s confidence in
our bank and damage our reputation. That’s why integrity is at the very foundation of our culture.
Employees are introduced to the Orange Code early with new joiners invited to complete a global online e-
learning introduction module that explains more about ING’s culture, how we work and what we expect from
employees.
Our Orange Code is included within Step Up Performance Management, our global performance management
approach, and discussed throughout the year. It is also linked to our Our People Offer, our Employee Value
Proposition, which forms the basis of all people-related programmes. Through these activities, our aim is to
develop a culture that is focused on long-term value creation.
The Orange Code applies to all employees worldwide, including the principal executive, financial and accounting
officers. The values and behaviours of the Orange Code are available on the ING website at
https://www.ing.jobs/Global/Careers/Orange-code.htm.
In 2021, there were no amendments to the Orange Code. ING did not grant any waivers (including implicit
waivers) under the Orange Code to the principal executive, financial or accounting officers in 2021.
Global Code of Conduct
Building on the Orange Code is ING’s Global Code of Conduct (launched in 2020) which outlines the 10 core
principles we expect from our employees. These principles build on the values and behaviors of the Orange Code
and are based on ING’s existing policies, minimum standards and guidelines.
All ING new joiners are requested to complete the Global Code of Conduct e-learning upon onboarding.
Whistleblower Policy
Two of the important Global Code of Conduct elements are the ‘speak-up’ principle, which encourages
employees to report any form of misconduct, and the principle that every ING employee is entitled to a safe
working environment. ING does not tolerate discrimination, harassment, bullying, sexual or other forms of
intimidation, aggression or violence. Furthermore, all persons in scope of the Whistleblower Policy are
encouraged to raise concerns about suspected or actual criminal conduct, unethical conduct or other misconduct
by or within ING.
In 2021, minor changes were made to the Whistleblower Policy to remain a safe and compliant bank. The
changes include an extension of the scope of the Policy. The Policy now covers any natural person working for,
having worked for or is in the process of being hired to work for or on behalf of ING, on contract or temporary,
including Senior Management and members of the Executive Board, Management Board Banking and the
Supervisory Board, persons on secondment, paid and unpaid interns, volunteers or trainees, and persons hired as
external employees, including self-employed workers, the principal executive, financial and accounting officers.
The updated Whistleblower Policy is available on the ING website at www.ing.com/About-us/Compliance/ING-
Group-Whistleblower-Policy.htm.
ING granted ING Turkey a waiver, because its local regulation was stricter than the ING Whistleblower Policy. No
further waivers were granted (including implicit waivers) under the Whistleblower Policy to the principal
executive, financial or accounting officers in 2021.
Orange Code Decision Making
To enhance risk awareness, support moral learning, and enable people to perform proper risk judgement, the
Orange Code Decision Making model (introduced in 2017) targets to support our employees in dealing with
dilemmas via workshops and dialogue sessions. This four-step approach supports balanced decision-making by
weighing the rights and interest of all stakeholders involved. Compliance organizes ongoing training for local
Compliance experts so that they can properly apply the model in their respective countries. Moreover, the model
has been embedded into other decision making processes, such as the data ethics governance process and the
global Product Approval and Review Process.
Conflicts of Interest
ING Group Annual Report 2021 on Form 20-F
135
Regarding the management of actual or potential conflicts of interest, ING maintains a policy on Conflicts of
Interests which applies to all employees worldwide, including the principal executive, financial and accounting
officers. A description of the policy on Conflicts of Interest is available to view on the ING website at
https://www.ing.com/About-us/Compliance/Conflicts-of-interest-and-confidential-information.htm.
The Conflict of Interest Policy “aims to identify, assess, manage and mitigate or prevent actual and potential
conflicts between ING customers and between the interests of ING an the private interests of ING employees,
including members of ING’s senior management which could adversely influence the performance of their duties
and responsibilities”.
ING did not grant any waivers (including implicit waivers) under the Conflicts of Interest Policy to the principal
executive, financial or accounting officers in 2021. In 2021 the Conflicts of Interest Policy was revised to further
align with the standards as defined by enterprise risk management and to incorporate key requirements for both
personal and organizational conflicts of interest in line with the European Bank Association Guidelines on Internal
Governance. The policy will become effective in April 2022.
Banker’s Oath
All employees working for ING in the Netherlands (including ING's principal executive, financial or accounting
officers) take the Banker's Oath. The Oath contains a set of principles affirming the banking industry's
commitment to maintain high standards of ethical behaviour. Accountability and a disciplinary sanction
mechanism are linked to breaches of these principles.
Compliance is trained to support employees in dealing with dilemmas via workshops and dialogue sessions, using
the Orange Code Decision Making model (a so-called “four-step approach” weighing the rights and interest of
stakeholders involved).
In 2021, there were no amendments to the Banker's Oath. ING did grant waivers under the Banker's Oath, but
not to principal executives, financial or accounting officers in 2021 (unless they were not in scope of the Banker’s
Oath obligation according to ING’s Banker’s Oath Guidelines). The text of the Banker’s oath can be found here:
https://www.ing.com/About-us/Corporate-governance/Dutch-Banking-Code.htm
ING Group Annual Report 2021 on Form 20-F
136
Item 16C. Principal Accountant Fees and
Services
At the Annual General Meeting held on 23 April 2019, KPMG (
) was re-appointed as the external audit firm for ING Group for the financial years
2020 through 2023. This appointment includes the responsibility to provide an audit opinion on the financial
statements and internal control over financial reporting on 31 December 2021 and to report on the outcome of
these audits to the Executive Board and the Supervisory Board.
The external auditor may be questioned at the Annual General Meeting in relation to its audit opinion on the
financial statements. The external auditor will therefore attend and be entitled to address this meeting. The
external auditor attended the meetings of the Risk Committee and of the Audit Committee and attended and
addressed the 2020 Annual General Meeting, at which the external auditor was questioned about its audit
opinion.
The external auditor may only provide services to ING Group and its subsidiaries with the permission of the Audit
Committee, in line with the ING Group Policy on External Auditors’ Independence. All services were approved by
the Audit Committee.
More information on the ING Group Policy on External Auditors’ Independence is available on the website of ING
Group www.ing.com.
Audit fees
Audit fees were paid for audit and assurance services provided by the auditors. The services provided include the
audit of ING Group’s consolidated financial statements and Form 20-F. Moreover, these services include the
audits of the statutory financial statements of its subsidiaries. And, it includes assurance services provided by the
auditor regarding other filings for regulatory and supervisory purposes as well as the review on interim financial
statements. Furthermore, it includes the assurance services relating to comfort letters issued in connection with
prospectuses and reviews of SEC product filings.
Audit-related fees
Audit-related fees were paid for assurance and related services that are reasonably related to the performance of
the audit or review of the consolidated financial statements not reported under the audit fee item above. These
services consisted primarily of specific agreed-upon procedure engagements and assurance engagements for
third parties.
Tax fees
Over 2021 no tax fees were paid. Under the current ING Group Policy on External Auditors’ Independence most
tax services are prohibited. Some tax services are only allowed after specific approval under an ‘exception
procedure’.
Reference is made to Note 29 ‘Audit fees ’ in the consolidated financial statements for audit, audit-related, tax
and all other fees paid to the external auditors in 2021, 2020 and 2019.
Item 16D. Exemptions from the Listing
Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by
the Issuer and Affiliated Purchasers
On 1 October 2021, ING announced a share buyback programme under which it repurchases ordinary shares of
ING Groep, with a maximum total value of EUR 1,744 million and for a number of shares not exceeding the
authority granted by the general meeting of shareholders (10% of the issued shares). The share buyback
programme has commenced on 5 October 2021 and was completed on 28 February 2022. The total number of
shares repurchased under the programme is 139,711,040 ordinary shares at an average price of EUR 12.47 for a
ING Group Annual Report 2021 on Form 20-F
137
total consideration of EUR 1,742 million. The purpose of the share buyback programme is to reduce the share
capital of ING.
The share buyback programme has been approved by the ECB and is executed within the limitations of the
existing authority granted by the general meeting of shareholders on 26 April 2021 and in compliance with the
Market Abuse Regulation. ING has entered into a non-discretionary arrangement with a financial intermediary to
conduct the buyback.
There were no purchases by us or any of our affiliated purchasers of any of our equity securities registered
pursuant to Section 12 of the U.S. Securities Exchange Act of 1934 during the fiscal years ended December 31,
2020 and 2019.
Purchases of Equity Securities by the Issuer and affiliated Purchasers
Month of purchase
Total number of
shares purchased
1
Average price paid
per share in EUR
Total number of
shares purchased
as part of publicly
announced plans
or programmes
2
Maximum Value of
shares that may yet be
purchased under the
plans or programmes in
EUR million
October 2021
31,584,782
12.86
31,584,782
1,338
November 2021
43,158,794
12.85
43,158,794
783
December 2021
52,884,224
12.17
52,884,224
140
Total
127,627,800
12.57
127,627,800
140
Of which:
Purchased in the open market
127,627,800
12.57
127,627,800
1,604
Acquired through exercise of call
options / settlement of forward
contracts
n.a.
n.a.
n.a.
n.a.
1
The table excludes purchases for market-making in ING Groep N.V. shares.
2
On 1 October 2021, ING Groep N.V. announced a share buyback programme for EUR 1,744 million. The programme was initiated
on 5 October 2021 and is expected to end no later than 5 May 2022. The share buyback programme was completed on 28
February 2022. The programme is executed by an intermediary to allow for purchases in the open market during both open and
closed periods. As the programme was initiated for capital reduction purposes, ING Groep N.V. intends to cancel all of the shares
acquired under the programme. ING Groep N.V. has no other publicly announced plans or programmes to repurchase shares. No
publicly announced plans or programmes expired during 2021. In 2021, ING Groep N.V. did not determine to terminate any
publicly announced plans or programmes prior to expiration, or determine that it intends not to make any further purchases
under any publicly announced plans or programmes.
Item 16F. Changes in Registrant’s Certifying
Accountant
Not applicable.
Item 16G. Corporate Governance
Dutch Corporate Governance Code and Banking Code
As ING Group is established and listed in the Netherlands, it must comply with Dutch laws and regulations and is
subject to the Dutch Corporate Governance Code (the DCGC).
The DCGC provides guidance for ING’s corporate governance structure and practices. ING strongly supports the
DCGC and its principles to ensure sound corporate governance. ING’s application of the DCGC is described in the
2021 ‘Application of the Dutch Corporate Governance Code by ING Groep N.V.’, 10 March 2022, available on
ing.com.
The DCGC can be downloaded from the website mccg.nl.
The Dutch Banking Code (the Banking Code) is only applicable to ING Bank, but ING Group voluntarily applies the
principles of the Banking Code on remuneration for its Executive Board members and senior management.
The Banking Code can be downloaded from the website nvb.nl/english/.
This chapter, including the parts of this Annual Report incorporated by reference, along with the
ING Group Annual Report 2021 on Form 20-F
138
publication ‘Application of the Dutch Corporate Governance Code by ING Groep N.V. ’, comprise the Corporate
Governance Statement.
Differences between Dutch and US corporate governance practices
ING Group qualifies as a foreign private issuer under the US Securities and Exchange Commission (SEC) rules and
is permitted to follow home-country practice in some circumstances, in lieu of certain corporate governance
standards required by the New York Stock Exchange (NYSE) applicable to US domestic companies. Accordingly,
ING Group must disclose in its Annual Report on Form 20-F any significant differences between its corporate
governance practices and those applicable to US companies under NYSE listing standards. ING Group believes
there differences are the following:
•
ING Group has a two-tier board structure, in contrast to the one-tier board structure used by most US
companies. In the Netherlands, a public limited liability company with a two-tier board structure has an
executive board as its management body and a supervisory board that advises and supervises the executive
board. Supervisory board members are often former state or business leaders and sometimes former
members of the executive board. A member of the executive board or other officer or employee of the
company cannot simultaneously be a member of the supervisory board. The supervisory board must approve
specified decisions of the executive board.
•
Under the DCGC, all members of the supervisory board, with the exception of not more than one person,
should be ‘independent’ as determined under the DCGC. However, the definition of ‘independent’ under the
DCGC differs in its details from the definition of ‘independent’ under the NYSE listing standards.
of ING’s Supervisory Board, are independent as determined under the DCGC.
•
NYSE listing standards require a US company to have a compensation committee and a nominating/corporate
governance committee, each composed entirely of independent directors (as determined under the NYSE
listing standards). ING’s Nomination and Corporate Governance Committee and Remuneration Committee are
composed entirely of members of the Supervisory Board who are independent as determined under the
DCGC.
•
NYSE listing standards require that, when a member of the audit committee of a US company serves on four
or more audit committees of public companies, the company should disclose (on its website, in its annual
proxy statement or in its annual report filed with the SEC) that the board of directors has determined this
simultaneous service would not impair the director’s service to the company. Dutch law does not require the
Supervisory Board to make such a determination.
•
In contrast to the NYSE listing standards, the DCGC contains an ‘apply-or-explain’ principle, offering the
possibility of deviating from the DCGC. For any deviations by ING Group, please refer to the paragraph ‘Dutch
Corporate Governance Code and Banking Code’.
•
NYSE listing standards require external auditors to be appointed by the audit committee. By contrast, Dutch
law requires ING Group’s external auditors to be appointed by the General Meeting and not by the Audit
Committee. The Audit Committee is responsible for preparing the Supervisory Board’s nomination to the
General Meeting for the appointment and remuneration of ING Group’s external auditor, and annually
evaluates the independence and functioning of, and developments in the relationship with, ING Group’s
external auditor and informs the Supervisory Board of its findings and proposed measures.
•
Under NYSE listing standards, shareholders of US companies must be given the opportunity to vote (of which
the result is advisory in nature) on all equity compensation plans applicable to any employee, director or
other service provider of a company (or on material revisions thereto), with limited exceptions set forth in the
NYSE rules. Under Dutch law and the DCGC, 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.
•
The NYSE listing standards require certain transactions with related parties to be reviewed by a company’s
audit committee or another independent body of the board of directors for potential conflicts of interest, and
for the audit committee or other independent body to prohibit such a transaction if it determines it to be
inconsistent with the interests of the company and its shareholders. However, foreign private issuers can rely
on home country practice with respect to review and approval of related party transactions. ING has adopted
internal policies and procedures for the purposes of identifying, assessing, and recording conflicts of interest,
including with respect to whether related party transactions are on customary or arm’s length terms. These
policies and procedures are intended, if and to the extent required under applicable law, prudential rules and
other applicable guidelines, to enable the Management Board and Supervisory Board to assess the terms of
these intended transactions.
ING Group Annual Report 2021 on Form 20-F
139
Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I. Disclosure Regarding Foreign
Jurisdictions that Prevent Inspections
Not applicable.
ING Group Annual Report 2021 on Form 20-F
140
PART III.
Item 17. Consolidated Financial Statements
Not applicable.
Item 18. Consolidated Financial Statements
Reference is made to the Consolidated financial statements of ING Group on page F-258.
ING Group Annual Report 2021 on Form 20-F
141
Item 19. Exhibits
The following exhibits are filed as part of this Annual Report:
Exhibit 1.1
Exhibit 2.2
Exhibit 2.3
Exhibit 2.4
Exhibit 2.5
Exhibit 2.6
Exhibit 2.7
Exhibit 2.8
Exhibit 2.9
Exhibit 2.10
Exhibit 2.11
Exhibit 2.12
ING Group Annual Report 2021 on Form 20-F
142
Exhibit 2.13
Exhibit 2.14
Exhibit 2.15
Fourth Supplemental Indenture between ING Groep N.V. and The Bank of New York Mellon,
London Branch, as trustee, dated September 14, 2021, in respect of 3.875% Perpetual
Additional Tier 1 Contingent Convertible Capital Securities and 4.250% Perpetual Additional
Tier 1 Contingent Convertible Capital Securities (incorporated by reference to Exhibit 4.1 of
ING Groep N.V.'s Report on Form 6-K filed on 14 September 2021)
Exhibit 101
Inline eXtensible Business Reporting Language (Inline XBRL)
Exhibit 104
Cover Page Interactive Datafile (embedded in Exhibit 101)
SIGNATURES
The registrant hereby certifies that it meets all the requirements for filing on Form 20-F and that it has duly
caused and authorised the undersigned to sign this annual report on its behalf.
ING Groep N.V.
(Registrant)
By:/s/T. Phutrakul
T. Phutrakul
Chief Financial Officer
Date: March 7, 2022
Risk management at ING Group
ING Group Annual Report 2021 on Form 20-F
143
Risk management
The Covid-19 pandemic continued to have a negative impact on the global
economy. Although economic activity continued to recover in 2021, strains on
supply chains and inflation hamper the recovery. This section explains ING’s
approach towards risk manageme nt and how this was impacted by the Covid-
19 pandemic.
As a global financial institution with a strong European base, offering banking services, ING is exposed to a variety
of risks. We manage these risks through a comprehensive risk management framework that integrates risk
management into daily business activities and strategic planning. This aims to safeguard ING’s financial strength
and reputation by promoting the identification, measurement and management of risks at all levels of the
organisation. Taking measured risks aligned with its Risk Appetite is core to ING’s business.
The risk management function supports the Executive Board in formulating the risk appetite, strategies, policies
and limits. It provides oversight, challenges and controls throughout ING on risk-related items.
This section sets out how ING manages its risks on a day-to-day basis. It explains how the risk management
function is embedded within the organisation based on the ‘three lines of defence’ model. It describes the key
risks that arise from ING’s business model and how these are managed by dedicated risk management
departments, with various specific areas of expertise. The section provides qualitative and quantitative
disclosures about solvency, credit, market, funding and liquidity, ESG and climate change, business, operational,
IT, compliance and model risks.
Risk profile
This chart provides high-level information on the risks arising from ING’s business activities:
Risk profile
Risk management at ING Group
ING Group Annual Report 2021 on Form 20-F
144
Risk categories
ING’s main risks are described in the categories below. The chapters in the risk management section are based on how risks are managed internally. Operational and IT risk are part of the NFR chapter.
Overview of Risk Categories
Risk Categories
Sub-categories
defined as:
Financial Risk
Solvency risk
The risk of lacking sufficient capital to fulfil business objectives, regulatory requirements or market expectations. A bank that is completely insolvent is unable to pay its debts and will be
forced into bankruptcy.
Credit risk
The risk of potential loss due to default by ING’s debtors (including bond issuers) or trading counterparties.
Market risk
The risk of potential loss due to adverse movements in market variables.
Funding and liquidity risk
The risk that ING cannot meet financial liabilities when they become due at reasonable cost and in a timely manner.
Non-Financial Risks
Operational risk
The risk of direct or indirect loss arising from inadequate or failed internal processes, people and systems or from external events.
Information (Technology) risk
The risk of financial loss, regulatory sanction and/or reputational damage due to ineffectively utilising information, or inappropriately protecting information.
Compliance risk
A threat posed to ING’s standing resulting from failure to act in line with applicable laws and regulations, internal rules (including ING’s Orange Code and global Code of Conduct) and/or
societal expectations.
Overarching Risks
ESG risk (including climate risk)
ESG is the risk that environmental, social and governance issues stemming from the banks clients result in reputational damages and/or financial losses for ING. Climate risk is the risk
that a financial loss will be incurred due to climate change events, either through physical risk (eg flooding) or transition risk (eg solar energy instead of gas).
Business and strategy risk
The value or earnings loss due to business and strategic decisions that do not materialise as planned. This risk can be expressed in terms of volumes, margins, expenses and fees and
commissions.
Model risk
The risk that the financial or reputational position of ING is negatively impacted as a consequence of the use of models. Model risk can arise from errors in the development,
implementation, use or interpretation of models, or from incomplete or wrong data etc., leading to inaccurate, noncompliant or misinterpreted model outputs.
Risk management at ING Group
ING Group Annual Report 2021 on Form 20-F
145
Top and emerging risks
The risks listed below are defined as existing and emerging risks which could cause the actual results to differ, in
some instances materially, from those anticipated. They may have a material impact on the reputation of the
company, introduce volatility in future operating results, or impact ING’s medium and long-term strategy
including the ability to pay dividends, maintain appropriate levels of capital or meet liquidity and funding targets.
An emerging risk is defined as a risk that has the potential to have a significant negative effect on our
performance, but whose impact on the organisation is currently more difficult to assess than other risk factors
that are not identified as emerging risks.
The topics have emerged as part of the annual risk assessment that is performed as part of the Stress Testing
Framework and the Risk Appetite Framework. The sequence in which the risks are presented below is not
indicative of their likelihood of occurrence or the potential magnitude of their financial consequences.
The 2021 risk assessment confirmed our top and emerging risks. The top risks in 2021 are related to cybercrime,
data risk management and a persistent low interest rate environment. On top of that, the Covid-19 pandemic
continued to impact our business environment. Climate change risk remains an emerging risk, reflecting the
impact that climate change may have for the financial position and/or reputation of ING.
The Russian invasion of Ukraine
The Russian invasion of Ukraine and rapidly escalating events in late February and early March 2022 is a
significant tragedy to the people and is causing disruption to business and economic activity in the region and
worldwide. Subsequently, the United States, United Kingdom and Europe initiated sanctions against Russia in late
February and early March 2022. In response, the Russian central bank enforced liquidity and currency controls.
On sanctions
The international community is leveraging their sanction tools in response to the escalation of Russia’s invasion
of Ukraine. Accordingly, as part of ING’s know your customer and compliance risk governance and procedures,
ING is continuously monitoring the situation to stay abreast on all relevant updates to implement effective and
appropriate additional control measures and to manage the increased risk and financial impacts of these
developments.
Our exposures
ING has wholesale banking activities in both Russia and Ukraine, as well as investments in Russia, some of which
are denominated in local currency. As a result of the Russian invasion of Ukraine and related international
response measures, including sanctions and capital controls, we may be exposed to increased risk of default of
counterparties located in Russia and Ukraine, counterparties of which the ultimate parent is located in Russia or
may be considered effectively controlled or influenced through Russian involvement, and other counterparties in
sectors affected by the international response measures. Furthermore, we have counterparty exposure to
Russian entities in connection with foreign exchange derivatives for future receipt of foreign currencies against
RUB.
As of 28 February 2022, ING’s total Russia-related exposure was approximately €6.7 billion (~0.9% of our total
loan book), mainly consisting of liquidity facilities and pre-export financing. In Ukraine, our exposure was
approximately €500 million mainly with liquidity facilities and other lending. Around €700 million exposure to
Russian clients was affected by new sanctions. Early March 2022, we announced our decision to not do any new
business with Russian companies.
Basis of disclosures (*)
The risk management section contains information relating to the nature and extent of the risks of
financial instruments as required by International Financial Reporting Standards (IFRS) 7 'Financial
Instruments: Disclosures'. These disclosures are an integral part of ING Group Consolidated financial
statements and are indicated by the symbol (*). This is applicable for the chapters, paragraphs, graphs
or tables within the risk management section that are indicated with this symbol in the respective
headings or table header.
This risk management section also includes additional disclosures beyond those required by IFRS
standards, such as certain legal and regulatory disclosures. Not all information in this section can be
reconciled back to the primary financial statements and corresponding notes, as it has been prepared
using risk data that differs to the accounting basis of measurement. Examples of such differences
include the exclusion of accrued interest and certain costs and fees from risk data, and timing
differences in exposure values (IFRS 9 models report expected credit loss on underlying exposures).
Disclosures in accordance with Part Eight of the CRR2 and CRD V, and as required by the supervisory
authority, are published in our ‘Additional Pillar III Report’, which can be found on our corporate
website ing.com.
Risk management at ING Group
ING Group Annual Report 2021 on Form 20-F
146
The impact on our business is being monitored on a continuous basis. A central team was established for daily
monitoring and we intensified monitoring of our counterparties. Furthermore, we are working together with
counterparties, both onshore and offshore, to limit risks associated with derivatives exposures.
Below table illustrates our exposure to Russia per 28 February 2022. Compared to year-end 2021, as disclosed in
the credit risk portfolio section, the exposure to Russian borrowers of €4.8 billion increased with approximately
€500 million due to central bank placements of deposits received and (limited) drawings under committed
facilities.
Russia exposure
1
in EUR billion
28 Feb 2022
Russian borrowers
2
5.3
Non-Russian borrowers with Russian ownership
1.5
Total
6.7
Of which covered by ECA (0.9), CPRI (1.3) and European parent guarantees (0.3)
3
2.5
Total booked at ING in Russia
4
1.3
Of which covered by European parent guarantees
0.3
1 Credit outstandings of lending, pre-settlement (including lending related derivatives), money market and investment activities, excluding
off-balance sheet positions such as undrawn committed exposures of €0.6 billion
2 Includes Russian borrowers with non-Russian (ultimate) ownership
3 Refers to Export Credit Agency (ECA) and Credit and Political Risk Insurance (CPRI)
4 Exposures booked at ING in Russia are partly supported by Legal lending limit guarantees from ING Bank N.V.. These guarantees cover
current outstandings of approximately €150 million
Below table illustrates our exposure to Ukraine per 28 February 2022.
Ukraine exposure
1
in EUR billion
28 Feb 2022
Booked at ING in Ukraine
0.4
Booked at other ING entities
0.2
Total
0.5
Of which covered by (European) parent guarantees
0.2
1 Credit outstandings of lending, pre settlement, money market and investment activities. Off-balance positions are not included but are
negligible
Covid-19 pandemic
In 2021, the Covid-19 pandemic continued to have an impact on people, businesses and the economy. While
vaccination rates continued to increase and Covid-19 related restrictions were lifted in some jurisdictions in the
first part of 2021, the end of 2021 was again marked by new waves of infections. Uncertainty concerning the
ongoing pandemic remains and we therefore continue to be cautious and remain ready to support our clients
when they need it. Further, the economic environment in 2021 was marked by supply chain disruptions, rising
energy and commodity prices, significantly increasing house prices and increasing inflation impacting companies
and consumers..
ING is carefully monitoring the Covid-19 pandemic and the impact on its people and business. A central ING team
monitors the situation globally and provides guidance on health and safety measures, travel advice, and business
continuity for our company. In addition, a situation in which most or some of ING’s employees continue working
from home may raise operational risks, including with respect to information security, data protection,
availability of key systems and infrastructure integrity.
Increased attention is being paid to our financial risks. ING performed several types of stress tests and sectoral
reviews to assess the potential impact of the covid-19 pandemic and the uncertainties of the current economic
environment (e.g. inflation risk stress test) on its financial position. These stress tests and reviews helped ING to
get further insights into the potential impact and to define appropriate mitigating actions.
Risk management at ING Group
ING Group Annual Report 2021 on Form 20-F
147
Potential economic implications for the countries and sectors where ING is active, which could have a material
adverse effect on ING’s business and operations, are continuously being identified, assessed and monitored in
order to execute possible mitigating actions.
Financial crime
We’re committed to fulfilling our role as a gatekeeper to the financial system, in order to protect our customers,
society and our bank from the corrosive effects of financial crimes such as money laundering, terrorist financing,
bribery and corruption, sanctions evasion and tax offences. It’s our intention to not just comply with applicable
laws and regulations in relation to financial crime, but also to continue to strengthen our financial crime control
framework in a robust and sustainable way to prevent, detect and respond to illicit activity. We continue to seek
to harness new and innovative technological capabilities in order to create a safer environment for our
customers, our bank and society. In 2021, we adjusted our financial crime risk appetite and framework of policies
and procedures to reflect changes in the risk environment and responded to external developments; including
the Pandora Papers release. We also sought to further empower our people with the skills and knowledge to
fight financial crime; sharing insights with them about emerging and evolving threats (including in relation to
financial crime risks linked to or heightened by the Covid-19 pandemic) and enhancing our training framework.
However, fighting financial crime and protecting the integrity of the financial system is a challenge for all banks,
given the constantly changing environment and pace at which criminals evolve their methods. We believe we can
be more effective in our efforts if we collectively join forces and share intelligence with other banks and with
national, European and international authorities and law enforcement to combat financial crime. We therefore
continue to proactively participate in public-private partnerships, such as Transaction Monitoring Netherlands
and Germany’s Anti-Financial Crime Alliance, and to collaborate with other banks.
Cybercrime
Cybercrime remains a continuous threat to companies in general and to financial institutions in particular. Both
the frequency and the intensity of attacks are increasing on a global scale. The sophistication and implications of
ransomware attacks are a growing concern in the threat landscape.
The continuous enhancement of the control environment to protect from, and detect and respond to, e-banking
fraud, DDoS, targeted attacks and more specific ransomware attacks is of the highest priority. Additional controls
continue to be embedded in the organisation as part of the overall internal control framework and are
continuously re-assessed against existing and new threats. In addition, ING continues to strengthen its global
cybercrime and fraud resilience through extensive collaboration across the globe with financial industry peers,
law enforcement authorities, government (e.g. National Cybersecurity Center) and Internet Service Providers
(ISPs).
Data risk management
Data, whether customer, financial, risk or other busines data, is at the core of the ING’s purpose: data leads to
insights and insights empower people to stay a step ahead in life and in business. The ING Data Strategy is
creating a single vision and governance, empowering business users and building a harmonised foundation
regarding data. This encompasses further embedding data functions and improving (bank-wide) data operations,
and simplifying, standardising and modernising its technology and data platforms. Recognising that data risk is
one of the top risks of the bank, ING is creating a holistic view on how ING manages risk around data including
personal data protection, data security, data quality and data ethics.
Low/negative interest rate environment
The persistent low/negative interest rate environment, with central banks holding their rates at negative or low
levels, continued to negatively impact short-term as well as long-term market rates. The Covid-19 pandemic
intensified the low/negative interest rate environment. Interest rates are expected to remain at current levels for
some time. This is posing a challenge for bank business models that earn net interest income from traditional
savings activities. In addition, loans are being repriced at lower rates which is putting more pressure on margins
and impacting long-term profitability. ING is continuously assessing this market environment. ING has introduced
negative interest rate charging and is reducing thresholds for charging negative interest rates. Further, ING is
expanding other sources of income such as net fee and commission income.
Risk management at ING Group
ING Group Annual Report 2021 on Form 20-F
148
Sourcing risk
The scope of functions and services that ING businesses source to third parties and internal parties has risen in
recent years. As such sourcing has evolved from being a means to control costs to a mechanism for building
centres of excellence internally and external partnerships that can add real strategic value. Apart from the clear
tangible benefits sourcing adds to ING, it also raises new risks for the bank. Primarily these are operational risks
associated with third parties performing (parts of) functions and services, and range from underperformance and
data privacy to business continuity and cybercrime.
With growing reliance on sourcing, ING’s Sourcing Policy is baselining the requirements in terms of controls when
sourcing. The Sourcing Policy which is, at least in part, based on regulatory requirements allows ING to
implement the required control assurance over the functions and activities sourced to third parties and internal
parties, throughout the entire sourcing lifecycle.
Climate change risk
ING is increasingly aware of the risks associated with climate change and how these can impact our clients and
their financial stability. This includes physical risk and transition risk. Physical risk can be acute, such as flood and
wildfires, or chronic, such as increased temperature and rising sea levels. Transition risk can be driven by policy,
technological or market changes as we shift towards a low-carbon global economy and potentially lead to
stranded assets.
In addition to our Climate Expert Group (CEG) and Climate Change Committee (CCC), an internal programme was
launched in 2020 to address the impacts resulting from climate change. In 2021, this programme was brought
under ING’s global oversight of regulatory programs. The governance of the programme was recently
strengthened with clear allocation of responsibilities for oversight and execution. As such, climate risk will be
included in our risk management framework in a forward-looking approach. In our integrated climate report on
ing.com we report on our progress until end-2020. The report details our approach and sector-specific insights.
Risk governance (*)
Effective risk management requires firm-wide risk governance. ING’s risk and control structure is based on the
‘three lines of defence’ governance model. Each line has a specific role and defined responsibilities, with the
execution of tasks being distinct from the control of these same tasks. The three lines work closely together to
identify, assess, and mitigate risks.
This governance framework is designed in such a way that risk is managed in line with the risk appetite approved
by the Management Board Banking (MBB), the Executive Board (EB) and the Supervisory Board (SB); and this
approach is cascaded throughout ING. The MBB is composed of the EB of ING Group, the heads of the business
lines, the chief technology officer (CTO) and the chief operations and transformations officer (COO).
The heads of ING’s banking business and support functions and the heads of the country units, or their delegates,
are the first line of defence. They have primary ownership, and accountability and responsibility for assessing,
controlling and mitigating all financial and non-financial risks affecting their businesses, as well as for the
completeness and accuracy of the financial statements and risk reports with respect to their responsible areas.
The CTO is responsible and accountable for proper security and controls on global applications and IT platforms
servicing the bank and implementing proper processes.
The second line of defence consists of oversight and specialised functions in risk management and compliance.
They (i) have co-responsibility for risk management, through articulating and translating the risk appetite into
methodologies and policies to support and monitor business management's control of risk, (ii) objectively
challenge risk management execution and control processes and coordinate the reporting of risks and controls by
the first line of defence, (iii) advise management on risk management and compliance and have decision-making
power in relation to business activities that are judged to present unacceptable risks to ING and (iv) can set
minimum requirements in terms of quality and quantity of global resourcing in the risk management and
compliance functions.
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The internal audit function forms the third line of defence. It provides independent assurance to the Audit
Committee (part of the SB), the EB and the MBB on the quality and effectiveness of ING’s internal control, risk
management, governance and implemented systems and processes in both the first and second lines of defence.
To protect its independent nature, decisions regarding the appointment, re-appointment or dismissal from office
as well as the remuneration package of the head of the internal audit function require SB approval.
Board-level risk oversight (*)
ING has a two-tier board structure consisting of a management board (EB for ING Group and MBB for ING Bank),
and an SB; both tiers play an important role in managing and monitoring the risk management framework.
◾
The SB is for risk management purposes advised mainly by the Risk Committee, which assists and advises
in monitoring the risk profile and approving the overarching risk appetite of the company as well as the
structure and effective operation of the internal risk management and control systems.
◾
The EB is responsible for managing risks associated with all activities of ING Group, whereas the MBB is
responsible for managing risks associated with all activities of ING Bank. The EB and MBB responsibilities
include ensuring that internal risk management and control systems are effective and that ING Group
and ING Bank comply with relevant legislation and regulations. On a regular basis, the EB and MBB
report on these issues and discuss the internal risk management and control systems with the SB. On a
quarterly basis, the EB and MBB report on ING’s risk profile versus its risk appetite to the Risk
Committee, explaining changes in the risk profile.
As a member of the EB and the MBB, the CRO is responsible for ensuring that risk management issues are heard
and discussed at the highest level. The CRO steers a risk organisation both at head-office and business-unit levels,
which participates in commercial decision-making, bringing countervailing power to keep the risk profile within
the agreed risk tolerance. The CRO reports to the SB risk committee on ING’s risk appetite levels and on ING’s risk
profile at least quarterly. In addition, the CRO briefs them on developments in internal and external risk-related
issues and seeks to ensure they understand specific risk concepts.
Executive level (*)
The key risk committees described below act within the overall risk policy and delegated authorities granted by
the MBB:
◾
Global Credit and Trading Policy Committee (GCTP) discusses and approves policies, methodologies, and
procedures related to credit, trading, country, and reputation (i.e. environmental and social risk or ESR)
risks. The GCTP meets monthly. After the MBB and the GCTP, the Credit and Trading Risk Committee
(CTRC) is the highest level body authorised to discuss and approve policies, methodologies, and
procedures related to credit and trading risk.
◾
Global Credit Committee – Transaction Approval (GCC(TA)) discusses and approves transactions that
entail taking credit risk (including investment risk), country, legal, and environmental and social risk. The
GCC(TA) meets twice a week.
◾
Asset and Liability Committee Bank (ALCO Bank) discusses and steers, on a monthly basis, the overall risk
profile of all ING Bank’s balance sheet and capital management risks. ALCO Bank discusses and approves
policies, methodologies and procedures regarding solvency, market risk in the banking book and funding
and liquidity risks.
◾
Non-Financial Risk Committee Bank (NFRC Bank) is accountable for the design and maintenance of the
Non-financial risk management framework including operational risk management, compliance and legal
policies, minimum standards, procedures and guidelines, development of tools, methods, and key
parameters (including major changes) for risk identification, measurement, mitigating and
monitoring/reporting. NFRC Bank meetings are held at least quarterly.
◾
The Model Risk Management Committee (MoRMC) discusses and steers, on a monthly basis, the overall
model strategy. MoRMC discusses and approves policies and methodologies related to model risk
management.
◾
Climate Change Committee (CCC) is responsible for mandating processes for identifying and managing
climate-related risks and opportunities, guiding climate-related policies, strategy, objective-setting and
performance monitoring. Further, it is responsible for monitoring and overseeing progress on relevant
goals and targets. The CCC meets six times a year.
Regional and business unit level (*)
ING’s regional and/or business unit management have primary responsibility for the management of risks (credit,
market, funding and liquidity, operational, IT, compliance and model) that arise in their daily operations. They are
accountable for the implementation and execution of appropriate risk frameworks affecting their businesses in
compliance with procedures and processes at the corporate level. Where necessary, the implementation is
adapted to local requirements.
The regional and/or business unit (BU) CROs are involved in these activities. The local (regional and BU) CRO is
responsible for the analysis, monitoring and management of risks across the whole value chain (from front to
back office). The local risks are discussed in local risk committees that roll up to the key risk committees at
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executive level. Local Client Integrity Risk Committees (CIRCs) assess client integrity risk and they have a final
decision on client acceptance or client off-boarding, from a risk-based perspective, in the areas of financial crime,
Foreign Account Tax Compliance Act (FATCA), Common Reporting Standard (CRS) and ESR.
Organisational structure (*)
The Risk Management function consists of corporate risk departments headed by General Managers directly
reporting to the CRO and regional/business unit CROs functionally reporting to the CRO. The corporate risk
departments support the CRO to set the Bank's risk appetite, develop the corporate policies, rules and global
procedures and infrastructures.
In 2021, the CRO for ING in Germany started to report functionally to the Group CRO, instead of the CRO CG,
seen the importance of the German market. The following organisation chart illustrates the reporting lines in
2021 for the risk management organisation:
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The banking industry has been re-assessing the business environment it operates in and the pandemic has
accelerated a number of trends, which have an impact on the types of risks we manage as a bank. Consequently,
ING has reviewed its risk organisational structure, looking to improve governance with a more holistic and
integrated approach towards risk management by strengthening group risk steering and further simplification
and automation of processes.
With the strategic review of the risk organisational structure, that will start as of March 2022, the following
corporate departments will be created:
●
‘Credit risk’
be managed from an overarching point of view, rather than per business line.
●
‘Integrated risk’
one risk type, in order to ensure that a consistent approach and interdependencies between the various
risk types are taken into account. The current Risk Capital Integration department will move into
Integrated Risk, just as Model Development from Financial Risk and the Professional Practice Unit from
NFR. An Environment, Society Governance Risk team will also be introduced.
●
‘Risk Culture Behavioural risk’
vision, aligned strategy and methodological approach in order to identify, assess and bring change with
regards to how ING employees act on risks.
Risk policies, procedures and standards (*)
ING has a framework of risk management policies, procedures, and minimum standards in place to create
consistency throughout the organisation, and to define requirements that are binding for all business units. The
goal of the governance framework of the local business units is to align with ING’s framework and to meet local
(regulatory) requirements. Senior management is responsible for the implementation of and adherence to
policies, procedures and standards. Policies, procedures and standards are regularly reviewed and updated via
the relevant risk committees to reflect changes in requirements, markets, products and practices.
Internal control framework
In its Enterprise Risk Management (ERM) Framework, ING has explained the approach to mitigate risk outside
ING’s risk appetite. The internal control framework (ICF) is thereby translating regulations and internal
requirements into policies articulating specific risks and control objectives. These policies form the basis for
translation into process control standards, which are used by the business to support and promote an effective
risk and control environment. The ICF includes binding principles, definitions, process steps, and roles and
responsibilities to create consistent bank-wide policies and control standards.
Global policies and control standards are developed and maintained or updated within the ICF. These global
documents are designed by head-office functions and are to be adhered to by all ING entities and support
functions. In line with the ERM approach, ownership for policies will be with the 2nd line of defence (2
nd
while control standards are to be owned by the 1st line of defence (1
st
documents are approved by relevant approval bodies (e.g. SB, EB, MBB and Bank NFRC).
The policies are based on the risk taxonomy, which is designed to prevent overlaps in policy control objectives.
The control standard owners are responsible for defining the key controls that mitigate the critical and high
inherent risks in the business processes.
The process of developing policy and process control standard documents includes the following steps: identify
the document owner, determine the relevant stakeholders, define a risk-based approach, perform an impact
assessment, involve relevant stakeholders and (local) entities for sounding on key and expected controls, and
determine an approval body.
The principal role of the gatekeepers is to provide quality assurance and to advise on the relevant approval
bodies. The ICF gatekeepers challenge document owners on the alignment of internal control documents with
the agreed methodology and risk taxonomy, and verify that the development and communication of those
documents are in line with the agreed process. All policies, control standards, and procedures are published on
ING’s intranet. New and updated documents are periodically communicated by means of a dedicated policy
update bulletin to the country managers and senior heads of business departments.
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Risk culture
At ING we attach great importance to a sound risk culture, which is essential for performing our role in society
responsibly and to keep the bank safe, secure and compliant. Our risk culture determines the way in which
employees identify, understand, discuss, and act on the risks we are confronted with and the risks we take. In
2021, we drove several enhancement projects based on our 2020 assessment of our risk culture. Most notably,
enhancing our risk culture monitoring activities and bringing non-financial risk to life.
Orange Code and the global Code of Conduct
The Orange Code and the global Code of Conduct are the foundation of ING’s risk culture. The global Code of
Conduct defines the most essential conduct principles expected from ING employees in their daily activities, to
create additional risk awareness and better meet expectations stated in external rules and guidelines. In 2021,
the global Code of Conduct has been embedded into our employees’ performance management cycle to ensure
continuous attention to the Global Code of Conduct, and dialogue on how to apply it in our daily work practice.
The Orange Code is a declaration of who we are. It describes what we can expect from each other when we turn
up to work each day. It is a set of standards that we collectively value, strive to live up to, and invite others to
measure us by.
The Orange Code is the sum of two parts, the ING values and ING behaviours, with integrity being the
overarching principle. The ING values (being honest, prudent and responsible) are non-negotiable promises we
make to the world, principles we seek to stick to, no matter what. The ING behaviours (take it on and make it
happen, help others to be successful, and always be a step ahead) represent our way to differentiate ourselves.
The Orange Code is embedded in commitments we make to each other and the standards by which we measure
each other’s performance.
Orange Code decision-making
To enhance risk awareness, we continued to support monitoring risk culture and compliance risk in the business.
This included training by compliance and data experts to enhance balanced decision-making in line with the
Orange Code decision-making model to support moral learning and well-balanced decision-making. A four-step
model aims to find out where the moral weight lies for a potential decision.
Following the incorporation of the model in the global Product and Approval Process (PARP) policy in 2020 it has
been embedded in several local PARP policies in 2021. Compliance is continuing to train experts in this area
within the local Compliance teams to support the organisation in properly applying the model in practice in their
respective countries.
Learning
In 2021, we continued to strengthen and expand our learning offering on risk topics and the governance around
this. The learning focuses on compliance, non-financial risk and financial risk.
We established a board to approve and monitor progress on the required learning that is taken by all staff. This
will ensure more attendance by the learners, bank-wide alignment, and connection between learning, business
impact and management actions. It has also improved feedback and evidencing of outputs. The board brings
together content owners, learning experts and corporate communications to ensure the best fit for the training
need.
We also took steps to expand our learning for risk professionals, with the Risk Academy which provides focused
learning for Risk staff. These take the form of various online learning modules and frameworks that support
employees in developing their knowledge, skills and behaviours.
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Dutch Banker’s Oath
In the Netherlands, all employees of ING take the Bankers’ Oath and pledge this promise in a meaningful
ceremony. The Oath came into force in the Netherlands on April 1st of 2015, as part of a joint approach from all
banks, aimed at introducing social regulations, a revised Dutch Banking Code implementing an oath with
associated rules of conduct and disciplinary law. This way the Dutch banks show society what they stand for and
are accountable for, both as individual banks and as a sector. In 2021, due to the Covid-19 pandemic, ING NL
changed to virtual Bankers’ Oath ceremonies via Teams, instead of the former physical ones, to ensure that all
new employees (around 400 a month) can still take the Bankers’ Oath in time and in a meaningful ceremony.
Before taking the Oath, an e-learning is followed and the importance of the Oath is discussed. Also, dilemmas
that the employees may come across in their daily work are shown, to ensure careful balancing of the interests of
all our stakeholders, in the decisions we make. In 2020 and 2021 the whole Bankers’ Oath programme for new
joiners was revised and updated, to ensure that all elements still align with the current developments, both
internally and externally.
Remuneration
ING aims to align its remuneration policy with its risk profile and the interests of all stakeholders. For more
information on ING’s compensation and benefits policies and its relation to the risk taken, please refer to the
Capital Requirements Regulation (CRR) Remuneration Disclosure published on the corporate website ing.com.
Centre of Expertise on Behavioural Risk Management (BRM)
Behavioural risk is an increasingly important risk area for ING and across the financial industry. It arises when
behavioural patterns are at the root of financial and non-financial risks in the organisation.
The complexity of this type of risk is that it is less tangible compared to other risk areas because it focuses on
behavioural patterns and their drivers. There are patterns in how decisions are made, how people communicate
and whether they can take ownership. Behaviour is driven by formal and informal mechanisms. Examples of
formal drivers are the processes ING applies and how its governance is structured. Informal drivers are less
tangible; such as group dynamics or underlying beliefs that influence behaviour.
At ING, BRM is positioned in the second line of defence, reporting directly to the CRO. The global BRM Centre of
Expertise not only assesses behavioural risk in the organisation, but also has the mandate to direct, challenge and
support business owners to intervene on behavioural patterns and their underlying drivers.
Behavioural risk assessments
Behavioural risk assessments (BRAs) identify and analyse undesired behaviours within ING and provide
management with specific direction on how to change these behaviours. They focus on the effectiveness of
groups rather than individuals, the role of leadership and on less visible aspects such as team dynamics and
unwritten social norms. The goal is to understand and systematically assess what drives undesired habits at ING.
The BRM model of behavioural risk is used as the standard across ING to signal behavioural risks going forward.
Behavioural risk interventions
Based on the results of the executed behavioural risk assessments, BRM mitigates behavioural risk in a focused
manner. Effective mitigation requires a deep understanding of what drives undesired behaviours. Behavioural
and organisational science theories and evidence-based techniques and tools play an important role in designing
and facilitating interventions. Given the crucial role of leaders in creating the right conditions for employees,
interventions are first initiated at leadership level. These include leadership labs, which address topics such as
‘connection, alignment and trust’, as well as bringing together the ‘whole system in the room’. Here senior
leaders delve into the outcomes of the assessments, identifying deeply rooted and often complex issues for
improvement.
In addition, interventions are also set in motion that focus on enabling employees to build awareness on
behavioural risk and support them in initiating solutions to mitigate the potential behavioural risks. After each
assessment the results are shared with the management teams of the assessed units and with the participants of
the BRA in a feedback session. This is followed up with a dialogue starter toolkit, enabling teams to reflect on the
results, discuss opportunities for improvement and call for first steps towards sustainable solutions.
In 2021, BRM pioneered a new approach to address behavioural risk challenges related to decision-making,
ownership and group dynamics behavioural challenges on a wider scale. The used approach is a 'World Cafe' – a
large group intervention that drives common understanding, engagement and ownership and enhances learning
and behavioural change.
The BRM team works closely with the business units and departments such as HR, Internal Audit, and Compliance
to align on and embed desired leadership and risk behaviours (i.e. speak up, psychological safety,
communication, guiding leadership).
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Risk cycle process
ING uses a step-by-step risk management approach to identify, manage and mitigate its financial and non-
financial risks. The approach consists of a cycle of five recurrent activities: risk identification, risk assessment, risk
control, risk monitoring, and risk reporting. The cycle is designed to determine what the risks are, assess which of
these risks can really do harm, take mitigating measures to control these risks, monitor the development of the
risk to see if the measures taken are effective, and report the findings to management at all relevant levels to
enable them to take action when needed.
The cycle recurs in two ways. First, the identification, assessment, review, and update of mitigating measures are
repeated periodically. Second, this periodic monitoring exercise may indicate emerging risks, known risks that are
changing, risk levels that are changing, or current control measures that are not effective enough. Further
analyses of these findings may then result in renewed and more frequent risk identification, and/or assessment,
and/or change of mitigating measures.
Risk identification
Risk identification is a joint effort of the business and the risk management functions. Its goal is to detect
potential new risks and determine changes in known risks. Regular risk identification is essential for effective risk
management. Potential risks that are not identified, will not be controlled and monitored and may lead to
surprises later. Known risks may have changed over time and as a consequence the existing mitigating measures
and monitoring may be inadequate or obsolete.
Risk identification is performed periodically. In case of material internal or external change, additional ad hoc risk
identification can be performed.
Risk assessment
Each identified risk is assessed qualitatively or quantitatively to determine its importance. This enables ING to
decide which of the identified risks need control measures and how strict or tolerant these measures should be.
Known risks are re-assessed to detect any change in the risk level.
The importance of a risk is based on both the likelihood that the risk materialises and the subsequent financial or
reputational impact that may occur should the risk arise. Unlikely risks with a potentially high impact need to be
controlled. A risk that is likely to happen regularly but expected to have a modest financial impact may not need
to be mitigated if the consequences are accepted by management.
Risk control
Risks can be controlled by mitigating measures that lower the likelihood the risk occurs, lower the impact when it
occurs or both. The ultimate measure to lower a risk is to stop the activity or service that causes the risk (risk
avoidance). Risk control and mitigation measures are defined and maintained both bank-wide and at the local
level.
Monitoring and reporting
ING monitors the risk-control measures by checking if they are executed, complied with and have the expected
mitigating effects and by following the development of the risks and their risk levels. Risk reporting provides
senior and local management with the information they need to manage risks.
Risk Appetite Framework
The Risk Appetite Framework (RAF) is one of the foundation pillars of the ERM Framework. Its objective is to set
the appropriate risk appetite at the consolidated level across the different risk categories and to allocate the risk
appetite throughout the organisation.
Policy
The RAF policy states the overarching global risk appetite. Within the RAF, ING monitors a range of financial and
non-financial risk metrics to ensure that our risk profile is in line with our risk appetite while executing our
strategy. ING’s RAF, which is approved by the SB, defines the desired risk profile that is to be integrated in the
strategic decision-making and financial planning process. It is designed to be able to withstand market volatility
and stress, while meeting regulatory requirements. The framework, including underlying assumptions and
metrics, is regularly reviewed so that it remains relevant. The RAF combines various financial and non-financial
risk appetite statements (RASs) into a single, coordinated approach to provide the business with a clear overview
of the relevant risks and the tools to manage them. This view allows the EB, the MBB and senior management to
form an opinion on the adequacy of internal risk management and control systems for the risks ING faces while
pursuing its strategy.
Process
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The RAF is focused on setting the risk appetite at the consolidated level and across the different risk categories,
and provides the principles for cascading this risk appetite down into the organisation. The RAF and underlying
limit allocation are reviewed on an annual basis, or more frequently if necessary, based on their quarterly review
in the EB, the MBB and the SB. It is therefore a top-down process, which bases itself on the ambition of the bank
in terms of its risk profile, the regulatory environment and the economic context. The set of limits used is split
according to the approval levels needed for them. Limits that need SB approval are called boundaries and the
underlying metrics supporting the boundaries which need EB and MBB approval are called instruments.
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Step 1. Identify and assess ING’s key risks
The outcome of the risk identification and risk assessment process is used as the starting point for the review of
the RAF. Within this step, the risks ING faces when executing its strategy are identified in the context of the
current economic, political, social, regulatory and technological environment. The assessment identifies whether
the potential impact is material and if it is sufficiently controlled within ING’s risk management function. It
benchmarks the current risk framework against regulatory developments. Known risks are re-assessed either to
confirm risk levels or to take account of potential changes. The assessment is contextualised by the current set of
risk appetite statements.
Step 2. Set Risk Appetite Framework
Based on ING’s risk assessment and risk purpose, boundaries for the overarching risk frameworks are set. Once
the overarching risk appetite thresholds have been set and approved by EB/MBB and subsequently by SB, the
statements are translated into risk-type-specific statements and lower level thresholds which are set and
approved by senior risk committees, ALCO Bank, GCTP and Bank NFRC. Cascading is done via a number of
detailed risk appetite statements which have been defined per risk type, the combination of which ensures
compliance with the overarching solvency, concentration and funding and liquidity RASs.
Examples of underlying risk metrics include:
◾
Solvency and Profitability (e.g. IFRS PL-at-Risk and FX translation risk)
◾
Funding and liquidity (e.g. Liquidity coverage ratio (LCR) and Net Stable Funding Ratio (NSFR))
◾
Credit risk (Exposure at Default (EAD) and Risk Weighted Assets (RWA))
◾
Market risk trading book (e.g. Event risk, historical value at risk (HVaR))
◾
Market risk banking book (Net interest income (NII)-at-Risk and Revaluation-Reserve-at Risk)
◾
Non-financial risk (eg. Expected loss tolerance and management of audit issues)
◾
Business risk (e.g. IFRS PL-at-Risk and Economic Capital)
◾
Model risk (e.g. Number of inadequate Pillar 1 models)
ING has started including climate risk into its Risk Appetite Framework by a.o. introducing climate risk as one of
the dimensions to determine sector concentration as part of the credit risk appetite statements. In the coming
years, ING will extend the climate risk impact to other risk types to ensure that the potential risks stemming from
e.g. transition risk and physical risk are properly captured in the Risk Appetite Framework.
Step 3. Cascade into statements per risk type and business unit
The bank-wide risk appetite is translated per risk type, which is further cascaded into the organisation. Risk
appetite statements are then translated into dedicated underlying risk limits that are used for the day-to-day
monitoring and management of ING’s risks. The risk appetite statements serve as inputs for the quarterly
planning process as well as for the establishment of key performance indicators and targets for senior
management.
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Step 4. Monitor and manage underlying risk limits
To verify that it remains within the Risk Appetite Framework, ING reports its risk positions vis-à-vis its limits on a
regular basis to senior management committees. The Quarterly Risk Update reflecting the exposure of ING
against the risk appetite is submitted quarterly to the EB and the MBB and to the (Risk Committee of the) SB.
Moreover every quarter the financial plan is checked for potential limit breaches within a one-year horizon,
where in the strategic dialogue the MBB can take mitigating measures or adjustments to the dynamic plan can be
made.
Stress testing
Stress testing is an important risk management tool that provides input for strategic decisions and capital
planning. The purpose of stress testing is to assess the impact of plausible but severe stress scenarios on ING’s
capital and liquidity position. Stress tests provide complementary and forward-looking insights into the
vulnerabilities of certain portfolios, with regards to adverse macroeconomic circumstances, stressed financial
markets, and changes in the (geo)political climate. Since the outbreak of the Covid-19 pandemic, ING assessed
the potential impact on its financial position via different types of stress tests. In addition to assessing PL,
capital and liquidity position of ING for a range of different scenarios, idiosyncratic risks were also included. The
outcome of these Covid-19 stress tests helped management to get insight into the potential impact and to define
actions to mitigate this potential impact.
In the second half of 2021, ING started preparing for the regulatory climate risks stress test scenario, which will
be assessed in 2022 as part of the bi-annual ECB Single Supervisory Mechanism (SSM) stress test. This regulatory
stress test, combined with internal analyses done on climate risk, will be used to enhance ING’s internal climate
risk stress testing.
Types of stress tests
Within ING, different types of stress tests are performed. The most comprehensive type of stress tests are the
firm-wide scenario analyses, which involve setting scenario assumptions for all the relevant macroeconomic and
financial market variables in all countries relevant to ING. These assumptions usually follow a qualitative
narrative that provides a background to the scenario. In addition to firm-wide scenario analyses, ING executes
scenario analyses for specific countries or portfolios. Furthermore, sensitivity analyses are performed, which
focus on stressing one or more risk drivers; usually without an underlying scenario narrative. Finally, ING
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performs reverse stress tests, which aim to determine scenarios that could lead to a pre-defined severe adverse
outcome.
Process
The stress testing process of ING consists of several stages, which are:
Risk identification and risk assessment: It identifies and assesses the risks ING or the relevant entity is
facing when executing its strategy based on the current and possible future economic, political,
regulatory and technological environment. It provides a description of the main risks and risk drivers
related to the nature of ING’s business, activities and vulnerabilities.
Scenario definition and parameterisation: Based on the outcome of the previous step, a set of scenarios
is determined with the relevant scope and set of risk drivers for each scenario, as well as its severity, the
key assumptions and input parameters. The output of this phase includes a quantitative description of
the stress scenarios to be analysed, the relevant output metrics and, when applicable, a narrative
description.
Impact calculation and aggregation: Based on the quantitative description of the stress scenarios
determined in the previous step, the impact is determined for the relevant scenario, scope and horizon.
The impact calculation and aggregation can be part of a recurring process or part of a specific process
set-up for one-off stress tests.
Scenario reporting: For each stress test, a report is prepared after each calculation which describes the
results of the scenario and gives a recap of the scenario with its main assumptions and parameters. The
stress-test report is sent to the relevant risk committees and/or senior management. It is
complemented, if needed, with advice for management action based on the stress-testing results.
Scenario control and management assessment: Depending on the outcomes of the stress test and the
likelihood of the scenario, mitigating actions may be proposed. Mitigating actions may include, but are
not limited to, sales or transfers of assets and reductions of risk limits.
Methodology
Detailed and comprehensive models are used to calculate the impact of the scenarios. In these models, statistical
analysis is combined with expert opinion to make sure that the results adequately reflect the scenario
assumptions. The methodologies are granular and portfolio-specific and use different macroeconomic and
market variables as input variables. The calculations are in line with our financial and regulatory reporting
frameworks. The stress-testing models are subject to review by Model Risk Management.
Developments in the regulatory environment
Basel III revisions and upcoming regulations
In December 2017, revisions to Basel III were formally announced by the Basel Committee. These revisions to
Basel III establish new prudential rules for banks, including a revision to the standardised approach to credit risk,
the introduction of a capital floor based on standardised approaches, the use of internal models, limitation of
options for modelling operating risks, and new rules for the establishment of risk-weighted items and unused
credit lines at the banks. Such revisions have a long implementation phase and are not yet fully transposed into
EU regulation. The revisions are commonly referred to as Banking Reform package. In Europe, this has been
partly implemented in the CRR II / CRD V (see below) and it will be implemented further through the CRR III / CRD
VI in the coming years. A draft was published in October 2021 and implementation is expected as of 1 January
2025.
CRRII/CRDV and BRRDII
On 27 June 2019, a series of measures referred to as the Banking Reform Package (including certain amendments
to CRR and CRD IV, commonly referred to as CRR II and CRD V) came into force, subject to various transitional
and staged timetables. The adoption of the Banking Reform Package concluded a process that began in
November 2016 and marks an important step toward the completion of the European post-crisis regulatory
reforms, drawing on international standards agreed by the Basel Committee, the Financial Stability Board and the
G20. CRD V was implemented in Dutch law in 2020. The Banking Reform Package updates the framework of
harmonised rules established following the financial crisis of 2008 and introduces changes to the CRR, CRD IV, the
Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR). The
Banking Reform Package covers multiple areas, including the Pillar 2 framework, the introduction of a leverage
ratio requirement of 3% and a leverage ratio buffer requirement of 50% of the global systemically important
banks (G-SIB) buffer requirement (applicable per 1 January 2023), a sectoral systemic risk buffer, a binding NSFR
ratio based on the Basel NSFR standard but including adjustments with regard to e.g. pass-through models and
covered bonds issuance, mandatory restrictions on distributions, permission for reducing own funds and eligible
liabilities, macroprudential tools, a new category of ‘non-preferred’ senior debt, the minimum requirement for
own funds and eligible liabilities (MREL) and the integration of the TLAC standard into EU legislation. Further, the
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EBA obtained a mandate to investigate how to incorporate ESG risks into the supervisory process and what the
prudential treatment of assets associated with environmental or social objectives should look like.
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Solvency risk
Introduction
Solvency risk is the risk of lacking sufficient capital to fulfil the business objectives, regulatory requirements or
market expectations. A bank that is insolvent is unable to pay its debts and will be forced into bankruptcy.
The level and quality of capital is crucial for the resilience of individual banks. Banks are expected to
assess the risks they face, and in a forward-looking manner ensure that all material risks are identified, managed
and covered sufficiently by loss-absorbing capital to ensure continuity in case of materialisation of unexpected
risks in times of stress. Given the interdependencies to other financial
and non-financial risks this balancing act of capital adequacy needs to be done within a sound and
integrated management approach coherently linking all moving parts of the bank in line with the long-term
business strategy.
Solvency risk management
ICAAP Framework
ING’s Internal Capital Adequacy Assessment Processes (ICAAP) aims to ensure that capital levels are
adequate to cover all material risks at all levels and to ensure compliance with regulations. ING follows an
integrated approach to assess the adequacy of its capital position in relation to its business activities, underlying
business strategy, market positioning risk profile and operating environment. This implies taking account of the
interests of its various stakeholders such as regulators, shareholders, investors, rating agencies and customers.
The continued strength of ING’s capital position, the adequacy of the financial position and risk
management effectiveness are essential for achieving the strategy. ING’s ICAAP ultimately supports this strategy
and contributes thereby to the continuity of ING Group, ING Bank and all its business units.
Managing ING’s capital requirements and allocation entails finding a balance between the forces
governing supply and demand. The uncertainties surrounding these factors reflect changing market
circumstances and continuous unpredictability in regulatory and macroeconomic
forces. The process of balancing these strategic goals is captured in the ICAAP framework and enabled by the
building blocks and elements facilitating the ICAAP. The following building blocks have been defined in the ICAAP
Framework, which are applied for both the ‘normative’ and ‘economic’ perspective as defined in the ECB Guide
to ICAAP, published in November 2018:
●
Risk identification and assessment
●
Risk appetite
●
Capital planning
●
Capital management
●
Stress testing
●
Continuity
Solvency risk related to Covid-19
Since the outbreak of Covid-19 several stress-test analyses have been done to assess the potential impact of the
virus on the actual and future solvency position, whereby also potential risks are taken into account. For
instance, in 2021 ING performed stress tests whereby the combination of inflation and Covid-19 risks was
assessed in several scenarios and sensitivity analyses. These stress tests were used to prepare potential
mitigating actions, but also served as starting point for the review of ING’s risk appetite and of the financial and
capital planning. In light of this, ING also updated the management actions in the Contingency Capital and
Funding Plan and the Recovery Plan and assessed potential additional mitigating actions to counter this very
specific crisis.
Risk identification and assessment
ING’s capital management and solvency risk management starts with the risk identification and risk assessment
process. Its main purpose is to detect potential new risks and to identify changes in the potential impact of
known risks. On an annual basis, ING performs a thorough review of its solvency risks or risks to capital. Within
this assessment, bottom-up assessments are combined with top-down assessments, including a questionnaire
and interviews with senior management. The results of the risk assessment are discussed in ALCO Bank which
comprises almost the full MBB. Once approved, the conclusions of the risk assessment feed into the annual
review of the Risk Appetite Framework, the Stress Testing Framework and the Economic Capital Framework. In
addition to this annual process, ING also re-assesses its risks as part of its Capital Adequacy Statement, a
quarterly process to assess ING’s capital adequacy.
Solvency risk
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Solvency risk appetite
As explained in the Risk Appetite Framework section in the previous chapter, ING has established overarching
solvency risk boundaries. Boundaries are risk appetite statements that are essential for risk management activity,
making it of paramount importance to keep these boundaries within the defined level. The SB is responsible for
approving and monitoring the boundaries. These boundaries are complemented by a sequence of risk-type-
specific instruments (risk appetite statements). These underlying risk appetite statements are cascaded down
into the organisation and dedicated risk thresholds are set that are used for day-to-day monitoring and
management of ING’s risks. ING has solvency risk appetite statements in place for the following metrics: CET1
ratio, total capital ratio, leverage ratio, total loss-absorbing capacity (TLAC ) minimum requirement for own
funds and eligible liabilities (MREL) based on RWA/leverage ratio and economic capital adequacy.
Capital planning
The capital and funding plan is an integral part of the dynamic plan, ING’s financial and business planning
process. Its objective is to inform and advise the management on the capital development and need of ING
Group and ING Bank, under base case and adverse scenarios. It describes how ING shall finance the expected
capital constraints taking into consideration growth projections, capital and risk evolution, macro and market
conditions, both under the normative and economic perspective. The capital and funding plan is discussed and
approved by ALCO Bank and updated at least twice a year. Within these updates, ING takes account of recent
market and risk developments and ensures that capital planning adheres to the solvency risk appetite set by the
SB.
Capital management
Formulation of the CET1 ambition is a key element in solvency risk management. The target ratio, based on the
management buffer concept, enables ING’s senior management to steer, benchmark and assess the bank’s
current and future capital levels much more efficiently while the ambition level clearly supports trust building
among ING’s key stakeholders (e.g. regulators, investors and customers).
The capital management buffer aims to protect the interests of key stakeholders and plays an important role in
the overall capital adequacy governance. The rationale behind the concept of the management buffer is that it
provides an additional cushion on top of the (local) regulatory minimum requirements (e.g. Supervisory Review
and Evaluation Process (SREP) requirements) to withstand a certain level of stress and to facilitate awareness and
preparedness to take management actions. ING reviews its capital management buffer on a regular basis to
determine its effectiveness and robustness, updating it as appropriate.
Stress testing
Solvency stress testing allows ING to examine the effect of plausible but severe stress scenarios on the solvency
position and provides insight into which entities or portfolios are vulnerable to which type of risks or in which
type of scenarios. Solvency stress testing is an important tool in identifying, assessing, measuring and controlling
risks to capital, providing a complementary and forward-looking perspective to other solvency risk management
tools. For solvency stress testing, ING follows the same process steps that are described in the overall section on
stress testing.
ING distinguishes the following three types of stress test analyses:
●
Sensitivity analysis: Within these analyses, ING assesses the impact of a pre-defined shock in one or
more risk drivers. The key purpose of sensitivity analyses is to monitor the impact of this pre-defined (or
standardised) shock over time to get an understanding of how the risk profile of the bank has developed.
●
Scenario analysis: Scenario analyses are used to assess an integral impact of historical, statistical and/or
hypothetical circumstances on the financial position of ING. These stress tests often build on a
qualitative scenario narrative and reflect risk topics that are deemed relevant for ING given, for example,
its business model. Scenarios can be derived from historical realisations, but also reflect e.g. potential
macroeconomic, geopolitical or climate risk related events. These scenarios can be used for one-off
analyses. They can also be translated into a set of regular or standardised stress tests that are assessed
on a quarterly basis.
●
Reverse stress testing: The purpose of reverse stress testing is to identify scenarios that could lead to a
pre-defined outcome. This could for example be a pre-defined solvency level. The added value of reverse
stress testing is to explore risk drivers and stress scenarios outside the existing range.
The outcomes of solvency stress test analyses are taken into account in capital planning, but also for setting risk
appetite statements and the capital management buffer.
Solvency risk
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Contingency and Recovery Planning
Contingent capital events are unexpected situations or business conditions that may increase the risk with
respect to ING’s capital position. These events may be ING-specific, or arise from external factors. The
Contingency Capital and Funding Plan (CCFP) sets out the organisation and actions in case of contingency events.
The CCFP has a suite of monitoring metrics that are aligned with the risk appetite statements that are in place for
managing ING’s capital, liquidity and funding position. The Recovery Plan is designed by ING to detect and act
upon possible major and unforeseen deterioration of its solvency position in a timely fashion. This plan has
integrated several risk appetite statements to allow timely identification of possible stress on the company.
Incorporating risk appetite statements into both plans ensures a seamless continuum between the ING’s
business-as-usual management and its contingency or recovery management.
Assessing capital adequacy: Capital Adequacy Statement (CAS)
The CAS is ING Group’s quarterly assessment of its capital adequacy and takes into account different elements
with respect to its capital position. The degree to which ING’s capital position is considered adequate depends on
a variety of internal and external drivers:
●
Current supervisory requirements and (expected) requirements going forward;
●
Current internal requirements and (expected) requirements going forward;
●
Coherence of the available capital with the (realisation of) strategic plans; and
●
The ability to meet internal and external requirements in the case of stressed events or should a risk
materialise.
The CAS assesses the adequacy of ING’s capital position in relation to above-mentioned drivers and states the
extent to which the capital position consequently is considered as adequate. On a quarterly basis the CAS
document is prepared. Additionally each year, the EB/MBB signs and provides a comprehensive assessment of
ING’s capital adequacy, supported by the ICAAP outcomes, in the form of a Capital Adequacy Statement.
Credit risk
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Credit risk
Introduction
Credit risk is the risk of loss from the default and/or credit rating deterioration of clients. Credit risks arise in
ING's lending, financial markets and investment activities. The credit risk section provides information on how
ING measures, monitors and manages credit risk and gives an insight into the portfolio from a credit risk
perspective.
Governance (*)
ING’s credit risk strategy is to maintain an internationally diversified loan and bond portfolio, while avoiding large
risk concentrations. The emphasis is on managing business developments within the business lines by means of a
top-down risk appetite framework, which sets concentration limits for countries, individual clients, sectors,
products, secondary risk (collateral/guarantees) and investment activities. The aim is to support relationship-
banking activities, while maintaining internal risk/reward guidelines and controls.
ING has organised support functions at two levels: Tier 1, operational unit level, and Tier 2, head office level.
Credit risk is a Tier 1 level risk function within ING and is part of the second line of defence. It is managed by
regional and/or business unit CROs. The CRO Wholesale Banking (WB), CRO Challengers Growth Markets
(CG), CRO Netherlands, CRO Belux and CRO Germany focus on specific risks in the geographical and/or business
areas of their responsibilities. The Financial Risk department is a Tier 2 level risk function, which is responsible for
the consolidated risk appetite setting, risk frameworks, model development and policies.
The credit risk function encompasses the following activities:
◾
Measuring, monitoring and managing credit risks in the bank’s portfolio, including the measures taken
since the start of the Covid-19 crisis;
◾
Challenging and approving new and modified transactions and borrower reviews;
◾
Managing the levels of provisioning and risk costs, and advising on impairments; and
◾
Providing consistent credit risk policies, systems and tools to manage the credit lifecycle of all activities.
Credit risk categories (*)
Credit risk uses the following risk categories to differentiate between the different types of credit risk:
◾
Lending risk:
interest or fees on a loan when they are due, or on demand for letters of credit (LCs) and guarantees
provided by ING.
◾
Investment risk
: is the credit default and risk rating migration risk that is associated with ING’s
investments in bonds, commercial paper, equities, securitisations, and other similar publicly traded
securities. This can be viewed as the potential loss that ING may incur from holding a position in
underlying securities whose issuer's credit quality deteriorates or defaults. All investments in the banking
book are classified in the investment risk category. The primary purpose of ING’s investments in the
banking books is for liquidity management.
◾
Money market risk
: arises when ING places short-term deposits with a counterparty in order to manage
excess liquidity. In the event of a counterparty default, ING may lose the deposit placed.
◾
Pre-settlement risk
: arises when a client defaults on a transaction before settlement and ING must
replace the contract by a trade with another counterparty at the then prevailing (possibly unfavourable)
market price. This credit risk category is associated with derivatives transactions (exchange-traded
derivatives, over-the-counter (OTC) derivatives and securities financing transactions).
◾
Settlement risk
: arises when there is an exchange of value (funds or instruments) and receipt from its
counterparty is not verified or expected until after ING has given irrevocable instructions to pay or has
paid or delivered its side of the trade. The risk is that ING delivers but does not receive delivery from its
counterparty. ING manages settlement risk in the same way as other credit risks by setting a risk limit
per client. Due to the short-term nature (typically one day), ING does not hold provisions for settlement
risk. Although a relatively low risk, ING increasingly uses DVP (delivery versus payment) and safe
settlement payment techniques to reduce settlement risk.
For the reconciliation between credit risk outstandings categories and financial assets, refer to the table below:
Credit risk
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Reconciliation between credit risk categories and financial position (*)
Credit risk categories
Mainly relates to:
Notes in the financial statements
Lending risk
-Cash and balances with central banks
Note
2
Cash and balances with central banks
-Loans and advances to banks
Note
3
Loans and advances to banks
-Loans and advances to customers
Note
4
Financial assets at fair value through profit or loss
-Off-balance sheet items e.g. obligations under financial guarantees and letters of credit and undrawn
Note
5
Financial assets at fair value through other comprehensive income
credit facilities
Note
7
Loans and advances to customers
Note
45
Contingent liabilities and commitments
Investment risk
-Debt securities
Note
4
Financial assets at fair value through profit or loss
-Equity securities
Note
5
Financial assets at fair value through other comprehensive income
Note
6
Securities at amortised cost
Money market risk
-Cash and balances with central banks
Note
2
Cash and balances with central banks
-Loans and advances to banks
Note
3
Loans and advances to banks
-Loans and advances to customers
Note
7
Loans and advances to customers
Pre-settlement risk
-Financial assets at fair value through profit or loss (trading assets and non-trading derivatives)
Note
4
Financial assets at fair value through profit or loss
-Financial liabilities at fair value through profit or loss (trading assets and non-trading derivatives)
Note
14
Financial liabilities at fair value through profit or loss
-Securities financing
Note
44
Offsetting financial assets and liabilities
Settlement risk
-Financial assets at fair value through profit or loss (trading assets and non-trading derivatives)
Note
4
Financial assets at fair value through profit or loss
-Financial liabilities at fair value through profit or loss (trading assets and non-trading derivatives)
Note
11
Other assets
-Amounts to be settled
Note
14
Financial liabilities at fair value through profit or loss
Note
16
Other liabilities
Credit risk
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Credit risk appetite and concentration risk framework (*)
The credit risk appetite and concentration risk framework is designed to prevent undesired high levels of credit
risk and credit concentrations within various levels of the ING portfolio. It is derived from the concepts of
boundaries and instruments as described in the ING Risk Appetite Framework.
Credit risk appetite is the maximum level of credit risk ING is willing to accept for growth and value creation. The
credit risk appetite is linked to the overall bank-wide risk appetite framework. The credit risk appetite is
expressed in quantitative and qualitative measures. Having a credit risk appetite provides:
◾
Clarity about the credit risks that ING is prepared to assume, target setting and prudent risk
management;
◾
Consistent communication to different stakeholders;
◾
Guidelines on how to align reporting and monitoring tools with the organisational structure and strategy;
and
◾
Alignment of business strategies and key performance indicators of business units with ING’s credit risk
appetite through dynamic planning.
Credit risk appetite is set at different levels within ING and specifies the scope and focus of the credit risk which
ING takes, and the composition of the credit portfolio, including its concentration and diversification objectives in
relation to business lines, sectors and products. The introduction of climate risk via sectors is a first important
step with the objective to promote ING’s Terra approach, focusing on sectors’ necessary pathway to contribute
to a low-carbon world and also mitigate potential climate and environmental risks to ING and its business
environment.
The credit risk appetite and concentration risk framework is composed of:
◾
Country risk concentration
: Country risk is the risk that arises due to events in a specific country (or
group of countries). In order to manage the maximum country event loss ING is willing to accept,
boundaries are approved by the SB. The estimated level is correlated to the risk rating assigned to a
given country. Actual country limits are set by means of country instruments, which are reviewed
monthly and updated when needed. For countries with elevated levels of geopolitical or severe
economic cycle risk, monitoring is performed on a more frequent basis with strict pipeline and exposure
management.
◾
Single name and industry sector concentration
: ING has established a credit concentration risk
framework to identify, measure and monitor single name concentration and industry sector
concentration (systemic risk). The same concept of boundaries and instruments is applicable.
◾
Product and secondary risk concentration
: ING has established a concentration framework to identify,
measure and monitor product concentration and secondary risk.
◾
Scenarios and stress tests
: Stress testing evaluates ING’s financial stability under severe, but plausible
stress scenarios, and supports decision-making that assures ING remains a financially going concern even
after a severe event occurs. In addition to the bank-wide stress testing framework described above, ING
performs sensitivity analyses regularly to assess portfolio risks and concentrations. These sensitivity
analyses are consistent with the stress scenario established in the Group-wide credit risk appetite
framework. In light of Covid-19 ING incorporated pandemic specific scenarios for the stress tests to gain
insight into the potential effects of Covid-19 on the credit risk in the portfolios.
◾
Product approvals
: The product approval and review process (PARP) assesses and manages risks
associated with the introduction of new or modified products. It ensures that sound due diligence is
performed by relevant stakeholders and the relevant risks (credit, operational, compliance, etc.) are
addressed appropriately.
◾
Strategy and risk appetite papers
: These are detailed analyses of defined products and/or industries.
They identify the major risk drivers and mitigants, the internal business mandate, and propose the risk
(including business) parameters – and potentially the maximum product and/or portfolio limit - to
support that business. A strategy and risk appetite paper is always prepared by the front office
responsible for the internal business mandate and requires an approval from the designated approval
authority. Strategy and risk appetite papers may also have geographical and/or business limitations (e.g.
local vs. global).
◾
Credit approval process
: The purpose of the credit approval process is that individual transactions and
the risk associated with these transactions are assessed on a name-by-name basis. For each type of
client there is a dedicated process with credit risk managers specialised along the business lines of ING,
including the use of automated decision-making in certain cases. The credit approval process is
supported by a risk rating system and exposure monitoring system. Risk ratings are used to indicate a
client’s creditworthiness which translates into a probability of default. This is used as input to determine
the maximum risk appetite that ING has for a given type of client (reference benchmark). The
determination of the delegated authority (the amount that can be approved at various levels of the
organisation) is a function of the risk rating of the client and ING’s credit risk exposure on the client.
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Where necessary, underwriting standards have been reviewed and refined to limit the credit risk to
portfolios particularly sensitive to Covid-19.
Credit risk models (*)
Within ING, internal Basel-compliant models are used to determine probability of default (PD), exposure at
default (EAD) and loss given default (LGD) for regulatory and economic capital purposes. These models also form
the basis of ING’s IFRS 9 loan loss provisioning (see ‘IFRS 9 models’ below). Bank-wide, ING has implemented
approximately 100 credit risk models, for regulatory capital, economic capital and loan loss provisioning
purposes.
There are two main types of PD, EAD and LGD models used throughout the Bank:
◾
Statistical models
characterised by sufficient data points to facilitate meaningful statistical estimation of the model
parameters. The model parameters are estimated with statistical techniques based on the data set
available;
◾
Hybrid models
experts from risk management and front-office staff, literature from rating agencies, supervisors and
academics. These models are especially appropriate for ‘low default portfolios’, where limited historical
defaults exist.
Credit risk rating process (*)
In principle, all risk ratings are based on a Risk Rating (PD) Model that complies with the minimum requirements
detailed in CRR/CRDIV, ECB Supervisory Rules and European Banking Authority (EBA) guidelines. This concerns all
borrower types and segments.
ING’s PD rating models are based on a 1-22 scale (1=highest rating; 22=lowest rating) referred to as the ‘Master
scale’, which roughly corresponds to the rating grades that are assigned by external rating agencies, such as
Standard Poor’s, Moody’s and Fitch. For example, an ING rating of 1 corresponds to an SP/Fitch rating of AAA
and a Moody’s rating of Aaa; an ING rating of 2 corresponds to an SP/Fitch rating of AA+ and a Moody’s rating
of Aa1, and so on.
The 22 grades are composed of the following categories:
◾
Investment grade (risk rating 1-10);
◾
Non-investment grade (risk rating 11-17);
◾
Sub-standard (risk rating 18-19); and
◾
Non-performing (risk rating 20-22).
The first three categories (1-19) are risk ratings for performing loans. The ratings are calculated in IT systems with
internally developed models based on manually or automatically fed data. Under certain conditions, the outcome
of a manually fed model can be challenged through a rating appeal process. Risk ratings for non-performing loans
(NPL) (20-22) are set by the global or regional credit restructuring department. For securitisation portfolios, the
external ratings of the tranche in which ING has invested are leading indicators.
Risk ratings assigned to clients are reviewed at least annually, with the performance of the underlying models
monitored regularly. Some of these models are global in nature, such as those for large corporates, commercial
banks, insurance companies, central governments, local governments, funds, fund managers, project finance and
leveraged companies. Other models are more regional- or country-specific: there are PD models for small
medium enterprise (SME) companies in Central Europe, the Netherlands, Belgium, Luxembourg, as well as
residential mortgage and consumer loan models in the various retail markets.
Rating models for retail clients are predominantly statistically driven and automated, such that ratings can be
updated on a monthly basis. Rating models for large corporates, institutions and banks include both statistical
characteristics and manual input, with the ratings being manually updated at least annually. Since 2020,
portfolios and clients most at risk of being affected by the pandemic were subject to more frequent (e.g.
quarterly) reviews.
After the introduction of IFRS9 in 2018 and introduction of the new definition of default (DoD) in 2020, we’re
now updating the credit models.
Credit risk
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Credit risk systems
Credit risk tools and data standards
The acceptance, maintenance, measurement, management and reporting of credit risks at all levels of ING is
executed through single, common credit risk data standards using shared credit risk tools that support
standardised and transparent credit risk practices. ING has chosen to develop credit risk tools centrally with the
philosophy of using a single source of data in an integrated way. This includes applying a combination of the ING
policy, the regulatory environment in which we operate and the daily processes that are active throughout the
Group. Disciplined application in these three areas is essential for achieving high data quality standards.
The Credit Risk Control Unit (CRCU), which is part of the Financial Risk department, ensures compliant and
continuously improving rating systems.
Credit risk portfolio (*)
ING’s credit exposure is mainly related to lending to individuals and businesses followed by investments in bonds
and securitised assets, and money market. Loans to individuals are mainly mortgage loans secured by residential
property. Loans (including guarantees issued) to businesses are often collateralised, but may be unsecured based
on the internal analysis of the borrower’s creditworthiness. Bonds in the investment portfolio are generally
unsecured, but predominantly consist of bonds issued by central governments and EU and/or OECD based
financial institutions. Secured bonds, such as mortgage-backed securities and asset-backed securities are secured
by the underlying diversified pool of assets (commercial or residential mortgages, car loans and/or other assets)
held by the securities issuer. For money market, exposure is mainly deposits to Central Banks. The last major
credit risk source involves pre-settlement exposures which arise from trading activities, including derivatives,
repurchase transactions and securities lending/borrowing transactions. This is also commonly referred to as
counterparty credit risk.
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Portfolio analysis per business line (*)
Outstandings per line of business (*)
1, 2, 3
in EUR million
Wholesale Banking
Retail Benelux
Retail Challengers
Growth Markets
Corporate Line
Total
Rating class
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Investment grade
1 (AAA)
2-4 (AA)
5-7 (A)
8-10 (BBB)
Non-Investment grade
11-13 (BB)
14-16 (B)
-
17 (CCC)
Substandard grade
18 (CC)
-
19 (C)
-
Non-performing loans
20-22 (D)
Total
Industry
Private Individuals
-
Central Banks
-
Real Estate
-
Commercial Banks
Central Governments
Natural Resources
-
Non-Bank Financial Institutions
Transportation Logistics
-
Food, Beverages Personal Care
-
Services
Lower Public Administration
-
Utilities
-
General Industries
-
Other
Total
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Outstandings per line of business (*) - continued
1, 2, 3
in EUR million
Wholesale Banking
Retail Benelux
Retail Challengers Growth
Markets
Corporate Line
Total
Region
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Europe
Netherlands
Belgium
Germany
Poland
Spain
United Kingdom
Luxemburg
France
Rest of Europe
America
Asia
Australia
Africa
Total
1 Based on credit risk measurement contained in lending, pre-settlement, money market and investment activities.
2 Based on the total amount of credit risk in the respective column using ING’s internal credit risk measurement methodologies. Economic sectors (industry) below 2% are not shown separately but grouped in Other.
3 Geographical areas are based on country of residence, except for private individuals for which the geographical areas are based on the primary country of risk.
Overall portfolio (*)
During 2021, ING’s portfolio size increased by €
%) to €
volume growth was concentrated in the Lending risk categories in Wholesale Banking and growth in exposures to
Private Individuals.
Foreign exchange rate changes had a positive impact on portfolio growth and increased total outstanding by
€
%), the British Pound (+
%), and the
Australian Dollar (+
%) partly offset by the depreciation of the Turkish Lira (
-40.2
%) against the Euro.
Rating distribution (*)
Due to the Covid-19 pandemic, governments and banks introduced numerous measures to support individuals
and businesses financially. The overall rating distribution in the portfolio has not been materially affected by
Covid-19. For details on portfolios most sensitive to Covid-19 see the next paragraph ‘Covid-19 sensitive sectors’.
Overall, the rating class concentration slightly improved in 2021. The share of investment grade rating classes
increased from
% to
%, while the share of non-investment grade decreased, from
% to
%. Sub-
standard grade outstandings decreased from
% to
% of the total portfolio, whereas non-performing loans
decreased from
% to
%.
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With respect to the rating distribution within the business lines, in Wholesale Banking investment-grade rated
assets increased, mainly driven by Natural Resources, Non-Bank Financial Institutions and Utilities, while for non-
investment grade assets the outstandings decreased, across multiple sectors.
The rating distribution for Retail Benelux improved mostly because of Dutch residential mortgages, shifting from
rating class BB to BBB and A, driven by the continuing increase in the house price index and improving Loan to
Values. The rating distribution of residential mortgages in Belgium also improved, reducing concentration in B
ratings and lower, while increasing in BBB and BB.
In Retail Challengers Growth Markets, the distribution across rating classes remained rather stable in 2021.
Overall share of investment grade decreased from
% to
%. The increase in non-investment grade is
explained primarily by the portfolio in Poland.
Industry (*)
In line with our objective to give stakeholders insight into the portfolio, we present the business lending portfolio
per industry breakdown in accordance with the NAICS definition.
The industry composition within Retail is concentrated in private individuals with
% for Retail Benelux and
%
for Retail Challengers Growth. In Market Leaders, the overall volumes remained stable throughout 2021 in the
Netherlands and in Belgium. In CG, the increase in volume is in Private Individuals, primarily in Germany, and to
a lesser extent in Poland, Spain and Australia.
Within Wholesale Banking, an increase in exposures is noted in Natural Resources of €
Switzerland and in Belux (also as a consequence of higher commodity prices, i.e. financing of same volume
requires higher value LC's), in Non-Bank Financial Institutions and in Utilities, compensated to a certain extent by
a decrease in Central Governments and Commercial Banks.
Covid-19 sensitive sectors (*)
ING has assessed the elevated risk of our portfolio as a result of the continued impact of the Covid-19 pandemic
and the related measures and restrictions. The following sectors are considered to be most impacted (directly or
indirectly) by the Covid-19 pandemic, resulting in management adjustments to the model-based Loan Loss
Provisions. Refer also to the explanation of the economic sector-based management adjustment in the
“management adjustments” section.
Aviation (Transportation Logistics):
% of total
portfolio). In terms of rating, the portfolio improved. Main concentration remains in BB and B rating classes. The
sub-standard grade outstanding decreased to
% from
% of the Aviation portfolio, and the non-performing
grade decreased to
% from
%.
Hospitality Leisure (Services and Food, Beverages Personal Care):
exposure decreased by €
€
% of total portfolio). Of the total portfolio,
% is in non-Investment grade. Sub-
standard grade decreased to
% from
%, whereas non-performing loans increased to
% from
%.
Non-food retail (Other):
% of total portfolio). Outstanding
in investment grade improved from
% to
%, non-investment grade decreased from
% to
%. Sub-
standard grade increased to
% from
%, while the non-performing loans remained flat at
%.
Real Estate
: credit outstandings slightly decreased and amounted to €
%
of total portfolio) from €
% of total portfolio) in 2020. Rating distribution improved with
concentrations increasing in Investment grade and reducing in Speculative grade. The NPL grade increased to
% from
% in 2020, while Substandard grade improved to
% from
%.
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Outstandings by economic sectors and geographical area (*)
in EUR million
Region
Total
Industry
Netherlands
Belgium
Germany
Poland
Spain
United
Kingdom
Luxemburg
France
Rest of Europe
America
Asia
Australia
Africa
2021
Private Individuals
Central Banks
Real Estate
Commercial Banks
Central Governments
Natural Resources
Non-Bank Financial Institutions
Transportation Logistics
Food, Beverages Personal Care
Services
Lower Public Administration
-
Utilities
General Industries
Other
Total
Rating class
Investment grade
Non-Investment grade
Sub-standard grade
Non-performing loans
Total
1 Geographical areas are based on country of residence, except for private individuals for which the geographical areas are based on the primary country of risk.
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Outstandings by economic sectors and geographical area (*)
in EUR million
Region
Total
Industry
Netherlands
Belgium
Germany
Poland
Spain
United
Kingdom
Luxemburg
France
Rest of Europe
America
Asia
Australia
Africa
2020
Private Individuals
Central Banks
Real Estate
Commercial Banks
Central Governments
Natural Resources
Non-Bank Financial Institutions
Transportation Logistics
Food, Beverages Personal Care
Services
Lower Public Administration
-
Utilities
General Industries
Other
Total
Rating class
Investment grade
Non-Investment grade
Sub-standard grade
Non-performing loans
Total
1 Geographical areas are based on country of residence, except for private individuals for which the geographical areas are based on the primary country of risk.
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173
Portfolio analysis per geographical area (*)
The portfolio analysis per geographical area re-emphasises the international distribution of ING’s credit portfolio.
The share of the Netherlands in the overall portfolio decreased to
% (
%).
The most noticeable trend in the Netherlands was the increase in exposure with Central Banks. Outstandings to
private individuals are stable at
% (
%) of total outstandings (excl. Central Banks). In Belgium no substantial
moves were observed in the portfolio, apart from a decrease in Central Banks (-€
In Market Leaders, in terms of rating distribution, the share of investment grade increased in both the
Netherlands and Belgium. Apart from the increase in investment grade assets, the outstanding with non-
investment grade reduced in 2021 for both Netherlands and Belgium. Also, for both countries, the share of sub-
standard grade and NPL decreased in 2021. For sub-standard, from
% to
% and from
% to
%. For non-
performing loans (NPL), from
% to
% and from
% to
% respectively.
In Challenger Growth Markets, ING has a strong market position in residential mortgages in Germany, Poland
and Spain. Residential mortgage exposures increased in these countries. In Germany, an increase in mortgages is
compensated by lower outstandings with the Central bank.
The top five countries within Rest of Europe based on outstanding were: Italy (€
billion), Romania (€
Rest of Europe were impacted by the sale of the retail portfolio in Austria (-€
compensated by increased outstandings in Romania and Ireland.
In Europe, outside the Benelux, rating distribution in most countries improved. The share of non-investment
grade decreased in most countries, apart from Poland (mostly in Natural Resources and in General Industries),
and the United Kingdom (increase in Natural Resources). In the UK, a noticeable increase in the share of NPL to
% (from
%), was due mainly to the Food, Beverages and Personal Care sector impacted by a single file,
whereas in the other European countries, share of NPL decreased or remained flat.
The increase in exposure in the Americas was mainly driven by FX impact. In Australia, outstanding increased,
mostly driven by mortgages (Private individuals).
In terms of rating distribution for America region, an increase in investment grade to
% (from
%), non-
investment grade decreased to
% from
%. Sub-standard grade decreased to
%, while NPL slightly
improved to
% (from
%).
Australia’s rating distribution improved with a shift of outstanding from non-investment to investment grade.
Credit risk mitigation (*)
ING uses various credit risk mitigation techniques and instruments to mitigate the credit risk associated with an
exposure and to reduce the losses incurred subsequent to a default by a customer. The most common
terminology used in ING for credit risk protection is ‘cover’. While a cover may be an important mitigant of credit
risk and an alternative source of repayment, generally it is ING’s practice to lend on the basis of the customer’s
creditworthiness rather than exclusively relying on the value of the cover.
Cover forms (*)
Within ING, there are two distinct forms of covers. First, where the asset has been pledged to ING as collateral or
security, ING has the right to liquidate it should the customer be unable to fulfil its financial obligation. As such,
the proceeds can be applied towards full or partial compensation of the customer's outstanding exposure. This
may be tangible (such as cash, securities, receivables, inventory, plant and machinery, and mortgages on real
estate properties) or intangible (such as patents, trademarks, contract rights and licences). Second, where there
is a third-party obligation, indemnification or undertaking (either by contract and/or by law), ING has the right to
claim from that third party an amount if the customer fails on its obligations. The most common examples are
guarantees (such as parent guarantees and export credit insurances) or third-party pledged mortgages.
Cover valuation methodology (*)
General guidelines for cover valuation are established to ensure consistent application within ING. These also
require that the value of the cover is monitored on a regular basis. Covers are revalued periodically and
whenever there is reason to believe that the market is subject to significant changes in conditions. The frequency
of monitoring and revaluation depends on the type of cover.
The valuation method also depends on the type of covers. For asset collateral, the valuation sources can be the
customer’s balance sheet (e.g. inventory, machinery and equipment), nominal value (e.g. cash and receivables),
market value (e.g. securities and commodities), independent valuations (e.g. commercial real estate) and market
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ING Group Annual Report 2021 on Form 20-F
174
indices (e.g. residential real estate). For third-party obligations, the valuation is based on the value that is
attributed to the contract between ING and that third party.
Where collateral values are used in the calculation of stage 3 individual Loan Loss provisions, haircuts may be
applied to the valuation in specific circumstances, to sufficiently include all relevant factors impacting the future
cash flows. ING increased the haircuts applied to collateral values used in stage 3 individual provisions as at 31
December 2021 to reflect the increased risk of inflated asset prices in certain sectors of the economy. The haircut
is applied on real estate, shipping and aviation collateral values used in the calculation of the loss-given-default in
recovery scenarios. The haircut reflects the risks of adverse price developments between the moment of
valuation of an asset and the actual settlement/cash receipt.
Cover values (*)
This section provides insight into the types of cover and the extent to which exposures benefit from collateral or
guarantees. The disclosure differentiates between risk categories (lending, investment, money market and pre-
settlement). The most relevant types of cover include mortgages, financial collateral (cash and securities) and
guarantees. ING obtains cover that is eligible for credit risk mitigation under CRR/CRDIV, as well as cover that is
not eligible. Collateral covering financial market transactions is valued on a daily basis, and as such not included
in the following tables. To mitigate the credit risk arising from Financial Markets transactions, the bank enters
into legal agreements governing the exchange of financial collateral (high-quality government bonds and cash).
The cover values are presented for the total portfolio of ING, both the performing and non-performing portfolio.
Our definition of non-performing is explained in detail in ‘Credit restructuring’ (below). For additional insight, a
breakdown of ING’s portfolio by industry and geography is provided.
Exposures are categorised into different value-to-loan (VTL) buckets that give insight in the level of
collateralisation of ING’s portfolio. VTL is calculated as the cover value divided by the outstandings at the balance
sheet date. The cover values are indexed where appropriate and exclude any cost of liquidation. Covers can
either be valid for all or some of a borrower’s exposures or particular outstandings, the latter being the most
common. For the purpose of aggregation, over-collateralisation is ignored in the total overview and VTL coverage
of more than 100% is reported as fully covered. For VTL coverage in the tables for mortgages, consumer lending
and business lending, each cover is subsequently assigned to one of the six defined VTL buckets: no cover, 0% to
25%, 25% to 50%, 50% to 75%, 75% to 100%, and ≥ 100%.
The next table gives an overview of the collateralisation of the ING’s total portfolio.
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175
Cover values including guarantees received (*)
in EUR million
Cover type
Value to Loan
2021
Outstandings
Mortgages
Financial
Collateral
Guarantees
Other covers
No Cover
Partially covered
Fully covered
Consumer Lending
6.3%
7.6%
86.1%
Business Lending
44.2%
20.2%
35.5%
Investment and Money Market
98.9%
0.8%
0.3%
Total Lending, Investment and Money Market
36.0%
12.8%
51.2%
Pre-settlement
Total Bank
Cover values including guarantees received (*)
in EUR million
Cover type
Value to Loan
2020
Outstandings
Mortgages
Financial
Collateral
Guarantees
Other
No Cover
Partially covered
Fully covered
Consumer Lending
6.7%
7.5%
85.8%
Business Lending
43.1%
21.2%
35.7%
Investment and Money Market
99.2%
0.1%
0.7%
Total Lending, Investment and Money Market
36.9%
12.7%
50.4%
Pre-settlement
Total Bank
In 2021, the collateralisation level of the portfolio increased as a result of an increase in the cover value in
lending to private individuals. Excluding the pre-settlement portfolio,
% of ING’s outstandings were fully
collateralised in 2021 (2020:
%). Since investments traditionally do not require covers, the percentage for ‘no
covers’ in this portfolio is above
%. However,
% of the investment outstanding is investment grade.
Improved economic conditions in ING’s main markets contributed to improved collateral valuations, observed in
consumer lending. Relative to the overall developments in the housing markets and the impact on provisioning,
note the paragraphs on ‘management adjustments’ in the Loan Loss provisioning section, that were made to
reflect potential impact of higher inflation, higher rates and market uncertainty.
Consumer lending portfolio (*)
The consumer lending portfolio accounts for
% (2020:
%) of ING’s total outstanding, primarily consisting
of residential mortgage loans and other consumer lending loans, which mainly comprise term loans, revolvers
and personal loans to consumers. As a result, most of the collateral consists of mortgages. The mortgage values
are collected in an internal central database and in most cases external data is used to index the market value. A
significant part of ING’s residential mortgage portfolio is in the Netherlands (
%), followed by Germany
(
%), Belgium and Luxembourg (
%) and Australia (
%).
Consumer lending portfolio – cover values (*)
The below tables show the values of different covers and the VTL split between performing and non-performing
loans.
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176
Cover values including guarantees received - Consumer lending portfolio (*)
in EUR million
Cover type
Value to Loan
2021
Outstandings
Mortgages
Financial
Collateral
Guarantees
Other covers
No Cover
0% - 25%
25%-50%
50% - 75%
75% - 100%
≥ 100%
Performing
Residential Mortgages (Private Individuals)
–
0.5%
7.6%
91.8%
Residential Mortgages (SME)
0.2%
0.6%
1.4%
5.4%
92.4%
Other Consumer Lending
79.7%
0.3%
0.1%
0.1%
0.3%
19.5%
Total Performing
6.0%
–
0.1%
0.5%
7.0%
86.3%
Non-performing
Residential Mortgages (Private Individuals)
0.4%
–
0.3%
1.0%
4.8%
93.4%
Residential Mortgages (SME)
0.1%
0.2%
0.7%
1.6%
7.4%
90.0%
Other Consumer Lending
92.3%
0.4%
0.2%
0.4%
0.5%
6.3%
Total Non-performing
23.5%
0.1%
0.3%
0.9%
3.8%
71.4%
Total Consumer Lending
6.3%
–
0.1%
0.5%
7.0%
86.1%
1 Consists mainly of residential mortgages to small individual business clients
Cover values including guarantees received - Consumer lending portfolio (*)
in EUR million
Cover type
Value to Loan
2020
Outstandings
Mortgages
Financial
Collateral
Guarantees
Other covers
No Cover
0% - 25%
25%-50%
50% - 75%
75% - 100%
≥ 100%
Performing
Residential Mortgages (Private Individuals)
0.1%
0.7%
7.3%
92.0%
Residential Mortgages
(SME)
0.3%
0.7%
1.4%
6.1%
91.5%
Other Consumer Lending
81.5%
0.3%
0.1%
0.2%
0.3%
17.6%
Total Performing
6.4%
0.1%
0.7%
6.7%
86.1%
Non-performing
Residential Mortgages (Private Individuals)
0.2%
0.1%
0.4%
1.2%
5.9%
92.2%
Residential Mortgages (SME)
0.1%
0.2%
0.5%
1.8%
7.7%
89.7%
Other Consumer Lending
91.8%
0.3%
0.2%
0.3%
0.6%
6.7%
Total Non-performing
23.2%
0.1%
0.3%
1.0%
4.6%
70.6%
Total Consumer Lending
6.7%
0.1%
0.7%
6.7%
85.8%
1 Consists mainly of residential mortgages to small individual business clients
Credit risk
ING Group Annual Report 2021 on Form 20-F
177
The collateralisation levels of the consumer lending portfolio continued to improve during 2021. The rise in
collateralisation levels was due to rising housing prices observed in different mortgage markets, specifically
noticeable in the Netherlands but also in Belgium, Germany and Australia. Relative to the overall developments
in the housing markets driving a decrease of loan loss provisions relating to the mortgages portfolio’s, note
management adjustments recognised to maintain an appropriate level of provisions. See paragraph on
‘management adjustments’ in the Loan Loss provisioning section.
ING’s residential mortgage outstanding increased mainly in Poland (
%), Spain (
%) and Germany (
%). In
2020 the increases where respectively
%,
% and
%. Mortgage outstanding in the Netherlands
decreased slightly (
%). For the residential mortgages portfolio, the cover type guarantees relate to mortgages
covered by governmental insurers under the Dutch national mortgage guarantee (NHG) scheme in the
Netherlands. The NHG guarantees the repayment of a loan in case of a forced property sale.
Business lending portfolio (*)
Business lending accounts for
% of ING’s total outstanding (2020:
%). In line with our objective to give
stakeholders insight into the portfolio, we present the business lending portfolio per industry breakdown in
accordance with the NAICS definition and per region and main market. Business lending presented in this section
does not include pre-settlement, investment and money market exposures.
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178
Cover values including guarantees received - Business lending portfolio (*)
in EUR million
2021
Cover type
Value to Loan
Industry
Outstandings
Mortgages
Financial
Collateral
Guarantees
Other covers
No Cover
0% - 25%
25%-50%
50% - 75%
75% - 100%
Central Banks
100.0%
Real Estate
3.6%
0.7%
2.3%
0.9%
4.9%
87.7%
Natural Resources
28.9%
14.2%
13.7%
8.9%
11.1%
23.2%
Transportation Logistics
16.1%
6.4%
2.1%
4.5%
12.2%
58.7%
Non-Bank Financial Institutions
40.2%
4.8%
0.4%
2.3%
6.5%
45.8%
Food, Beverages Personal Care
22.9%
4.6%
5.0%
9.3%
15.9%
42.3%
Services
28.1%
5.2%
5.9%
4.9%
9.8%
46.2%
Commercial Banks
74.6%
3.6%
0.6%
1.5%
5.1%
14.5%
Utilities
50.5%
15.0%
4.9%
3.9%
3.2%
22.3%
General Industries
33.1%
4.8%
3.9%
7.9%
9.1%
41.1%
Chemicals, Health Pharmaceuticals
30.6%
6.1%
2.9%
5.8%
12.6%
42.1%
Builders Contractors
22.7%
6.4%
6.2%
7.2%
11.4%
46.1%
Others
44.2%
3.7%
5.2%
3.6%
10.6%
32.7%
Total Business Lending
44.2%
5.0%
4.0%
3.8%
7.3%
35.5%
of which Total Non-performing
27.5%
5.9%
6.0%
6.0%
17.2%
37.4%
1 ‘Others’ comprises industries with outstandings lower than €
Credit risk
ING Group Annual Report 2021 on Form 20-F
179
Cover values including guarantees received - Business lending portfolio (*)
in EUR million
2020
Cover type
Value to Loan
Industry
Outstandings
Mortgages
Financial
Collateral
Guarantees
Other covers
No Cover
0% - 25%
25%-50%
50% - 75%
75% - 100%
≥ 100%
Central Banks
100.0%
–
–
–
–
–
Real Estate
3.3%
0.7%
2.1%
1.5%
7.4%
85.1%
Natural Resources
24.5%
14.4%
13.0%
7.2%
15.9%
25.0%
Transportation Logistics
18.2%
5.1%
2.4%
3.9%
11.7%
58.8%
Non-Bank Financial Institutions
42.9%
3.5%
2.3%
3.6%
4.6%
43.2%
Food, Beverages Personal Care
25.0%
5.1%
5.9%
9.6%
14.0%
40.3%
Services
27.9%
5.8%
7.0%
5.3%
7.2%
46.9%
Commercial Banks
74.8%
1.0%
3.4%
1.7%
8.2%
10.8%
Utilities
42.3%
19.1%
5.2%
4.3%
3.0%
26.0%
General Industries
31.5%
4.0%
5.7%
9.6%
9.9%
39.3%
Chemicals, Health Pharmaceuticals
26.0%
5.7%
3.6%
7.7%
13.6%
43.5%
Builders Contractors
26.3%
6.2%
6.4%
8.9%
10.4%
41.7%
Others
40.0%
5.1%
4.3%
6.1%
10.5%
34.1%
Total Business Lending
43.1%
4.9%
4.2%
4.2%
7.9%
35.7%
of which Total Non-performing
29.1%
5.2%
5.0%
8.5%
14.2%
38.1%
1 ‘Others’ comprises industries with outstandings lower than €
Credit risk
ING Group Annual Report 2021 on Form 20-F
180
Cover values including guarantees received - Business lending portfolio (*)
2021
Cover type
Value to Loan
Region
Outstandings
Mortgages
Collateral
Guarantees
Other covers
No Cover
0% - 25%
25%-50%
50% - 75%
75% - 100%
≥ 100%
Europe
Netherlands
53.2%
1.7%
2.3%
3.5%
7.6%
31.8%
Belgium
25.5%
1.9%
2.5%
2.9%
5.9%
61.3%
Germany
75.0%
4.1%
2.0%
1.6%
0.8%
16.5%
Luxembourg
59.5%
1.0%
3.7%
1.3%
4.3%
30.1%
Poland
30.2%
4.5%
4.2%
6.0%
10.7%
44.4%
United Kingdom
47.8%
17.7%
4.0%
6.4%
7.1%
17.1%
Switzerland
23.3%
19.3%
27.1%
13.3%
4.1%
12.9%
France
43.4%
2.5%
2.4%
3.3%
4.0%
44.3%
Rest of Europe
37.8%
6.9%
3.8%
3.3%
9.2%
39.1%
America
37.6%
9.3%
5.8%
3.8%
10.9%
32.6%
Asia
40.9%
6.1%
5.8%
6.0%
9.9%
31.3%
Australia
34.3%
6.1%
1.0%
1.4%
2.6%
54.6%
Africa
13.9%
9.1%
7.3%
9.7%
22.4%
37.5%
Total Business Lending
44.2%
5.0%
4.0%
3.8%
7.3%
35.5%
of which Non-performing
27.5%
5.9%
6.0%
6.0%
17.2%
37.4%
Credit risk
ING Group Annual Report 2021 on Form 20-F
181
Cover values including guarantees received - Business lending portfolio (*)
2020
Cover type
Value to Loan
Region
Outstandings
Mortgages
Collateral
Guarantees
Other covers
No Cover
0% - 25%
25%-50%
50% - 75%
75% - 100%
≥ 100%
Europe
Netherlands
51.6%
1.6%
2.5%
3.9%
8.6%
31.8%
Belgium
24.8%
1.6%
3.0%
3.1%
6.9%
60.7%
Germany
80.4%
4.0%
2.1%
1.4%
1.2%
10.9%
Luxembourg
46.4%
1.5%
6.0%
1.5%
3.4%
41.1%
Poland
28.3%
4.5%
3.8%
7.9%
11.3%
44.2%
United Kingdom
44.6%
16.1%
7.2%
3.0%
8.3%
20.8%
Switzerland
27.2%
21.7%
16.6%
7.1%
7.2%
20.3%
France
39.2%
5.1%
4.1%
2.7%
2.0%
46.8%
Rest of Europe
35.4%
7.7%
4.6%
4.7%
9.1%
38.5%
America
38.3%
7.3%
6.0%
5.4%
10.2%
32.7%
Asia
40.6%
5.0%
5.5%
6.6%
11.9%
30.5%
Australia
26.4%
7.7%
2.1%
2.4%
4.7%
56.8%
Africa
8.0%
6.6%
3.0%
19.9%
26.8%
35.7%
Total Business Lending
43.1%
4.9%
4.2%
4.2%
7.9%
35.7%
of which Non-performing
29.1%
5.2%
5.0%
8.5%
14.2%
38.1%
The tables above on cover values describe the collateralisation of ING’s business lending portfolio. Breakdowns
are provided by industry as well as by geographical region or market, based on the residence of the borrowers.
Broken down by industry, the largest increase in outstanding is attributable to Natural Resources (€
%) followed by Utilities (€
%). The largest decrease in outstanding was observed in Real Estate
(€
The proportion of the business lending portfolio with no cover increased, which was mainly witnessed in the
Netherlands to
% (from
%), caused by increased Central Bank outstanding. Most industry types
experienced an increase in total covers.
Credit risk
ING Group Annual Report 2021 on Form 20-F
182
Credit quality (*)
Credit risk categories (*)
Regular
Watch List
Restructuring
Non-
performing
Possible ratings
Typical ratings
Deterioration in risk
Significant intervention
Account Ownership
Credit Risk Management
Primary Manager
Accounting provisioning
1 More information on the Restructuring and Non-performing categories can be found in the Credit restructuring section.
Credit quality outstandings (*)
1
in EUR million
2021
2020
Performing not past due
Business lending performing past due
Consumer lending performing past due
Non-performing
Total lending and investment
Money market
Pre-settlement
Total
1 Past due based on new definition of default, prior period outstandings updated
Past due obligations (*)
Retail Banking continuously measures its portfolio in terms of payment arrears and determines on a monthly
basis if there are any significant changes in the level of arrears. This methodology is principally extended to loans
to private individuals, such as residential mortgage loans, car loans and other consumer loans, as well as business
lending. An obligation is considered ‘past due’ if a payment of interest or principal is more than one day late. ING
aims to help its customers as soon as they are past due by communicating to remind them of their payment
obligations. In its contact with the customers, ING aims to solve the (potential) financial difficulties by offering a
range of measures (e.g. payment arrangements, restructuring). If the issues cannot be cured, for example
because the customer is unable or unwilling to pay, the contract is sent to the recovery unit. The facility is
downgraded to risk rating 20 (non-performing) when the facility or obligor – depending on the level at which the
non-performing status is applied - is more than 90 days past due and to risk rating 21 or 22 in case of an exit
scenario.
ING has aligned the regulatory concept of non-performing with that of the definition of default. Hence, in
Wholesale Banking, obligors are classified as non-performing when a default trigger occurs:
◾
ING believes the borrower is unlikely to pay; the borrower has evidenced significant financial difficulty,
to the extent that it will have a negative impact on the future cash flows of the financial asset. The
following events could be seen as indicators of financial difficulty:
◾
The borrower (or third party) has started insolvency proceedings;
◾
A group company/co-borrower has NPL status;
◾
Indication of fraud (affecting the company’s ability to service its debt);
◾
There is doubt as to the borrower’s ability to generate stable and sufficient cash flows to service
its debt;
◾
Restructuring of debt.
◾
ING has granted concessions relating to the borrower’s financial difficulty, the effect of which is a
reduction in expected future cash flows of the financial asset below current carrying amount.
◾
The obligor has failed in the payment of principal, interest or fees, the total past due amount is above
the materiality threshold and this remains the case for more than 90 consecutive days.
Further, Wholesale Banking has an individual name approach, using early warnings indicators to signal possible
future issues in debt service.
Credit risk
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183
Ageing analysis (past due but performing): Consumer lending portfolio by geographic area, outstandings (*)
1,2,3
in EUR million
2021
2020
Region
Past due for 1–
30 days
Past due for 31–
60 days
Past due for 61–
90 days
Past due for 90
days
Total
Past due for 1–
30 days
Past due for 31–
60 days
Past due for 61–
90 days
Past due for 90
days
Total
Europe
Belgium
0
Germany
0
Poland
Netherlands
0
Luxemburg
0
0
Spain
0
France
0
0
0
0
0
0
United Kingdom
0
0
0
0
0
0
0
Rest of Europe
0
America
0
0
0
0
0
0
0
Asia
0
0
0
0
0
0
0
Australia
Total
1 Based on consumer lending. The amount of past due but performing financial assets in respect of non-lending activities was not significant.
2 The absolute and relative materiality thresholds used for determining a defaulted status do not apply for the purposes of classification as past due. Below these thresholds, arrears of more than 90 days are reported as past due.
3 Based on new definition of default, prior period has been adjusted.
The past due but performing outstanding of consumer lending increased by €
was observed in Belgium (€
The largest decreases are reported by Australia, Rest of Europe and Germany. Australia’s decrease (€
is mainly visible in the 90 days past due bucket.
Credit risk
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184
Ageing analysis (past due but performing): Business lending portfolio by geographic area, outstandings (*)
1,2
in EUR million
2021
2020
Region
Past due for 1–
30 days
Past due for
31–60 days
Past due for
61–90 days
Past due for
90 days
Total
Past due for 1–
30 days
Past due for
31–60 days
Past due for
61–90 days
Past due for
90 days
Total
Europe
United Kingdom
0
0
Belgium
0
Netherlands
0
Luxemburg
0
Poland
0
Germany
0
0
0
–
0
Spain
0
0
–
–
–
France
0
0
0
0
Rest of Europe
America
0
0
–
–
Asia
–
0
–
0
Australia
0
Total
1 The absolute and relative materiality thresholds used for determining a defaulted status do not apply for the purposes of classification as past due. Below these thresholds, arrears of more than 90 days are reported as past due.
2 Based on new definition of default, prior period has been adjusted.
Total past due but performing outstanding of business lending increased by €
mainly contributed by increased outstanding in the 1-30 days past due bucket (€
decreased outstanding in 31-60 days past due bucket (€
bucket are Belgium (€
recognised management adjustment to cover the elevated risk of clients using payment holiday facilities.
Credit restructuring (*)
Global Credit Restructuring (GCR) is the dedicated and independent department that deals with non-performing
loans and loans that hold a reasonable probability that ING will end up with a loss, if no specific action is taken.
GCR handles accounts or portfolios requiring an active approach, which may include renegotiation of terms and
conditions and business or financial restructuring. The loans are managed by GCR or by units in the various
regions and business units.
ING uses three distinct statuses to categorise the management of clients with (perceived) deteriorating credit risk
profiles, i.e. there is increasing doubt as to the performance and the collectability of the client’s contractual
obligations:
◾
Watch List
: Usually, a client is first classified as Watch List when there are concerns of any potential or
material deterioration in credit risk profile that may affect the ability of the client to adhere to its debt
service obligations or to refinance its existing loans. Watch List status requires more than usual
attention, increased monitoring and quarterly reviews. Some clients with a Watch List status may
develop into a Restructuring status or even a Recovery status.
◾
Restructuring
: A client is classified in Restructuring when there are concerns about the client’s financial
stability, credit worthiness, and/or ability to repay, but where the situation does not require the recall or
acceleration of facilities or the liquidation of collateral. ING’s actions aim to maintain the going concern
status of the client by:
◾
Restoring the client’s financial stability;
◾
Supporting the client’s turnaround;
Credit risk
ING Group Annual Report 2021 on Form 20-F
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◾
Restoring the balance between debt and equity; and
◾
Restructuring the debt to a sustainable situation.
◾
Recovery
: A client is classified as in Recovery when ING and/or the client concludes that the client’s
financial situation cannot be restored and a decision is made to end the (credit) relationship or even to
enter into bankruptcy. ING prefers an amicable exit, but will enforce and liquidate the collateral or claim
under the guarantees if deemed necessary.
Watch List, Restructuring and Recovery accounts are reviewed at least quarterly by the front office, GCR and the
relevant credit risk management executives.
Forbearance (*)
Forbearance occurs when a client is unable to meet their financial commitments due to financial difficulties they
face or are about to face and ING grants concessions towards them. Forborne assets are assets in respect of
which forbearance measures have been granted.
Forbearance may enable clients experiencing financial difficulties to continue repaying their debt.
For business customers, ING mainly applies forbearance measures to support clients with fundamentally sound
business models that are experiencing temporary difficulties with the aim of maximising the client’s repayment
ability and therewith avoiding a default situation or helping the client to return to a performing situation.
For ING retail units, clear criteria have been established to determine whether a client is eligible for the
forbearance process. Specific approval mandates are in place to approve the measures, as well as procedures to
manage, monitor and report the forbearance activities.
ING reviews the performance of forborne exposures at least quarterly, either on a case-by-case (business) or on a
portfolio (retail) basis.
All exposures are eligible for forbearance measures, i.e. both performing (Risk Ratings 1-19) and non-performing
(Risk Ratings 20-22) exposures. ING uses specific criteria to move forborne exposures from non-performing to
performing or to remove the forbearance statuses that are consistent with the corresponding European Banking
Authority (EBA) standards. An exposure is reported as forborne for a minimum of two years. An additional one-
year probation period is observed for forborne exposures that move from non-performing back to performing.
Since the outbreak of Covid-19, ING has supported clients affected by the pandemic among others by providing
payment holidays. Refer to ‘Payment holidays’ below for more information on payment holidays.
Summary Forborne portfolio (*)
in EUR million
2021
2020
Business Line
Outstandings
Of which:
performing
Of which: non-
performing
% of total
portfolio
Outstandings
Of which:
performing
Of which: non-
performing
% of total
portfolio
Wholesale Banking
3.1%
3.2%
Retail Banking
2.1%
2.0%
Total
2.5%
2.5%
Summary Forborne portfolio by forbearance type (*)
in EUR million
2021
2020
Forbearance type
Outstandings
Of which:
performing
Of which: non-
performing
% of total
portfolio
Outstandings
Of which:
performing
Of which: non-
performing
% of total
portfolio
Loan modification
2.3%
2.3%
Refinancing
0.2%
0.2%
Total
2.5%
2.5%
As per 31 December 2021, ING’s total forborne assets remained stable at €
2020. Wholesale Banking decreased by €
Wholesale Banking (*)
As per December 2021, Wholesale Banking forborne assets amounted to €
% of
the total Wholesale Banking portfolio (Lending and Investment credit outstanding).
Credit risk
ING Group Annual Report 2021 on Form 20-F
186
Wholesale Banking: Forborne portfolio by geographical area (*)
in EUR million
2021
2020
Region
Outstandings
Of which:
performing
Of which: non-
Outstandings
Of which:
performing
Of which: non-
performing
performing
Europe
Netherlands
Belgium
Germany
United Kingdom
Italy
Norway
Poland
Rest of Europe
America
Asia
Australia
Africa
Total
Wholesale Banking: Forborne portfolio by economic sector (*)
in EUR million
2021
2020
Industry
Outstandings
Of which:
performing
Of which: non-
Outstandings
Of which:
performing
Of which: non-
performing
performing
Natural Resources
Transportation Logistics
General Industries
Food, Beverages Personal Care
Real Estate
Chemicals, Health Pharmaceuticals
Builders Contractors
Utilities
Services
Retail
Automotive
Other
Total
The main concentration of forborne assets in a single country was in the United Kingdom with
% (2020:
%)
of the total Wholesale Banking forborne assets and
% (2020:
%) of the total non-performing forborne assets.
Wholesale Banking forborne assets decreased by €
forborne assets decreased by €
most industries, offset by an increase for Real Estate. On a regional basis, the decrease was mainly visible in the
United Kingdom and America.
Wholesale Banking forborne assets were mainly concentrated in Natural Resources, Real Estate, Transportation
Logistics and Food Beverages Personal Care. Together they accounted for
% of the total Wholesale
Banking forborne assets and
% of the total Wholesale Banking non-performing forborne assets. Back in 2020,
the main concentration was witnessed Natural Resources, Food Beverages Personal Care- and Transportation
Logistics with
% of the total WB forborne. In 2021, a significant increase in forborne assets was visible in Real
Estate (+€
Food, Beverages Personal Care (-€
towards sectors, also note the sector based approach as explained in the Management adjustments paragraph in
the Loan Loss Provisioning section.
Retail Banking (*)
As per end of December 2021, Retail Banking forborne assets amounted to a total of €
represented
% of the total Retail Banking portfolio (Lending and Investment credit outstanding).
Credit risk
ING Group Annual Report 2021 on Form 20-F
187
Retail Banking: Forborne portfolio by geographical area (*)
in EUR million
2021
2020
Region
Outstandings
Of which:
performing
Of which: non-
Outstandings
Of which:
performing
Of which: non-
performing
performing
Europe
Netherlands
Belgium
Germany
Turkey
Poland
Romania
Italy
Spain
Rest of Europe
America
Asia
Australia
Africa
Total
The main concentration of forborne assets in a single country was in the Netherlands with
% (2020:
%) of
the total Retail Banking forborne assets and
% (2020:
%) of the non-performing forborne assets. Then
Belgium followed with
% (2020:
%) of the total Retail Banking forborne assets. Out of the total of €10.0
billion, an amount of €4.6 billion is related to mortgages (2020: €4.6 billion).
Payment holidays
Globally, 2021 has been still dominated by the Covid-19 pandemic and the distressing human and economic cost
thereof. Despite increasing vaccination rates and a further reopening of economies during the year, the end of
2021 was marked again by increasing infection rates due to the spread of new virus variants. In many countries,
governments have adopted economic support programs (such as tax advantages, unemployment regulations or
guarantees) to address the adverse systemic economic impact of the coronavirus. In addition, various initiatives
have been taken by ING to support our clients to manage these extraordinary times by way of granting
temporary payment holidays, (guaranteed) new money facilities etc.
Governments in almost all Retail Banking countries have adopted measures providing for payment holidays.
During 2020 and 2021, in line with the EBA moratoria guidelines, approximately
granted payment holidays under schemes that were eligible under the EBA moratoria guidelines. The total
exposure of loans for which a payment holiday was granted amounts to €
% were for
customers located in the Netherlands and Belgium. At the end of 2021,
% of granted payment holidays had
expired.
The payment holiday schemes offered in the various countries differ in terms of scope, benefit duration and key
conditions and are mainly applied to business lending, mortgages and consumer loans.
The various measures taken by ING to alleviate the impact of Covid-19 also impacted the loan classification in
terms of forbearance and consequently IFRS 9 staging. In light of this, the EBA has provided guidelines that
expired on 30 September 2020, which defined eligibility criteria for a payment holiday arrangement offered to a
large group of customers to be classified as a “general payment moratorium”. Based on the guidelines, the
granting of these payment holidays did not lead to forbearance classifications. A small number of payment
holidays were granted outside this scheme and were flagged as forborne. ING followed the EBA guidelines and
when a payment holiday was provided to a customer as part of a “general payment moratorium”, ING did not
consider this measure to classifiable as forbearance. EBA further extended these guidelines in the first week of
December 2020, valid until 31 March 2021, with certain extra conditions. ING decided not to make use of the
extension of these guidelines and took the decision to treat exposures subject to a payment holiday under new
or extended schemes (after September 2020) as IFRS 9 stage 2 or stage 3 exposures. Limited exceptions, due to
local regulatory requirements, were specifically approved by the highest credit policy approval body (GCTP). To
address the elevated risk for clients with payment holidays a management adjustment was considered necessary.
Please refer to the paragraph on ‘Management adjustments’ in the Loan Loss Provisioning section.
Credit risk
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188
Non-performing loans (*)
ING’s loan portfolio is under constant review. Loans to obligors that are considered more than 90 days past due
on material exposure are reclassified as non-performing. For business lending portfolios, there generally are
reasons for declaring a loan non-performing prior to the obligor being 90 days past due. These reasons include,
but are not limited to, ING’s assessment of the customer’s perceived inability to meet its financial obligations, or
the customer filing for bankruptcy or bankruptcy protection.
The table below represents the breakdown by industry of credit risk outstandings for lending and investment
positions that have been classified as non-performing.
Non-performing Loans: outstandings by economic sector and business lines (*)
1
in EUR million
Wholesale Banking
Retail Benelux
Retail Challengers
Growth Markets
Corporate Line
Total
Industry
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Private Individuals
-
-
Natural Resources
Food, Beverages Personal
Care
Transportation Logistics
Services
Builders Contractors
Real Estate
General Industries
Non-Bank Financial Institutions
Retail
Other
Total
1 Based on Lending and Investment outstandings.
2 Economic sectors not specified in above overview are grouped in Other.
Credit risk
ING Group Annual Report 2021 on Form 20-F
189
Non-performing Loans: outstandings by economic sectors and geographical area (*)
in EUR million
Region
Total
Industry
Netherlands
Belgium
Germany
Poland
Spain
United Kingdom
France
Luxemburg
Rest of Europe
America
Asia
Australia
Africa
2021
Private Individuals
Natural Resources
Food, Beverages Personal
Care
Transportation Logistics
Services
Builders Contractors
Real Estate
General Industries
Non-Bank Financial
Institutions
Retail
Other
Total
1 Economic sectors not specified in above overview are grouped in Other.
Credit risk
ING Group Annual Report 2021 on Form 20-F
190
Non-performing Loans: outstandings by economic sectors and geographical area (*)
in EUR million
Region
Total
Industry
Netherlands
Belgium
Germany
Poland
Spain
United Kingdom
France
Luxemburg
Rest of Europe
America
Asia
Australia
Africa
2020
Private Individuals
Natural Resources
0
0
0
Food, Beverages Personal
Care
0
Transportation Logistics
0
0
Services
0
0
0
Builders Contractors
0
0
0
0
Real Estate
General Industries
0
0
0
Non-Bank Financial
Institutions
0
0
Retail
0
0
Other
0
Total
1 Economic sectors not specified in above overview are grouped in Other.
The non-performing portfolio decreased in 2021, mainly due to decreased outstandings in Private Individuals, in
Builders Contractors and in the Transportation Logistics industry. The decrease is visible in all businesses and
also in almost all sectors. In the Netherlands, the Non Performing in Private Individuals decreased mainly
because of cures (ending their default probation).
Credit risk
ING Group Annual Report 2021 on Form 20-F
191
Loan loss provisioning (*)
ING recognises loss allowances based on the expected credit loss (ECL) model of IFRS 9, which is designed to be
forward-looking. The IFRS 9 impairment requirements are applicable to on-balance sheet financial assets
measured at amortised cost or fair value through other comprehensive income (FVOCI), such as loans, debt
securities and lease receivables, as well as off-balance sheet items such as undrawn loan commitments, certain
financial guarantees issued, and undrawn committed revolving credit facilities.
ING distinguishes between two types of calculation methods for credit loss allowances:
◾
Individual Lifetime ECL for credit-impaired (Stage 3) financial instruments with exposures above €1 million;
◾
Collective 12-month ECL (Stage 1) and Lifetime ECL (Stage 2) for portfolios of financial instruments, as well as
Lifetime ECL for credit impaired exposures (Stage 3) below €1 million.
IFRS 9 models (*)
The IFRS 9 models leverage on the internal rating-based (IRB) models (PD, LGD, EAD), which include certain
required conservatism. To include IFRS 9 requirements, such regulatory conservatism is removed from the ECL
parameters (PD, LGD and EAD). The IFRS 9 models apply two types of adjustments to the ECL parameters: (1) to
economic outlook and (2) for Stage 2 and Stage 3 assets only, to the lifetime horizon. The IFRS 9 model
parameters are estimated based on statistical techniques and supported by expert judgement.
ING has aligned the definition of default for regulatory purposes with the definition of ‘credit-impaired’ financial
assets under IFRS 9 (Stage 3). To comply with the new regulatory technical standards (RTS) and EBA guidelines,
ING updated its definition of default in the first quarter of 2020. Consequently, ING updated this definition also
for IFRS 9 purposes, which accordingly is taken into account in updates of IFRS9 models.
More information can be found in section 1.6 of the Consolidated Financial Statements.
Climate and environmental risks in IFRS 9 models (*)
ING is evolving in its credit risk management framework to develop a better understanding of emerging climate and
environmental risks. Banks, including ING, are in the process of collecting and analysing empirical historical data and
moving towards embedding these emerging risks into their credit risk management processes and eventually into their
IFRS 9 ECL models.
At this point in time it is not yet possible to incorporate climate risk separately into IFRS 9 ECL models given the lack of
sufficient empirical historical data. The impact of climate risk is however currently implicitly embedded in ING’s ECL
models through the macroeconomic forecasts used for both the baseline and two alternative scenarios (downside and
upside). In particular, where climate and environmental factors have impacted the economy in the recent past or
present, these impacts are reflected in projected macro-economic indicators (e.g. GDP growth and unemployment
rates).
We note that ING’s ECL models are primarily sensitive to the short-term economic outlook (we use a 3 year time
horizon for macroeconomic outlook after which a mean reversion approach is applied), and therefore the longer-term
environmental/climate risk is not yet incorporated .
With regard to our evaluation of climate-related matters, where such events have already occurred (e.g. floods), the
impact of such events are individually assessed in the calculation of stage 3 Individual provisions and factored into
ING’s normal credit monitoring and identification processes. For example, we consider whether the affected assets
have suffered a significant increase in credit risk (or are credit impaired) and whether the ECL is appropriate.
Credit risk
ING Group Annual Report 2021 on Form 20-F
192
Reconciliation gross carrying amount (IFRS 9 eligible) and statement of financial position
in EUR million
2021
2020
Carrying
Amount
for credit
losses
on-demand
bank
positions
Repurchase
transactions
collateral
of
financial
Carrying
Amount
for credit
losses
on-demand
bank
positions
Repurchase
transactions
collateral
of
financial
Amounts held at Central Banks
-6
-3
-2
Loans and Advances to Banks
-22
-23
-1,943
Financial Instruments FVOCI Loans
-1
-2
Financial Instruments FVOCI Debt securities
-12
-12
Securities at Amortised Cost
-19
-17
Loans and Advances to customers
-5,274
-5,779
Total on-balance (IFRS 9 eligible)
-5,334
-5,836
Guarantees and irrevocable facilities (IFRS 9 eligible)
-34
-17
Total Gross Carrying Amount (IFRS 9 eligible)
-5,368
-5,854
This table presents the reconciliation between the Statement of Financial Position and the gross carrying
amounts used for calculating the expected credit losses. No expected credit loss is calculated for cash, on-
demand bank positions, reverse repurchase transactions, cash collateral received in respect of derivatives and
other. Therefore these amounts are not included in the total gross carrying amount (IFRS 9 eligible). Other
includes value adjustments on hedged items, deferred acquisition cost on residential mortgages and a receivable
which is offset against a liquidity facility.
Credit risk
ING Group Annual Report 2021 on Form 20-F
193
Portfolio quality (*)
The table below describes the portfolio composition over the different IFRS 9 stages and rating classes. The Stage
1 portfolio represents 93.5% (2020: 92.1%) of the total gross carrying amounts, mainly composed of investment
grade, while Stage 2 makes up 5.2% (2020: 6.5%) and Stage 3 makes up 1.3% (2020: 1.5%) total gross carrying
amounts, respectively.
Gross carrying amount per IFRS 9 stage and rating class (*)
1,2,3
in EUR million
12-month ECL (Stage 1)
Lifetime ECL not credit
impaired (Stage 2)
Lifetime ECL credit impaired
(Stage 3)
Total
2021
Rating class
Gross
Carrying
Amount
Provisions
Gross
Carrying
Amount
Provisions
Gross
Carrying
Amount
Provisions
Gross
Carrying
Amount
Provisions
Investment grade
1 (AAA)
0
2-4 (AA)
5-7 (A)
8-10 (BBB)
Non-Investment grade
11-13 (BB)
14-16 (B)
17 (CCC)
Substandard grade
18 (CC)
19 (C)
Non-performing loans
20-22 (D)
Total
1 Compared to the credit risk portfolio, the differences are mainly undrawn committed amounts (€
outstandings.
2 For a reference to the Notes in the consolidated financial statements, we refer to the table ‘Reconciliation between credit risk categories and financial position’.
3 IAS 37 provisions are established for non-credit replacement guarantees not in the scope of IFRS 9. Total IAS 37 provisions (€
Credit risk
ING Group Annual Report 2021 on Form 20-F
194
Gross carrying amount per IFRS 9 stage and rating class (*)
1,2,3
in EUR million
12-month ECL (Stage 1)
4
Lifetime ECL not credit
impaired (Stage 2)
4
Lifetime ECL credit impaired
(Stage 3)
Total
2020
Rating class
Gross
Carrying
Amount
Provisions
Gross
Carrying
Amount
Provisions
Gross
Carrying
Amount
Provisions
Gross
Carrying
Amount
Provisions
Investment grade
1 (AAA)
0
0
0
2-4 (AA)
0
0
0
5-7 (A)
0
0
8-10 (BBB)
0
0
Non-Investment grade
11-13 (BB)
0
0
14-16 (B)
0
0
17 (CCC)
0
0
Substandard grade
18 (CC)
0
0
0
0
19 (C)
0
0
0
0
Non-performing loans
20-22 (D)
0
0
0
0
Total
1 Compared to the credit risk portfolio, the differences are mainly undrawn committed amounts (€
2 For a reference to the Notes in the consolidated financial statements, we refer to the table ‘Reconciliation between credit risk categories and financial position’.
3 IAS 37 provisions are established for non-credit replacement guarantees not in the scope of IFRS 9. Total IAS 37 provisions (€
4 Prior year numbers adjusted reflecting model adjustment in residential mortgages Netherlands.
Changes in gross carrying amounts and loan loss provisions (*)
The table below provides a reconciliation by stage of the gross carrying amount and allowances for loans and
advances to banks and customers, including loan commitments and financial guarantees. The transfers of
financial instruments represent the impact of stage transfers upon the gross carrying/nominal amount and
associated allowance for ECL. This includes the net-remeasurement of ECL arising from stage transfers, for
example, moving from a 12-month (Stage 1) to a lifetime (Stage 2) ECL measurement basis.
The net-remeasurement line represents the changes in provisions for facilities that remain in the same stage.
Please note the following comments with respect to the movements observed in the table below:
◾
Stage 3 gross carrying amount decreased by €
mainly as a result of generally low inflow into NPL in 2021, primarily due to Government support
measures;
◾
Stage 2 gross carrying amount decreased by €
This is mainly caused by the Significant Lifetime PD trigger (-/-€
economic forecasts and the Watch List trigger (-/-€
are mainly more than 30 Days Past Due (€
year probation period is required before a client can move back to Stage 1;
Credit risk
ING Group Annual Report 2021 on Form 20-F
195
◾
Transportation Logistics (including Aviation), Real Estate, Services and Food, Beverages Personal
Care (latter two including Hospitality Leisure) were the sectors particularly impacted by the Covid-19
pandemic. In 2021 these sectors showed material releases in Stage 2 amounts compared to 31
December 2020 of €
pandemic turned out to be less harsh than expected last year and several files were being taken off the
watchlist. These sectors however still are the largest Stage 2 contributors representing
%,
%,
% and
% of the total Stage 2 gross carrying amounts respectively;
◾
Changes in models/Risk parameters is mainly related to the most important redeveloped models in
2021, being Netherlands mortgages, Germany mortgages and the models in Belgium.
Additional information on macroeconomic scenarios is included in the section ‘Macro-economic scenarios and
sensitivity analysis of key sources of estimation uncertainty’.
Credit risk
ING Group Annual Report 2021 on Form 20-F
196
Changes in gross carrying amounts and loan loss provisions (*)
1, 2
in EUR million
12-month ECL (Stage 1)
Lifetime ECL not credit
impaired (Stage 2)
Lifetime ECL credit impaired
(Stage 3)
Total
2021
Gross
carrying
amount
Provisions
Gross
carrying
amount
Provisions
Gross
carrying
amount
Provisions
Gross
carrying
amount
Provisions
Opening balance
Transfer into 12-month ECL (Stage 1)
-14,322
-279
-835
-54
-0
-313
Transfer into lifetime ECL not credit impaired (Stage 2)
-19,737
-32
-800
-75
-0
Transfer into lifetime ECL credit impaired (Stage 3)
-2,166
-13
-1,589
-96
-0
Net remeasurement of loan loss provisions
-130
-228
New financial assets originated or purchased
Financial assets that have been derecognised
-125,819
-73
-11,935
-104
-1,898
-237
-139,652
-414
Net drawdowns and repayments
-29,781
-2,527
-694
-33,002
Changes in models/risk parameters
Increase in loan loss provisions
-67
-460
Write-offs
-854
-854
-854
-854
Recoveries of amounts previously written off
Foreign exchange and other movements
-13
-125
-138
Closing balance
1 Stage 3 Lifetime credit impaired provision includes €
2 The addition to the loan provision (in the consolidated statement of profit or loss) amounts to €
restructured financial assets.
Credit risk
ING Group Annual Report 2021 on Form 20-F
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Changes in gross carrying amounts and loan loss provisions (*)
3
in EUR million
12-month ECL (Stage 1)
2
Lifetime ECL not credit
impaired (Stage 2)
2
Lifetime ECL credit impaired
(Stage 3)
1
Total
2020
Gross
carrying
amount
Provisions
Gross
carrying
amount
Provisions
Gross
carrying
amount
Provisions
Gross
carrying
amount
Provisions
Opening balance
Transfer into 12-month ECL (Stage 1)
-8,899
-200
-240
-18
0
-194
Transfer into lifetime ECL not credit impaired (Stage 2)
-39,093
-76
-509
-57
0
Transfer into lifetime ECL credit impaired (Stage 3)
-3,592
-30
-1,879
-163
0
Net remeasurement of loan loss provisions
0
0
0
0
New financial assets originated or purchased
0
0
0
0
Financial assets that have been derecognised
-116,035
-85
-6,987
-107
-897
-236
-123,919
-428
Net drawdowns and repayments
0
-1,043
0
-181
0
0
Changes in models/risk parameters
0
0
0
0
0
0
Increase in loan loss provisions
0
0
0
0
Write-offs
0
0
0
0
-1,200
-1,200
-1,200
-1,200
Recoveries of amounts previously written off
0
0
0
0
0
0
Foreign exchange and other movements
0
-28
0
-42
0
-226
0
-297
Closing balance
1 Stage 3 Lifetime credit impaired provision includes €
2 Prior year numbers adjusted reflecting model adjustment in residential mortgages Netherlands.
3 The addition to the loan provision (in the consolidated statement of profit or loss) amounts to €
-4
restructured financial assets.
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Exposure per stage, coverage ratio and stage ratio’s
2
in EUR million
2021
2020
Balance sheet
Gross Carrying
Amount
Allowances for
credit losses
Coverage ratio
Stage Ratio
Gross Carrying
Amount
Allowances for
credit losses
Coverage ratio
Stage Ratio
Loans and advances to Banks (including Central Banks)
Stage 1
100%
100%
Stage 2
2.0%
2.0%
Stage 3
Loans and advances to Customers
0.8%
1.0%
of which: Residential mortgages
0.2%
0.2%
Stage 1
96%
95%
Stage 2
1.5%
3%
1.4%
3%
Stage 3
10.3%
1%
9.0%
1%
Of which: Consumer Lending (excl. Residential mortgages)
4.3%
4.2%
Stage 1
0.8%
88%
0.7%
87%
Stage 2
13.8%
8%
12.1%
9%
Stage 3
67.9%
4%
55.9%
4%
Of which: Loans to public authorities
0.1%
0.1%
Stage 1
97%
98%
Stage 2
1.5%
2%
1.0%
1%
Stage 3
5.1%
1%
5.1%
Of which: Corporate Lending
1.3%
1.6%
Stage 1
0.1%
87%
0.1%
82%
Stage 2
1.8%
11%
2.6%
15%
Stage 3
39.0%
3%
34.4%
3%
Other IFRS 9 Eligible Financial Instruments
1
Stage 1
95%
95%
Stage 2
0.1%
4%
4%
Stage 3
4.1%
2.2%
Total Gross Carrying Amount (IFRS 9 eligible)
0.6%
0.6%
1 Includes Off balance sheet IFRS 9 eligible guarantees and irrevocable facilities
2 The exposure classification to residential mortgages, consumer lending and corporate lending is aligned to the regulatory definition
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Modification of financial assets
The table below provides the following information:
- Financial assets that were modified during the year (i.e. qualified as forborne) while they had a loss allowance
measured at an amount equal to lifetime ECL.
- Financial assets that were reclassified to stage 1 during the period.
Financial assets modified (*)
in EUR million
2021
2020
Financial assets modified during the period
Amortised cost before modification
Net modification results
-47
-144
Financial assets modified since initial recognition
Gross carrying amount at 31 December of financial assets for which loss allowance has changed to 12-
month measurement during the period
Modifications that have been provided in 2020 and 2021 under general payment moratoria (payment holidays)
are not included in this analysis. Refer to ‘Payment holidays’, above, for details.
Macroeconomic scenarios and sensitivity analysis of key sources of estimation uncertainty (*)
Methodology (*)
Our methodology in relation to the adoption and generation of macroeconomic scenarios is described in this
section. We continue to follow this methodology in generating our probability-weighted ECL, with consideration
of alternative scenarios and management adjustments supplementing this ECL where, in management's opinion,
the consensus forecast does not fully capture the extent of recent credit or economic events. The
macroeconomic scenarios are applicable to the whole ING portfolio in the scope of IFRS 9 ECLs.
The IFRS 9 standard, with its inherent complexities and potential impact on the carrying amounts of our assets
and liabilities, represents a key source of estimation uncertainty. In particular, ING’s reportable ECL numbers are
most sensitive to the forward-looking macroeconomic forecasts used as model inputs, the probability-weights
applied to each of the three scenarios, and the criteria for identifying a significant increase in credit risk. As such,
these crucial components require consultation and management judgement, and are subject to extensive
governance.
Baseline scenario (*)
As a baseline for IFRS 9, ING has adopted a market-neutral view combining consensus forecasts for economic
variables (GDP, unemployment) with market forwards (for interest rates, exchange rates and oil prices). The
Oxford Economics’ Global Economic Model (OEGEM) is used to complement the consensus with consistent
projections for variables for which there are no consensus estimates available (most notably house prices and –
for some countries - unemployment), to generate alternative scenarios, to convert annual consensus information
to a quarterly frequency and to ensure general consistency of the scenarios. As the baseline scenario is consistent
with the consensus view it can be considered as free from any bias.
The relevance and selection of macroeconomic variables is defined by the ECL models under credit risk model
governance. The scenarios are reviewed and challenged by two panels. The first panel consists of economic
experts from Global Markets Research and risk and modelling specialists, while the second panel consists of
relevant senior managers.
Alternative scenarios and probability weights (*)
Two alternative scenarios are taken into account; an upside and a downside scenario. The alternative scenarios
have technical characteristics as they are based on the forecast errors of the OEGEM.
To understand the baseline level of uncertainty around any forecast, Oxford Economics keeps track of all its
forecast errors of the past 20 years. The distribution of forecast errors for GDP, unemployment, house prices and
share prices is applied to the baseline forecast creating a broad range of alternative outcomes. In addition, to
understand the balance of risks facing the economy in an unbiased way, Oxford Economics runs a survey with
respondents from around the world and across a broad range of industries. In this survey the respondents put
forward their views of key risks. Following the survey results, the distribution of forecast errors (that is being
used for determining the scenarios) may be skewed.
For the downside scenario, ING has chosen for the 90th percentile of that distribution because this corresponds
with the way risk management earnings-at-risk is defined within the Group. The upside scenario is represented
by the 10th percentile of the distribution. The applicable percentiles of the distribution imply a 20% probability
for each alternative scenario. Consequently, the baseline scenario has a 60% probability weighting. Please note
that, given their technical nature, the downside and upside scenarios are not based on an explicit specific
narrative.
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Macroeconomic scenarios applied (*)
The loan loss provisions are based on the December 2021 consensus forecasts.
Baseline assumptions (*)
The general picture that the consensus conveys is that supply chain disruption, elevated energy prices as well as
covid related mobility restrictions will fade in the course of 2022. While slowing, the economic recovery
continues in the period 2022-2024 and inflation peaks in 2021-2022. The monetary policy stance in the US and
the eurozone is expected to become gradually less loose. However, with global monetary conditions remaining
loose, housing markets remain overall well supported but the rate of increase of house prices is expected to
decrease in most markets over the forecast period.
The December 2021 consensus expects global output (ING definition), after a strong rebound in 2021 of
%, to
continue to recover. For 2022, a growth rate of
% is being anticipated which is expected to level off to an at
or below
% growth rate for the years thereafter.
Eurozone GDP has reached again its pre-pandemic level in Q4 2021. As for the US, economic momentum in the
eurozone is seen gradually normalising after the strong rebound in 2021. Inflationary pressures, supply-side
disruptions and a challenging health situation weigh on the outlook.
Elsewhere in Europe, the consensus sees economic growth for Poland in 2022 at
%, below the rate of
economic growth in 2021 (
%). For the years thereafter some slowing down to
% (2023) and
% (2024) is
expected. For Turkey, after strong economic performance in 2021 (
%), economic growth is expected to
decrease to at or around
% in 2022-2024.
While already running above pre-pandemic levels again, demand in the US economy remains resilient.
Consumers may spend down excess savings generated during the episodes of pandemic-related uncertainty. This,
together with robust income growth driven by a resilient jobs market should provide support to domestic
demand. Elevated job openings, hirings, and quits point to sturdy labour market fundamentals and the consensus
expects the labour market to tighten further in 2022 and 2023. However, reduced supply of inputs caused by
disruption to global supply chains and increased inflation are weighing on economic activity. As a result, the
consensus expects the growth rate of the US economy to level off from
% in 2021 to
% in 2022 and
%
or below in 2023-2024.
The consensus expects GDP growth for China to be in a
% range in 2022-2024, down from a strong
rebound of
% in 2021. The slowdown reflects the government’s relatively tight regulatory and credit stance
regarding real estate developers and measures to rein in house price increases and mortgage approvals slowing
down real estate investment.
In Australia, economic growth is expected to strengthen in the course of 2022. The consensus sees economic
growth slowing to at or below
% in 2023 and 2024 after expanding by
% in 2022.
When compared to the December 2020 consensus forecast, used for the 2020 Annual Report, the December
2021 forecast assumes a stronger economic recovery. Global GDP is expected to increase by
% in 2021
(compared to
% assumed before) and
% in 2022 (
% assumed before). This upward adjustment follows
on from a more effective than expected roll-out of vaccination programs, higher than assumed fiscal stimulus and
generally better than expected realizations.
Alternative scenarios and risks (*)
Although vaccination against Covid-19 has progressed swiftly in many countries, uncertainty surrounding the
forecasts remains larger than usual. This reflects continued uncertainty around the development and impact of
the pandemic. The pandemic could worsen (again) as, given globally still low rates of vaccination, the emergence
of new, possibly more virulent, variants cannot be excluded.
To reflect the general increase of uncertainty surrounding the forecasts, the dispersion of the alternative
scenarios was widened in 2020. Specifically, the forecast bandwidths projected for the end of the forecast
horizon has been applied to the near-term as well. As the forecast-error distributions widen over time, this
means that the distributions became wider in the near-term and thus allow for a wider range of possible
outcomes. Meanwhile, at the end of the scenario horizon they remained unchanged and are hence comparable
to scenarios generated prior to the pandemic.
In the scenarios applied at year end 2021 the above-mentioned near-term dispersion has been halved, following
Oxford Economics’ research showing that the harm from lockdowns has halved from what it was in the first half
of 2020. The downward skew following on from the outcomes of Oxford Economics’ Global Risk Survey has been
maintained. As a result of this, the near-term dispersion of the forward-looking distributions (from which the
alternative scenarios are derived) remains larger than in normal times, but it now also reflects the adaptability of
economies to the pandemic.
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The upside scenario – though technical in nature – implies, for most countries, a quick return of output to its pre-
coronavirus baseline forecast and more positive medium-term prospects than envisaged in the baseline scenario.
In this scenario unemployment rates quickly fall back from their peaks and reach new lows in the mid-2020s.
The downside scenario, while being equally technical in nature, results in a renewed global downturn in the near-
term. The downside scenario reflects the risk of the coronavirus pandemic remaining a drag on the global
economy, if new highly transmissible and more virulent variants (than Omicron) result in renewed restrictions.
The subsequent recovery would be more sluggish, as the combination of persistent restrictions, increased risk
aversion and long-term scarring weigh heavily on the global economy. The downside scenario also captures the
risks of supply chain disruptions and higher inflation hampering economic growth.
Management adjustments applied this year (*)
In times of volatility and uncertainty where portfolio quality and the economic environment are changing rapidly,
models alone may not be able to accurately predict losses. In these cases, management adjustments can be
applied to appropriately reflect ECL. Management adjustments can also be applied where the impact of the
updated macroeconomic scenarios is over- or under-estimated by the IFRS 9 models.
ING has internal governance frameworks and controls in place to assess the appropriateness of all management
adjustments.
Management adjustments to ECL models (*)
in EUR million
2021
2020
Model time lag overlay
Economic sector based adjustments
Payment holiday adjustments
Reserve Based Lending adjustment
Mortgage portfolio adjustment
Other Post Model Adjustments
Total management adjustments
An economic sector-based management adjustment of €
delays in defaults occurring in the Covid-19 related crisis, mainly as a result of government support programmes,
while GDP growth forecasts as well as unemployment rates and house prices improved over 2021 and which
triggered releases of the model based provisions. As it is expected that additional defaults as a result of the
Covid-19 crisis will still come in, especially in certain sectors where a significant change to the business models is
observed, a sector-based management adjustment was calculated. In determining the sector-based management
adjustment, a heatmap approach was used to adjust the probability of default for sectors where businesses are
significantly impacted by the pandemic. Refer also to the section ‘Covid-19 sensitive sectors’. The Acquisition
Finance portfolio is also in scope of the sector based management adjustment, given the highly leveraged nature
of the product.
The economic sector-based management adjustment replaced the time lag overlay of €
recognised as at 31 December 2020 and which was calculated using a scenario with a time lag between GDP
growth forecasts deteriorating and defaults occurring, but did not differentiate between sectors. Also the
management adjustment that was recognised in 2020 for the Reserved Based Lending book was released in
2021, mainly as result of increased oil prices.
As mentioned earlier, per the guidance from EBA that expired on 30 September 2020, Covid-19 related payment
holidays granted have not automatically been classified as forbearance, and hence, have not automatically
triggered recognition of lifetime ECL in Stage 2. Payment holidays have also been granted in certain countries in
2021, though to a much lesser extent than in 2020. Looking forward, it is expected that the phasing out of all the
support measures in 2022 could lead to more insolvencies and unemployment. This could lead to more clients
getting into financial difficulties and to higher levels of defaults. To the extent ING believes that this elevated risk
is not yet covered in the IFRS 9 models, a management adjustment has been recognised. As at 31 December 2021
this management adjustment is reported in Retail Banking in Belgium, Italy and Australia. As many payment
holiday programs have already expired, this management adjustment has decreased to €
December 2021 coming from €
ECL of mortgage portfolios determined by the models continued to decrease rapidly during 2021, driven by
significant increase of house prices in various countries. Management adjustments of €
mainly in stage 2 and 3, have been recognised in ING Netherlands, Belgium, Germany and Australia to maintain
an appropriate level of ECL and reflecting a potential impact of higher inflation and rates on clients’ ability to pay
and a potential impact of market uncertainty on the recovery value of residential real estate. The management
adjustment for the Netherlands mortgage portfolio was determined by developing three alternative
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ING Group Annual Report 2021 on Form 20-F
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macroeconomic forecast scenarios, in addition to the consensus base, up- and down-scenarios, that reflect a
correction in the house prices in the next 3 years bringing it back in line with the historical growth rate. For other
countries, management adjustments were determined by calculating the impact of lower house prices on LTVs
and LGDs.
Other Post Model Adjustments mainly relate to the impact of model redevelopment or recalibration and periodic
model assessment procedures that have not been incorporated in the ECL models yet. These result from both
regular model maintenance and ING’s multiyear program to update ECL models for the new definition of default.
These adjustments will be removed once updates to the models have been implemented.
Analysis on sensitivity (*)
The table below presents the analysis on the sensitivity of key forward-looking macroeconomic inputs used in the
ECL collective-assessment modelling process and the probability-weights applied to each of the three scenarios.
The countries included in the analysis are the most significant geographic regions, in terms of both gross
contribution to reportable ECL, and sensitivity of ECL to forward-looking macroeconomics. Accordingly, ING
considers these portfolios to present the most significant risk of resulting in a material adjustment to the carrying
amount of financial assets within the next financial year. ING also observes that, in general, the Wholesale
Banking business is more sensitive to the impact of forward-looking macroeconomic scenarios.
The purpose of the sensitivity analysis is to enable the reader to understand the extent of the impact from the
upside and downside scenario on model-based reportable ECL. The table does not include any management
adjustments, except for the overlay for time lag in defaults of €
sector based management adjustment as per 31 December 2021 is not included in the table, which mainly
explains the decreases in reportable amounts.
In the table below the Real GDP is presented in percentage year-on-year change, the unemployment in
percentage of total labour force and the house price index (HPI) in percentage year-on year change.
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Sensitivity analysis as at December 2021 (*)
2022
2023
2024
Un-weighted
ECL (Eur mln)
Probability-
weighting
Reportable ECL
(Eur mln)
1
Netherlands
Upside scenario
Real GDP
20%
Unemployment
HPI
Baseline Scenario
Real GDP
60%
Unemployment
HPI
Downside scenario
Real GDP
-1.5
20%
Unemployment
HPI
-7.7
Germany
Upside scenario
Real GDP
20%
Unemployment
HPI
Baseline Scenario
Real GDP
60%
Unemployment
HPI
Downside scenario
Real GDP
-0.6
20%
Unemployment
HPI
-2.1
Belgium
Upside scenario
Real GDP
20%
Unemployment
HPI
Baseline Scenario
Real GDP
60%
Unemployment
HPI
Downside scenario
Real GDP
-0.4
20%
Unemployment
HPI
United States
Upside scenario
Real GDP
20%
Unemployment
HPI
Baseline Scenario
Real GDP
60%
Unemployment
HPI
Downside scenario
Real GDP
-0.7
20%
Unemployment
HPI
-3.2
-3.0
1 Excluding management adjustments.
Sensitivity analysis as at December 2020 (*)
2021
2022
2023
Un-weighted
ECL (Eur mln)
Probability-
weighting
Reportable ECL
(Eur mln)
1
Netherlands
Upside scenario
Real GDP
20%
Unemployment
HPI
Baseline Scenario
Real GDP
60%
Unemployment
HPI
-1.9
-1.6
Downside scenario
Real GDP
-4.9
20%
Unemployment
HPI
-12.3
-11.0
Germany
Upside scenario
Real GDP
20%
Unemployment
HPI
Baseline Scenario
Real GDP
60%
Unemployment
HPI
Downside scenario
Real GDP
-2.4
20%
Unemployment
HPI
-3.5
-0.9
Belgium
Upside scenario
Real GDP
20%
Unemployment
HPI
-0.2
Baseline Scenario
Real GDP
60%
Unemployment
HPI
-1.7
Downside scenario
Real GDP
-0.4
20%
Unemployment
HPI
-3.6
United States
Upside scenario
Real GDP
20%
Unemployment
HPI
Baseline Scenario
Real GDP
60%
Unemployment
HPI
Downside scenario
Real GDP
-6.3
20%
Unemployment
HPI
-1.9
-2.3
1 Sensitivity does only include the effect of time lag overlay, other management adjustments are excluded.
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ING Group Annual Report 2021 on Form 20-F
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When compared to the sensitivity analysis of 2020 the macroeconomic inputs for 2021 and 2022 are more
favourable, as at that time expectations around the possible consequences of the spread of the coronavirus were
more pessimistic, especially with regard to house prices and the unemployment rates. The macroeconomic
inputs used in the 2021 sensitivity analysis reflect that, after declining sharply in 2020, a strong bounce back in
macro-economic forecast has been realised in 2021 and is to a lesser extent also expected for 2022. Furthermore
the widened dispersion around upside and downside scenarios in 2021 is half of the size of that in 2020,
reflecting continuing but decreased short term uncertainty related to the impact of Covid-19 compared to a year
ago.
The decrease in reportable ECL compared to 2020 is mainly caused the €
m Model Time lag Overlay that was
included in the model ECL amounts as per December 2020, while current comparable Economic Sector based
management adjustment is not included in the December 2021 model ECL amounts. This due to the
improvement of the methodology applied to determine the adjustment, which is now recognised in addition to
the model ECL, and better reflects that the uncertainty is more prominent in specific sectors.
While the table above does give a high-level indication of the sensitivity of the outputs to the different scenarios,
it does not provide insight into the interdependencies and correlations between different macroeconomic
variable inputs. On total ING level, the unweighted ECL for all collective provisioned clients in the upside scenario
was €
to €
adjustments). This reconciles as follows to the reported ECL’s:
Reconciliation of model (reportable) ECL to total ECL (*)
in EUR million
2021
2020
Total model ECL*
ECL from individually assessed impairments
ECL from management adjustments**
Total ECL
* The prior period has been updated to improve consistency and comparability
** The overlay of €
m as per 2020 is included in Total model ECL.
Criteria for identifying a significant increase in credit risk (SICR) (*)
All assets and off-balance sheet items that are in scope of IFRS 9 impairment and which are subject to collective
ECL assessment are allocated a 12-month ECL if deemed to belong in Stage 1, or a lifetime ECL if deemed to
belong in Stages 2 and 3. An asset belongs in Stage 2 if it is considered to have experienced a significant increase
in credit risk since initial origination or purchase. ING considers the credit risk of an asset to have significantly
increased when either a threshold for absolute change in lifetime probability of default (PD) or a relative change
in lifetime PD is hit.
It should be noted that the lifetime PD thresholds are not the only drivers of stage allocation. An asset can also
change stages as a result of other triggers, such as having over 30 days arrears, being on a Watch List or being
forborne. Refer to section 1.6.8 of Note 1 ‘Basis of preparation and significant accounting policies’ for an
exhaustive list. Furthermore, this analysis is rudimentary in a sense that other parameters would change when an
asset changes stages.
Absolute lifetime PD threshold
The absolute threshold is a fixed value calibrated per portfolio/segment and provides a fixed threshold that, if
exceeded by the difference between lifetime PD at reporting date and lifetime PD at origination, triggers Stage 2
classification. The thresholds for the absolute change in lifetime PD vary between 75bps for Retail portfolios,
100bps for Wholesale and 250bps for SMEs, based on the characteristics of the specific portfolio. ING is in the
process of refining the thresholds on a portfolio level, which has been implemented for a few Turkish, Polish and
German models and resulting in deviating absolute lifetime PD thresholds.
Relative Lifetime PD threshold
The relative threshold defines a relative increase of the lifetime PD beyond which a given facility is classified in
Stage 2 because of significant increase in credit risk. The relative threshold is dependent on the individual PD
assigned to each facility at the moment of origination and a scaling factor calibrated in the model development
phase that is optimised depending on the observed default rates and overall average riskiness of the portfolio.
While the scaling factor is associated with a whole portfolio/segment, the PD at origination is facility-specific and,
in this sense, the relative threshold may differ facility by facility.
Ultimately the relative threshold provides a criterion to assess whether the ratio (i.e. increase) between lifetime
PD at reporting date and lifetime PD at origination date is deemed a significant increase in credit risk. If the
threshold is breached, SICR is identified and Stage 2 is assigned to the given facility.
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The threshold for the relative change in lifetime PD is inversely correlated with the PD at origination; the higher
the PD at origination, the lower the threshold. The logic behind this is to allow facilities originated in very
favourable ratings to downgrade for longer without the need of a Stage 2 classification. In fact, it is likely that
said facilities will still be in favourable ratings even after a downgrade of a few notches. On the contrary, facilities
originated in already unfavourable ratings grades are riskier and even a single-notch downgrade might represent
a significant increase in credit risk and thus a tighter threshold will be in place. Still, the relative threshold is
relatively sensitive for investment grade assets while the absolute threshold primarily affects non-investment
grade assets.
In the table below the average increase in PD at origination needed to be classified in Stage 2 is reported, taking
into account the PD at origination of the facilities included in each combination of asset class and rating quality.
In terms of rating quality, assets are divided into “Investment grade” and “Non-investment grade” facilities.
Rating 18 and 19 are not included in the table since facilities are not originated in these ratings and they
constitute a staging trigger of their own (i.e. if a facility is ever to reach rating 18 or 19 at reporting date, it is
classified in Stage 2). In the table values are weighted by IFRS 9 exposure and shown for both year-end 2020 and
year end 2021.
In order to represent the thresholds as a ratio (i.e. how much should the PD at origination increase in relative
terms to trigger Stage 2 classification) the absolute threshold is recalculated as a relative threshold for disclosure
purposes. Since breaching only relative or absolute threshold triggers Stage 2 classification, the minimum
between the relative and recalculated absolute threshold is taken as value of reference for each facility.
Quantitative SICR thresholds (*)
2021
2020
Average threshold ratio
Investment
grade (rating
grade 1-10)
Non-
investment
grade (rating
grade 11-17)
Investment
grade (rating
grade 1-10)
Non-
investment
grade (rating
grade 11-17)
Asset class category
Mortgages
Consumer Lending
Business Lending
Governments and Fin. Institutions
Other Wholesale Banking
As it is apparent from the disclosures above, as per ING’s methodology, the threshold is tighter the higher the
riskiness at origination of the assets, illustrated by the noticeable difference between the average threshold
applied to investment grade facilities and non-investment grade facilities. In addition to the above, asset classes
having usually more favourable ratings at origination (i.e. Central Governments and Financial Institutions) show
an average threshold higher than the rest in investment grade assets. Changes in the threshold averages
between the two reporting years can be caused by model updates (the staging parameters have been
recalibrated) and/ or by changes in portfolio composition.
Sensitivity of ECL to PD lifetime PD thresholds
The setting of PD threshold bandings requires management judgement and is a key source of estimation
uncertainty. On Group level, the total ECL collective-assessment for performing assets is €
€
to these PD thresholds bandings, analysis was run on all collectively-assessed assets, which assumed all assets
(Stage 1 and 2) were below the threshold and apportioned a 12-month ECL. On the same asset base, analysis was
run which assumed all performing assets were above the threshold and apportioned a lifetime ECL. This gave rise
to hypothetical collective-assessment ECLs of €
€
were kept equal.
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ING Group Annual Report 2021 on Form 20-F
206
Market risk
Introduction (*)
Market risk is the risk that movements in market variables, such as interest rates, equity prices, foreign exchange
rates, credit spreads and real estate prices negatively impact the bank’s earnings, capital, market value or
liquidity position. Market risk either arises through positions in banking books or trading books. The banking
book positions are intended to be held for the long term (or until maturity) or for the purpose of hedging other
banking book positions. The trading book positions are typically held with the intention of short-term trading or
to hedge other positions in the trading book. This means that financial instruments in the trading books should
be free of trade restrictions. Policies and processes are in place to monitor the inclusion of positions in either the
trading or banking book as well as to monitor the transfer of risk between the trading and banking books.
ING recognises the importance of sound market risk management and bases its market risk management
framework on the need to identify, assess, control and manage market risks. The approach consists of a cycle of
five recurring activities: risk identification, risk assessment, risk control, risk monitoring and risk reporting.
(*)
◾
Risk identification is a joint effort of the first and second lines of defence. The goal of risk identification is
to detect potential new risks and any changes in known risks. See ‘Risk Governance’ for more on our
three lines of defence governance model;
◾
Identified risks are assessed and measured by means of various risk metrics to determine the importance
of the risk to ING and subsequently to identify the control measures needed;
◾
Risk control measures used by ING include policies, procedures, minimum standards, limit frameworks,
buffers and stress tests;
◾
Risk monitoring occurs to check if the implemented risk controls are executed, complied with across the
organisation, and are effective; and
◾
Market risk management results and findings are reported to the necessary governing departments and
approval bodies.
Governance (*)
A governance framework has been established defining specific roles and responsibilities of business
management units, market risk management units, and internal approval bodies per activity.
Supervision of market risk falls under the responsibility of the EB/MBB and is delegated to the ALCO function,
where ALCO Bank is the highest approval authority and sets the market risk appetite. ALCO Bank monitors ING’s
adherence to the risk appetite for market risk and sets additional limits where appropriate. These limits are
cascaded through the organisation through lower level ALCOs. This ALCO structure facilitates top-down risk
management, limit setting, and the monitoring and control of market risk.
The monitoring and control of market risk is the responsibility of the Financial Risk (FR) department and Financial
Institutions – Financial Markets (FI-FM) Risk. FR and FI-FM Risk are the designated departments of the second line
of defence that report to the CRO function and are responsible for the design and execution of the bank’s market
risk and counterparty credit risk management functions in support of the ALCO function. FR focuses on the
market risks in the banking books, whereas FI-FM Risk is responsible for counterparty credit risk and market risks
resulting from the Financial Markets trading books. FR and FI-FM Risk are responsible for determining adequate
policies and procedures for actively managing market risk in the banking and trading books and for monitoring
ING’s compliance with these guidelines.
FR and FI-FM Risk also maintain a limit framework in line with ING’s Risk Appetite Framework. The businesses are
responsible for adhering to the limits that are ultimately approved by the ALCO Bank. Limit excesses are reported
to senior management on a timely basis and the business is required to take appropriate actions based on
management decisions. To adhere to the established limit framework, ING implements hedging and risk
mitigation strategies that range from the use of traditional market instruments, such as interest rate swaps, to
more sophisticated hedging strategies to address a combination of risk factors arising at the portfolio level.
The organisational structure facilitates top-down risk management by recognising that risk taking and risk
management to a large extent occur at the regional/local level. Bottom-up reporting from regional/local units to
head office units allows each management level to fully assess the market risks relevant at the respective levels.
Several committees govern communication between the parties involved in market risk management, such as
MRMC (reporting to ALCO Bank) and CTRC (reporting to GCTP). The Market Risk Model Committee (MRMC) is the
dedicated authority within ING for the approval of all trading risk, counterparty credit risk and banking risk
models, methodologies and related parameters. The Trading Pricing Model Committee (TPMC) approves pricing
models for trading and banking books. Financial Risk and FI-FM Risk departments provide systematic risk
reporting to the EB and MBB, the ALCO Bank and the senior executive management of related business functions.
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The Trading and Banking Book Boundary Policy governs the boundary between trading books and banking books.
It defines the activities ING considers to be trading according to a regulatory definition and for own funds
requirement purposes. Trading activity is systematically reviewed and positions are assessed against the
mandates jointly by the first and second lines of defence. As specified in the framework, the transfer of risk or
the transfer of positions between banking and trading books is in principle not allowed. In exceptional cases
when a re-designation is deemed necessary, the re-designation should be approved by ALCO. The boundary
requirements for banking book and trading book instruments and risk transfer are detailed in the Trading and
Banking Book Boundary Policy.
The following sections elaborate on the various elements of the risk management framework for:
◾
Market risk economic capital (trading and banking books);
◾
Market risks in banking books; and
◾
Market risks in trading books.
Market risk economic capital (trading and banking books)
Economic capital for market risk is the economic capital necessary to withstand unexpected value movements
due to changes in market variables and model risk.
Economic capital for market risk is calculated for exposures both in trading portfolios and banking portfolios and
includes interest rate risk, credit spread risk, equity price risk, foreign exchange rate risk, customer behaviour
risk, real estate risk, model risks and pension risk. Economic capital for market risk is calculated using internally
developed methodologies with a 99.9% confidence level and a horizon of one year.
For the trading books and the linear interest rate risk and equity investments in the banking books, the Value at
Risk (VaR) is taken as a starting point for the economic capital calculations for market risk. The VaR is measured
at a 99% confidence level with a one-day holding period.
To arrive at the economic capital for market risk, a simulation-based model is used which includes scaling to the
required confidence level and holding period. In determining this scaling factor, other factors are also taken into
account like the occurrence of large market movements (events).
Embedded options, e.g. the prepayment option and offered rate option in mortgages in the banking books, result
in non-linear interest rate risk in the banking books. Embedded options are economically hedged using a delta-
hedging methodology, leaving the mortgage portfolio exposed to convexity risk, volatility risk and model risk. For
the calculation of economic capital for this non-linear interest rate risk, ING performs a Monte Carlo simulation.
While aggregating the different economic capital market risk figures for the different portfolios, diversification
benefits (based on stressed correlations) are taken into account as it is not expected that all extreme market
movements will appear at the same moment.
Market risk in banking books (*)
ING makes a distinction between the trading and banking (non-trading) books. Positions in banking books
originate from the market risks inherent in commercial products that are sold to clients, Group Treasury
exposures, and from the investment of our own funds (core capital). Both the commercial products and the
products used to hedge market risk exposures in these products are intended to be held until maturity, or at
least for the long term.
Risk transfer (*)
An important element of the management of market risks in the banking book is the risk transfer process. In this
process the interest rate, FX, funding and liquidity risks are transferred from the commercial books through
matched funding to Group Treasury, where it is centrally managed. The scheme below presents the transfer and
management process of market risks in the banking books:
Market risk
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Risk measurement (*)
The main concepts and metrics used for measuring market risk in the banking book are described below per risk
type.
Interest rate risk in banking book (*)
Interest rate risk in the banking book is defined as the exposure of a bank’s earnings, capital, and market value to
adverse movements in interest rates originated from positions in the banking book.
Governance (*)
The management of interest rate risk follows the Interest Rate Risk in the Banking Book (IRRBB) framework as
approved by ALCO Bank. This framework describes roles, responsibilities, risk metrics, and the policies and
procedures related to interest rate risk management. Furthermore ALCO Bank sets the risk appetite for interest
rate risk, which is then translated into limits for the interest rate risk metrics.
As a result of this framework, ING centralises interest rate risk management from commercial books (that
capture the products sold to clients) to globally managed interest rate risk books. This enables a clear
demarcation between commercial business results and results based on unhedged interest rate positions.
ING distinguishes between three types of activities that generate interest rate risk in the banking book:
◾
Investment of own funds;
◾
Commercial business; and
◾
Group Treasury exposures including strategic interest rate positions.
Group Treasury is responsible for managing the investment of own funds (core capital). Capital is invested for
longer periods to keep earnings stable. The main objective is to maximise the economic value of the book and to
generate adequate and stable annual earnings within the risk appetite boundaries set by ALCO Bank.
Commercial activities can result in linear interest rate risk, for example, when re-pricing causes the tenors of
assets to differ from those of liabilities. Also, interest rate risk can arise from customer behaviour and/or
convexity risk, depending on the nature of the underlying product characteristics. Customer behaviour risk is
defined as the potential future value loss due to deviations in the actual behaviour of clients versus the modelled
behaviour towards the embedded options in commercial products. General sources of customer behaviour risk,
amongst others, include the state of the economy, competition, changes in regulation, legislation and tax regime,
Market risk
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and developments in the housing market. Since these risk factors cannot be (fully) mitigated, ING holds capital to
be able to absorb possible losses as a result of unforeseen customer behaviour.
From an interest rate risk perspective, commercial activities can typically be divided into three main product
types: savings and demand deposits, mortgages, and loans.
◾
Savings and demand deposits are generally invested to hedge their value and minimise the sensitivity of
the margin to market interest rates. Interest rate risk can arise when there is a lag between savings rate
adjustments and the adjustments experienced through market rates or when market rate changes
cannot be passed on to clients. Interest rate risk is modelled based on the stability of the deposit and the
pass-through rate. This takes account of different elements, such as pricing strategies, volume
developments and the level and shape of the yield curve. Savings volumes are typically assumed to be
relatively stable and not sensitive to rate changes;
◾
Interest rate risk for mortgages arises through prepayment behaviour. In modelling this risk, both
interest rate dependent pre-payments and constant prepayments are considered. Next to the
dependence on interest rates, modelled prepayments may include other effects such as loan-to-value,
seasonality and the reset date of the loan. In addition, the interest sensitivity of embedded offered rate
options is considered; and
◾
Wholesale Banking loans typically do not experience interest rate dependent prepayment behaviour;
these portfolios are match-funded taking the constant prepayment model into account. They typically do
not contain significant convexity risk. Wholesale banking loans can have an all-in rate floor or a floor on a
reference rate.
Customer behaviour in relation to mortgages, loans, savings and demand deposits is modelled, based on
extensive research. Per business unit and product type, exposures are typically segmented into different
portfolios based on expected client behaviour. For each of the segments, model parameters for example for the
pass-through rate and customer behaviour are determined based on historical data and expert opinion. Models
are backtested and updated when deemed necessary in an annual procedure. Model parameters and the
resulting risk measures are approved by (local) ALCO.
Linear risk transfers take place from commercial business books to the treasury book (Group Treasury), if
necessary, by using estimations of customer behaviour. The originating commercial business is ultimately
responsible for estimating customer behaviour, leaving convexity risk and (unexpected) customer behaviour risk
with the commercial business. Risk measurement and the risk transfer process take place monthly. However, if
deemed necessary, additional risk transfers can take place, for instance due to volatile markets.
The commercial business manages the convexity risk that is the result of products that contain embedded
options, like mortgages. Here the convexity risk is defined as the optionality effects in the value due to interest
rate changes, excluding the first-order effects. In some cases, convexity risk is transferred from the commercial
books to treasury books using cap/floor contracts.
In the following sections, the interest rate risk exposures in the banking books are presented. ING uses risk
measures based on both an earnings and a value perspective. Net interest income (NII)-at-risk is used to provide
the earnings perspective and the net present value (NPV)-at-risk figures provide the value perspective. Please
note that the expected interest rate risk coming forward from the business is assumed to be linearly hedged but
no additional corrective management actions are taken into account in the NPV-at-Risk measure. In the NII-at-
Risk measure a more dynamic hedging process is taken into account.
During 2021, the following activities related to the risk measurement for IRRBB were performed:
◾
Annual review of the risk appetite for IRRBB includes further enhancement;
◾
More in-depth assessment of sub-risk types such as tenor basis risk, vega optionality risk and a client
behaviour risk earnings and value metrics;
◾
Annual review of the interest rates scenarios used for calculating NII-at-Risk and NPV-at-Risk;
◾
Savings/ current account model updates and prepayment model updates for market developments;
◾
Specific Covid-19 related stress test; and
◾
IRRBB related impact as part of firm-wide inflation risk stress test.
Net interest income (NII) at Risk (*)
The NII-at-Risk measures the impact of changing interest rates on the forecasted net interest income (before tax)
of the banking book, excluding the impacts of credit spread sensitivity and fees. Future projected balance sheet
developments are included in this risk metric.
In its risk management ING monitors the NII-at-Risk under a three-year timeframe. Interest rates are stressed
during the first year versus the prevailing curve, taking gradual changes over the first year. The rate changes
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considered comprise both upward and downward scenarios, as well as parallel (equal movements across the
yield curve) and non-parallel scenarios.
The impact of changing interest rates on ING’s NII is predominantly caused by the following factors:
◾
Change in returns of (re-)investments of client deposits;
◾
Change in deposits client rates (mainly savings), (partially) tracking changes in market interest rates;
◾
Change in funding profile of mortgages, due to less or more expected prepayments;
◾
Higher/Lower returns of (re-)investments of capital investments;
◾
Open interest rate positions, leading to changes in return because of different market rates.
For projecting the change in client deposits rates ING uses a client rate model that describes the relation to
market interest rates and client deposits rates. The model is calibrated under a range of interest rate scenarios.
Per scenario the actual change in client deposits rate may deviate from this calibrated model.
For projecting the change in the funding profile of mortgages ING uses prepayment models for the various
mortgage portfolios.
The NII-at-Risk figures in the tables below reflect a parallel, gradual interest rate movement (“ramped”) under
the assumption of balance sheet developments in line with the dynamic plan with a time horizon of one year.
NII-at-Risk banking books per business - year one (*)
in EUR million
2021
2020
Ramped, unfloored
Ramped, unfloored
parallel
▼
parallel
▲
parallel
▼
parallel
▲
By business
Wholesale Banking
-33
-83
Retail Banking Benelux
-122
-114
Retail Challengers Growth Markets
-93
-52
-14
Corporate Line Banking
-58
-52
Total
-226
-83
EUR ramped is at +/- 100bps in 1 year
USD ramped is at +/- 120bps in 1 year
The NII-at-Risk is primarily driven by the difference in sensitivity of client liabilities, mainly savings, versus the
sensitivity of client assets and investments to rate changes. The investment of own funds only impacts the
earnings sensitivity marginally, as only a relatively small part has to be (re)invested within the one-year horizon.
NII-at-Risk banking book per currency - year one (*)
in EUR million
2021
2020
Ramped, unfloored
Ramped, unfloored
parallel
▼
parallel
▲
parallel
▼
parallel
▲
By currency
Euro
-181
-146
US Dollar
-23
-36
Other
-23
-25
Total
-226
-83
EUR ramped is at +/- 100bps in 1 year
USD ramped is at +/- 120bps in 1 year
Per year-end 2021, the NII is projected to be higher when interest rate rise. In this scenario the one-year (re-)
investment returns are higher than the modelled increase in client deposits rates and modelled extra funding
costs due to higher funding costs for mortgages.
The projected change in NII numbers in the tables above include projected changes in client deposits rates.
Without increasing client deposits rates the NII-at-Risk for the parallel ramped up scenario would be significantly
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higher, meaning that the actual client deposits rate tracking of market interest rates in such scenario is a key
driver in the NII development of the bank.
The change in NII under a declining or upward interest rate scenario are not equal. This is primarily caused by
different expected reactions in prepayment behaviour of mortgages and different pricing developments of
commercial loans and deposits products (mainly savings). This is caused by embedded options, explicit or implicit
pricing floors and other (assumed) pricing factors.
Year-on-year variance analysis (*)
In 2021, interest rates remained at very low levels and for short tenors at even negative levels. Interest rates in
the longer tenors increased towards the end of year. The change in NII sensitivity is driven by balance sheet
developments, specifically in relation to mortgages and savings. The production of mortgages in the longer
tenors in the Eurozone was significant. The increase in funds entrusted volume, the impact of explicit and implicit
floors on savings rates in the Eurozone and savings model updates also had an impact on NII sensitivity. Models
are reviewed and recalibrated annually to reflect actual client behavior accurately. The pre-existing hedges as
executed by Group Treasury were also adjusted during the year. As Group Treasury is included in the Wholesale
Banking risk numbers, this adjustment changed the Wholesale Banking NII-at-Risk. The total NII-at-Risk remains
relatively limited in comparison with ING’s total interest income.
Net Present Value (NPV) at Risk (*)
NPV-at-Risk measures the impact of changing interest rates on the value of the positions in the Banking Book.
This does not include the positive earnings in our commercial books. The NPV-at-Risk is defined as the outcome
of an instantaneous increase or decrease in interest rates from applying currency-specific scenarios. The NPV-at-
Risk asymmetry between the downward and upward shock is mainly caused by convexity risk in the mortgage
and savings portfolio.
The full value impact cannot be directly linked to the financial position or profit or loss account, as fair value
movements in banking books are not necessarily reported through the profit or loss account or through other
comprehensive income (OCI). The changes in value are expected to materialize over time in the profit and loss
account if interest rates develop according to forward rates throughout the remaining maturity of the portfolio.
NPV-at-Risk banking books per business (*)
in EUR million
2021
2020
unfloored
unfloored
parallel
▼
parallel
▲
parallel
▼
parallel
▲
By business
Wholesale Banking
-1,477
-68
Retail Banking Benelux
-953
-202
-1,425
Retail Challengers Growth Markets
-1,111
-506
-17
Corporate Line Banking
-1,712
-1,820
Total
-1,580
-54
-1,125
The prior period has been updated to improve consistency and comparability.
EUR +/- 100bp shock scenario
USD +/- 120bp shock scenario
Year-on-year variance analysis
The change in NPV-at-Risk in segments Retail Benelux and Retail Challengers Growth Markets was more or less
off-set by an opposite NII-at-Risk change for Wholesale Banking. The NPV change for the Retail Business line was
driven by increased production in fixed rate mortgages and the development of the savings and current account
volumes combined with savings model updates. The resulting impact on retail sensitivity was hedged by Group
Treasury in line with the internal ALM practices. The Group Treasury exposure is reported under business line
Wholesale Banking. An important part of the overall NII sensitivity can be attributed to the Corporate Line, in
which core capital is invested strategically.
IBOR transition (*)
Interbank offered rates have been widely used as benchmarks to set interest rates across a broad range of
financial products and contracts. In line with the recommendations from the Financial Stability Board, a
fundamental review of these important interest rates benchmarks has been undertaken. While some interest
benchmarks have been reformed, such as EURIBOR, others such as EONIA and LIBOR have or will be replaced by
risk-free rates (RFR) and discontinued.
The reform of EURIBOR was completed in 2019 and allows for the continued use in both existing and new
contracts. In 2021, the Working Group on Euro Risk-Free Rates completed its work on developing recommended
fallbacks for EURIBOR contracts based on €STR. These recommendations will be used to improve fallback
language in EURIBOR contracts.
Market risk
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EONIA ceased to be published on 3 January 2022, and is succeeded by €STR. EONIA and €STR are both overnight
rates and the spread between them was established and fixed in 2019. ING transitioned nearly all EONIA
dependent products in the course of 2021, with only a limited number utilising the statutory fallback mechanism
put in place by the EU.
GBP, CHF, JPY, and EUR LIBOR rates ceased on 31 December 2021, whereas the most used USD LIBOR tenors will
continue to be published until the end of June 2023 to support legacy products. The USD LIBOR extension was
seen as a welcome step given the range and volume of USD LIBOR contracts and has bought time for the market
to develop and assess the alternatives to USD LIBOR. The use of USD LIBOR for new contracts is (subject to very
limited exceptions) no longer permitted.
During 2021, ING focused on the transition of EONIA and non-USD LIBOR contracts and conducting new business
using the recommended alternatives. This was supported by our investment in and ability to offer a wide range
of products to our clients using alternative rates. In 2022, we will shift our focus to USD LIBOR, and expect to be
able to leverage the experience gained transitioning the other LIBOR rates.
To enable these changes, the financial sector has issued several guidance papers and other initiatives to help
phase in key components of this transition. For example ISDA issued an IBOR fallback supplement to help ensure
clear and agreed fallback rates apply on the discontinuation of key IBORs. For loans, various recommendations
have been made to help drive the inclusion of consistent robust fallback provisions.
Public authorities have also recognised that certain contracts do not contain provisions for any alternatives,
contain inappropriate alternatives, or cannot be renegotiated or amended prior to the expected cessation dates
of the relevant benchmark rates (‘tough legacy’ contracts). In response, the European Commission has
implemented legislation that gives the Commission the power to replace critical benchmarks if their termination
would significantly disrupt or otherwise affect the functioning of the financial markets in the EU. In addition, the
UK government has granted additional powers to the Financial Conduct Authority (FCA) to enable the temporary
publication of a ‘’synthetic’’ LIBOR using a different methodology and inputs. The FCA has used these powers to
ensure 1-, 3- and 6-months GBP and JPY LIBOR settings continue to be available using a “synthetic” methodology
for a limited time to support legacy contracts. The FCA has not yet decided whether it will require the LIBOR
benchmark administrator to publish synthetic USD LIBOR rates after June 2023.
At the beginning of 2021, ING Group had significant exposures to IBORs that either were discontinued at the end
of 2021 or will cease in the future. Due to the discontinuation of these interest rate benchmarks, ING Group, its
customers, and the financial services industry more widely has faced (and is still facing until the IBOR transition is
completed) a number of risks. These risks include legal risks, financial risks, operational risks, and conduct risk.
Legal risks are related to any required changes to documentation for new and existing transactions. Financial
risks (predominantly limited to interest rate risk) as a consequence of changes in the valuation of financial
instruments linked to such benchmarks and declining liquidity may impact a contract directly or the ability to
hedge the risks in that contract. Changes in valuation, interest calculation methodology or documentation may
also result in complaints or litigation. Operational risks due to the requirement to adapt IT systems, trade
reporting infrastructure and operational processes to the new benchmark rates. Conduct risk also plays a
particular role in each benchmark transition. For example, the renegotiation of loan contracts requires active
engagement from both parties or multiple parties in the case of syndicated loans, which is one of the key
challenges and may lead to negotiations and the required contractual updates occurring later than planned and
concentrated in a period close to actual cessation, which has been the case for GBP LIBOR. ING will continue to
reach out to impacted clients in order to best support the relevant timelines and regulatory guidelines.
The ING IBOR programme has a robust governance in place, with progress being tracked by business line steering
committees reporting into a central IBOR steering committee. The programme assesses and coordinates the
actions necessary to manage the required changes to internal processes and systems, including pricing, risk
management, legal documentation, hedge arrangements, as well as the impact on our customers. ING continues
to monitor market developments, with a focus on USD market, to anticipate the impact on the program, our
customers and any related risks.
During 2021, ING transitioned significant part of its non-derivative financial instruments linked to benchmarks
ceasing in 2021 to their designated replacement rates. The total of non-derivative financial assets linked to non-
USD LIBOR are reduced from EUR
derivative financial liabilities linked to non-USD LIBOR reduced from EUR
contracts remaining). The major part of the remaining non-derivative financial instruments (
%) is linked to USD
LIBOR that will cease at the end of June 2023. In addition, ING reduced its committed undrawn credit facilities
linked to non-USD LIBOR from EUR
during 2021. The remaining non-derivative financial instruments linked to non-USD LIBORs will either transition
before the next interest rate reset date with only a limited number making use of synthetic LIBORs. Therefore the
remaining exposure to non-USD LIBORs is expected to reduce further during the first quarter of 2022.
Market risk
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The tables below summarize ING’s approximate exposures by significant benchmark rate, excluding contracts
that will expire before transition is required. For all benchmarks except USD LIBOR the transition deadline has
been taken as 31 December 2021. For USD LIBOR the transition date is 30 June 2023 as USD LIBOR will be
available to support existing contracts until that date. The 31 December 2021 table excludes exposures whose
contractual terms were amended during 2021, including those where transition will occur in 2022 and prior to
the next interest rate reset date, as well as contracts that mature in early 2022 to which no amendment is
required.
Non derivative Financial instruments to transition to alternative benchmarks (*)
in EUR million at 31 December 2021
Financial Assets non-
derivative
Financial Liabilities non-
derivative
Off balance sheet
commitments
Carrying value
Carrying value
Nominal value
By benchmark rate
GBP LIBOR
USD LIBOR
CHF LIBOR
JPY LIBOR
EUR LIBOR
EONIA
Total
Non derivative Financial instruments to transition to alternative benchmarks (*)
in EUR million at 31 December 2020
Financial Assets non-
derivative
Financial Liabilities non-
derivative
Off balance sheet
commitments
Carrying value
Carrying value
Nominal value
By benchmark rate
GBP LIBOR
USD LIBOR
CHF LIBOR
JPY LIBOR
EUR LIBOR
EONIA
Total
Comparatives for non-derivative financial assets and liabilities have been updated to improve consistency and
comparability with the current period disclosure.
ING has also completed the transition of a significant part of its derivative financial instruments linked to
benchmarks ceasing in 2021 to their designated replacement rates. In total, the derivative financial instruments
linked to non-USD LIBOR were reduced from EUR
of derivatives linked to non-USD LIBOR rates were transacted with clearing houses and transitioned through a
standardized exercise to the designated replacement rates in December 2021. For non-centrally cleared
derivatives the main transition occurred using the ISDA IBOR fallback arrangements. The remaining derivative
financial instruments linked to non-USD LIBOR will either be transitioned before the next interest rate reset date
or will make use of synthetic LIBORs. Therefore a rapid drop of the remaining exposures to non-USD LIBORs is
expected at the beginning of the first quarter of 2022.
Derivative Financial instruments to transition to alternative benchmarks (*)
31 December 2021
31 December 2020
in EUR million
Nominal value
Nominal value
By benchmark rate
1
GBP LIBOR
USD LIBOR
CHF LIBOR
JPY LIBOR
EONIA
Total
1 For cross currency swaps all legs of the swap are included that are linked to a main IBOR that is significant to ING Group .
Comparatives have been updated to improve consistency and comparability with the current period disclosure.
ING Group also has exposure to interest rate benchmark reform in respect of its cash collateral balances across
some of its Credit Support Annex agreements. This exposure is not included within the table above. However,
during 2021 ING transitioned those portions of Credit Support Annex agreements linked to benchmarks ceasing
in 2021 to their designated replacement rates.
Given that IBOR reform may have various accounting implications, the International Accounting Standards Board
(IASB) has undertaken a two-phase project:
Market risk
ING Group Annual Report 2021 on Form 20-F
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●
Phase 1 addresses those issues that affect financial reporting before the replacement of an existing
benchmark. Phase 1 amendments to IFRS were issued by the IASB in 2019 and were early adopted by ING
Group in the same year. This allows ING to apply a set of temporary exceptions to continue hedge accounting
even when there is uncertainty about contractual cash flows arising from the reform. Under these temporary
exceptions, interbank offered rates are assumed to continue unaltered for the purposes of hedge accounting
until such time as the uncertainty is resolved.
●
Phase 2 focuses on issues that may affect financial reporting when the existing benchmark rate is reformed
or replaced. Phase 2 amendments to IFRS were issued by the IASB in 2020 and became effective in 2021.
Phase 2 amendments to IFRS relate mainly to accounting for changes in the basis for determining the
contractual cash flows of financial assets and liabilities due to the IBOR reform and impact on hedge
accounting when an existing benchmark rate is reformed or replaced with an alternative risk-free rate. Refer
to section 1.4.1 of Note 1 ‘Basis of preparation and significant accounting policies’ of the financial
statements.
As explained above, Phase 1 and Phase 2 IBOR amendments to IFRS, amongst other changes, provide specific
hedge accounting reliefs that allow hedge accounting relationships to continue when IBOR Reform is ongoing.
Phase 1 reliefs cease to apply when uncertainty arising from IBOR Reform is no longer present with respect to the
timing and amount of the IBOR-based cash flows of the relevant instruments. It is ING Group’s policy to cease to
apply Phase 1 reliefs when the applicable contract (either hedging instrument or hedged item) is actually
modified. During 2021, ING transitioned significant part of its financial instruments (designated in hedge
accounting relationships) linked to benchmarks ceasing in 2021. As a result, for these hedge accounting
relationships the applicable Phase 1 reliefs ceased to apply and Phase 2 became applicable. For USD LIBOR, and
although the administrator of LIBOR confirmed on 5 March 2021 its plans for the cessation of USD LIBOR rates at
the end of June 2023, there is still uncertainty with respect to the timing of the transition as well as the transition
strategy for individual hedged items and/or hedging instruments linked to USD LIBOR. Therefore, for USD LIBOR
financial instruments designated in hedge accounting the applicable Phase 1 reliefs will continue to apply until
the relevant contract is modified. At that point in time, Phase 2 reliefs will become applicable.
Foreign exchange (FX) risk in banking books (*)
FX exposures in banking books result from core banking business activities (business units doing business in
currencies other than their base currency), foreign currency investments in subsidiaries (including realised net
profit and loss), and strategic equity stakes in foreign currencies. The policy regarding these exposures is briefly
explained below.
Governance – Core banking business (*)
Every business unit hedges the FX risk resulting from core banking business activities into its base currency.
Consequently, assets and liabilities are matched in terms of currency.
Governance – FX translation result (*)
ING’s strategy is to protect the CET1 ratio against adverse impact from FX rate fluctuations, whilst limiting the
volatility in the profit and loss account due to this CET1 hedging. Therefore, hedge accounting is applied to the
largest extent possible. Taking this into account, the CET1 ratio hedge can be achieved by deliberately taking
foreign currency positions equal to certain target positions, such that the CET1 capital and risk-weighted assets
are equally sensitive in relative terms to changing FX rates. For a selection of emerging market currencies ING
decided not to enter into foreign currency hedges as allowed under the policy.
Risk profile – FX translation result (*)
The following table presents the currency exposures in the banking books for the most important currencies for
the FX translation result. Positive figures indicate long positions in the respective currency. As a result of the
strategy to hedge the CET1 ratio an open structural FX exposure exists.
In order to measure the sensitivity of the CET1 ratio against FX rate fluctuations, an Historical Value at Risk
approach is used. It measures the drop in the CET1 ratio based on historical FX rates. The impact is taken into
account under the Solvency RAS.
EBA Structural FX Guidelines
The EBA guidelines on structural FX positions become effective in 2022. These guidelines aim to harmonize the
implementation and treatment of structural FX positions, which may be excluded from the calculation of net
open currency positions under CRR article 352(2) subject to permission by the competent authorities. The
implementation of these guidelines is expected to have limited impact on the existing management of structural
FX positions of ING Group and its CET1 Ratio.
Market risk
ING Group Annual Report 2021 on Form 20-F
215
Foreign currency exposures banking books (*)
in EUR million
Foreign Investments
Hedges
Net exposures
2021
2020
2021
2020
2021
2020
US Dollar
1
-99
-10
Pound Sterling
Polish Zloty
-142
-369
Australian Dollar
-2,511
-2,269
Turkish Lira
Chinese Yuan
-107
Russian Rouble
-174
-126
Other currency
-3,453
-3,456
Total
-6,486
-6,231
1 US Dollar net exposure move is mainly driven by EURUSD FX rate.
Equity price risk in banking books (*)
Governance (*)
ING maintains a strategic portfolio with substantial equity exposure in its banking books. Local offices are
responsible for the management of the equity investment positions. Financial Risk is responsible for monitoring
the regulatory capital for equity investments on a monthly basis and acts independently from ING / local
management when monitoring these positions.
Risk Profile
Equity price risk arises from the possibility that an equity security’s price will fluctuate, affecting the values of the
equity security itself as well as other instruments whose value react similarly to the particular security, a defined
basket of securities, or a securities index. ING’s equity exposure mainly consists of the investments in associates
and joint ventures of EUR
other comprehensive income (FVOCI) of EUR
securities held at FVOCI is directly linked to equity security prices with increases/decreases being recognised in
the revaluation reserve. Investments in associates and joint ventures are measured in accordance with the equity
method of accounting and the balance sheet value is therefore not directly linked to equity security prices.
Year-on-year variance analysis (*)
In 2021, the revaluation reserve equity securities increased by EUR
new investments in HQLA eligible equity instruments.
Revaluation reserve equity securities at fair value through other comprehensive income (*)
in EUR million
2021
2020
Positive re-measurement
Negative re-measurement
-9
-20
Total
Market risk in trading books (*)
Within the trading portfolios, the positions are maintained in the financial markets. These positions are often a
result of transactions with clients and may benefit from short-term price movements. In 2021, ING continued its
strategy of undertaking trading activities to develop its client-driven franchise and deliver a differentiating
experience by offering multiple market and trading products.
Governance (*)
The Financial Markets Risk Committee (FMRC) is the market risk committee that, within the risk appetite set by
the ALCO Bank, sets market risk limits both on an aggregated level and on a desk level, and approves new
products. FI-FM Risk advises both FMRC and ALCO Bank on the market risk appetite of trading activities.
With respect to the trading portfolios, FI-FM Risk focuses on the management of market risks of Wholesale
Banking (mainly Financial Markets) as this is the only business line within ING where trading activities take place.
Trading activities include facilitation of client business and market making. FI-FM Risk is responsible for the
development and implementation of trading risk policies and risk measurement methodologies, and for reporting
and monitoring risk exposures against approved trading limits. FI-FM Risk also reviews trading mandates and
global limits, and performs the gatekeeper role in the product review process. The management of market risk in
trading portfolios is performed at various organisational levels. The FI-FM Risk Management Framework defines
policies and procedures for the overall management of trading books. Trading activity is systematically reviewed
and positions against the mandates are assessed jointly by the first and second lines of defence.
Market risk
ING Group Annual Report 2021 on Form 20-F
216
Risk measurement (*)
ING uses a comprehensive set of methodologies and techniques to measure market risk in trading books: Value
at Risk (VaR) and Stressed Value at Risk (SVaR), Incremental Risk Charge (IRC), and Event Risk (stress testing).
Systematic validation processes are in place to validate the accuracy and internal consistency of data and
parameters used for the internal models and modelling processes.
Value at Risk (*)
FI-FM Risk uses the historical simulation VaR methodology (HVaR) as its primary risk measure. The HVaR for
market risk quantifies, with a one-sided confidence level of 99%, the maximum overnight loss that could occur in
the trading portfolio of ING due to changes in risk factors (e.g. interest rates, equity prices, foreign exchange
rates, credit spreads, implied volatilities) if positions remain unchanged for a time period of one day. Next to
general market movements in these risk factors, HVaR also takes into account market data movements for
specific moves in e.g. the underlying issuer of securities. A single model that diversifies general and specific risk is
used. In general, a full revaluation approach is applied, and for a limited number of linear trading positions and
risk factors in commodity and equity risk classes a sensitivity-based approach is applied. The potential impact of
historical market movements on today’s portfolio is estimated, based on equally weighted observed market
movements of the previous year (260 days). When simulating potential movements in risk factors, depending on
the risk factor type, either an absolute or a relative shift is used. The data used in the computations is updated
daily. ING uses HVaR with a one-day horizon for internal risk measurement, management control, and
backtesting, and HVaR with a ten-day horizon for determining regulatory capital. To compute HVaR with a ten-
day horizon the one-day risk factor shifts are scaled by the square root of ten and then used as an input for the
revaluation. The same model is used for all legal entities within ING with market risk exposure in the trading
portfolio.
Limitations (*)
HVaR has some limitations: HVaR uses historical data to forecast future price behaviour, but future price
behaviour could differ substantially from past behaviour. Moreover, the use of a one-day holding period (or ten
days for regulatory capital calculations) assumes that all positions in the portfolio can be liquidated or hedged in
one day. In periods of illiquidity or market events, this assumption may not hold. Also, the use of a 99%
confidence level means that HVaR does not take into account any losses that occur beyond this confidence level.
Backtesting (*)
Backtesting is a technique for the ongoing monitoring of the plausibility of the HVaR model in use. Although
HVaR models estimate potential future trading results, estimates are based on historical market data. In a
backtest, the actual daily trading result (excluding fees and commissions) is compared with the one-day HVaR. In
addition to using actual results for backtesting, ING also uses hypothetical results, which exclude the effects of
intraday trading, fees, and commissions. When an actual or a hypothetical loss exceeds the HVaR, an ‘outlier’
occurs. Based on ING’s one-sided confidence level of 99%, an outlier is expected once in every 100 business days.
On an overall level in 2021, there were five outliers for hypothetical PL and 0 outliers for actual PL. The
outliers occurred by the market movements for that, ING Group is in the Yellow zone and as a result the
regulatory capital multiplier has changed from 3.75 to 4.15. In general, ING reports backtesting results on a
quarterly basis to the ECB.
Stressed HVaR (*)
The Stressed HVaR (SVaR) is intended to replicate the HVaR calculation that would be generated on the bank’s
current portfolio with inputs calibrated to the historical data from a continuous 12-month period of significant
financial stress relevant to the bank’s portfolio. To calculate SVaR, ING uses the same model that is used for
1DHVaR, with a ten-day horizon. The data for the historical stress period used currently includes the height of the
credit crisis around the fall of Lehman Brothers, and this choice is reviewed regularly. The historical data period is
chosen so that it gives the worst scenario loss estimates for the current portfolio. The same SVaR model is used
for management purposes and for regulatory purposes. The same SVaR model is used for all legal entities within
ING with market risk exposure in the trading portfolio.
Incremental risk charge (*)
The Incremental risk charge (IRC) for ING is an estimate of the default and migration risks for credit products
(excluding securitisations) in the trading book, over a one-year capital horizon, with a 99.9% confidence level. The
same IRC model is used for all legal entities within ING with market risk exposure in the trading portfolio. Trading
positions (excluding securitisations) of ING, which are subject to specific interest rate risk included in the internal
model approach for market risk regulatory capital, are in scope of the IRC model. By model choice, equity is
excluded from the model. For the calculation of IRC, ING performs a Monte-Carlo simulation based on a Gaussian
copula model. The asset correlations used in the Gaussian copula model are determined using the IRB correlation
formula. The rating change is simulated for all issuers over the different liquidity horizons (i.e. time required to
liquidate the position or hedge all significant risks) within one year. Movements across different rating categories
and probabilities of default are governed by a credit-rating transition matrix. An external transition matrix is
Market risk
ING Group Annual Report 2021 on Form 20-F
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obtained from Standard Poor’s (SP). The financial impact is then determined for the simulated migration to
default, or for the simulated migration to a different rating category, based on LGD or credit spread changes,
respectively.
The liquidity horizon has been set to the regulatory minimum of three months for all positions in scope. ING
reviews the liquidity horizons on a yearly basis based on a structured assessment of the time it takes to liquidate
the positions in the trading portfolio.
ING periodically assesses the compliance of the IRC model with regulatory requirements by performing gap
analyses, substantiating the modelling choices, and quantifying the impact of alternative approaches.
Stress testing and event risk (*)
Stress testing and event risk are valuable risk management tools. In addition to the bank-wide stress test
framework as described in the stress-testing section, FI-FM Risk performs additional assessments, specific to the
Trading Book, with various frequencies: sensitivity analyses (single-risk factor and multi-risk factor), ad-hoc stress
tests (e.g. Covid-19 scenarios) and structured stressed scenario tests under the event risk framework - to monitor
market risks under extreme market conditions. Event risk is calculated because HVaR in general does not produce
an estimate of the potential losses that can occur as a result of extreme market movements, i.e. beyond the
confidence level. Event risk evaluates the bank’s financial stability under severe but plausible stress scenarios and
assists in decision-making aimed at maintaining a financially healthy going-concern institution after a severe
event occurs. Event risk is based on historical as well as hypothetical extreme scenarios. The result is an estimate
of the profit and loss caused by a potential event and its worldwide impact for ING. As with HVaR, the risk
appetite for event risk is limited to ALCO Bank.
ING’s event risk policy is based on a large set of possible stress scenarios per risk type. In stress scenarios, shocks
are applied to prices (credit spreads, interest rates, equity, commodities, and FX rates) and volatilities. Depending
on the type of the stress test, additional scenario assumptions can be made, for example on correlations,
dividends, or recovery rates. For equity products, for example, both a crisis scenario (prices decrease) as well as a
bull scenario (prices increase) are assumed. Scenarios are calculated based on events happening independently,
jointly by region, or in all countries simultaneously. This way, for each risk type, a large set of scenarios is
calculated. The worst scenarios per market are combined across markets by assessing both independent events
per market, and the worst events happening in all markets at the same time.
Other trading controls
HVaR and event risk limits are the most important limits to control the trading portfolios. Additionally, limits have
been set on SVaR and IRC. Furthermore, ING uses a variety of other controls to supplement these limits. Position
and sensitivity limits are used to prevent large concentrations in specific issuers, sectors, or countries. Moreover,
other risk limits are set with respect to the activities in complex derivatives trading. The market risk of these
products is controlled by product-specific limits and constraints.
Market risk
ING Group Annual Report 2021 on Form 20-F
218
Risk profile
The following chart shows the development of the overnight HVaR under a 99% confidence level and a one-day
horizon versus actual and hypothetical daily trading profits and losses. In calculation of the hypothetical daily
profit and loss, the trading position is kept constant and only the market movement is taken into account. The
overnight HVaR is presented for the ING trading portfolio from 2016 to 2021.
1 CVA risk is not included in VaR.
The risk figures in the backtesting graph above and in the table below relate to all trading books for which the
internal model approach is applied, i.e. all trading books, including Credit Exposure Management books.
1d VaR for Internal Model Approach trading portfolios
in EUR million
Minimum
Maximum
Average
Year end
2021
2020
2021
2020
2021
2020
2021
2020
Interest rate
1
4
12
20
42
8
26
5
15
Equity and commodity
1
1
4
14
2
3
2
3
Foreign exchange
1
3
7
1
3
1
2
Credit spread
2
4
11
32
4
15
2
7
Diversification
-5
-17
-4
-4
Total VaR
2
4
12
26
52
10
29
6
22
1 For calculation of HVaR per risk class the full valuation is performed according to HVaR methodology using a set of scenario
changes for the risk factors for the particular risk class, while risk factors for all other risk classes are kept unchanged.
2 The total HVaR for the columns Minimum and Maximum cannot be calculated by taking the sum of the individual components
since the minimum/maximum observations for both the individual markets as well as for total HVaR may occur on different dates.
Therefore, diversification is not calculated for the minimum and maximum categories.
3 CVA risk is not included in VaR.
Average 1D/10D HVaR, 10D SVaR over 2021 has decreased compared to 2020, due to the increase in market
volatility, while IRC remained in line with 2020. The average for all the risk classes has decreased compared to
2020, mainly driven by market movements. The VaR at the period end of 2021 decreased from EUR 22 million to
EUR 6 million at period end of 2021, due to the market recovery from the COVID crisis.
ING doesn’t calculate Comprehensive Risk capital charge and therefore it appears N/A in the table below.
EU MR4: Consolidated trading HVaR
1
Market risk
ING Group Annual Report 2021 on Form 20-F
219
EU MR3: Internal Model Approach values for trading portfolios
in EUR million
2021
2020
VaR (10 day 99%)
1 Maximum value
78
161
2 Average value
27
83
3 Minimum value
12
31
4 Period end
18
60
Stressed VaR (10 day 99%)
5 Maximum value
105
304
6 Average value
80
116
7 Minimum value
64
72
8 Period end
74
83
Incremental Risk Charge (99.9%)
9 Maximum value
195
134
10 Average value
71
74
11 Minimum value
37
38
12 Period end
65
89
Comprehensive Risk capital charge (99.9%)
13 Maximum value
n/a
n/a
14 Average value
n/a
n/a
15 Minimum value
n/a
n/a
16 Period end
n/a
n/a
Regulatory capital
According to the Capital Requirements Regulation (CRR/CRD IV), regulatory capital (own funds requirements) for
market risk can be calculated using the standardised approach or an internal model approach. ING received
regulatory approval to use an internal model to determine the regulatory capital for the market risk in all trading
books of ING. Market risk capital of trading books is calculated according to the CRR, using internal HVaR, SVaR,
and IRC models, where diversification is taken into account. Capital for foreign exchange risk from the banking
books and for collective investment undertakings (CIUs) exposures in trading books are calculated using the
standardised approach with fixed risk weights. ING does not have a correlation trading portfolio or any other
securitisations in the trading book.
Standardised approach
EU MR1: Market risk under Standardised Approach
in EUR million
2021
2020
RWA
RWA
Outright products
1 Interest rate risk (general and specific)
6
2
2 Equity risk (general and specific)
3 Foreign exchange risk
4 Commodity risk
Options
5 Simplified approach
6 Delta-plus method
7 Scenario approach
8 Securitization (specific risk)
9
6
2
The MRWA under standardised approach slightly increased in 2021 as compared to end of 2020. The FX exposure
continued to be lower than the 2% own funds threshold. According to Art. 351 CRR, in such a case, the
calculation of Market Risk regulatory capital is not required. As of the third quarter of 2021, collective investment
undertakings are capitalised in market risk under standardised approach under interest rate risk and foreign
exchange risk.
Internal model approach
Market risk regulatory capital increased slightly during 2021 compared to 2020. The increase is driven by an
increase in HVaR and SVaR due to increased market volatility as a result of the Covid-19 pandemic, while IRC
slightly decreased.
Market risk
ING Group Annual Report 2021 on Form 20-F
220
EU MR2-A: Market risk under Internal Model Approach
in EUR million
2021
2020
RWA
Capital
requirements
RWA
Capital
requirements
1
VaR
1,179
94
3,214
257
(a)
Previous day’s VaR (VaRt-1)
21
60
(b)
Multiplication factor (mc) x average of previous 60 working days (VaRavg)
94
257
2
SVaR
(higher of values a and b)
6,336
507
4,419
354
(a)
Latest available SVaR (SVaRt-1))
112
83
(b)
Multiplication factor (ms) x average of previous 60 working days
(sVaRavg)
507
354
3
IRC
1,314
105
1,113
89
(a)
Most recent IRC measure
94
89
(b)
12 weeks average IRC measure
105
77
4
Comprehensive risk measure
(higher of values a, b and c)
(a)
Most recent risk measure of comprehensive risk measure
(b)
12 weeks average of comprehensive risk measure
(c)
Comprehensive risk measure - Floor
5
Other
200
16
180
14
6
Total
9,029
722
8,925
714
Sensitivities (*)
As part of the risk monitoring framework, FI-FM Risk actively monitors the daily changes of sensitivities of the
trading portfolios. Sensitivities measure the impact of movements in individual market risk factors (foreign
exchange rates, interest rates, credit spreads, equity, and commodity prices) on profit and loss results of the
trading positions and portfolios.
The following tables show the five largest trading positions in terms of sensitivities to foreign exchange, interest
rate and credit spread risk factor movements. These largest exposures also reflect concentrations of risk in FX risk
per currency, interest rate risk per currency, and credit spread risk per country, rating and sector. Due to the
nature of the trading portfolios, positions in the portfolios can change significantly from day to day, and
sensitivities of the portfolios can change daily accordingly.
Most important foreign exchange year-end trading positions (*)
in EUR million
2021
2020
Foreign exchange
Foreign exchange
US Dollar
-160
US Dollar
Taiwan Dollar
Chinese Yuan Renminbi
-63
Romanian Leu
Japanese Yen
-44
Japanese Yen
Great-Britain Pound
-37
South Korean Won
-24
Romanian Leu
-16
Most important interest rate and credit spread sensitivities at year-end (*)
in EUR thousand
2021
2020
Interest Rate (BPV)
Interest Rate (BPV)
Euro
-501
Euro
-787
US Dollar
US Dollar
-319
British Pound
-75
Great-Britain Pound
-120
Taiwan Dollar
Russian Ruble
-86
Japanese Yen
-57
Australian Dollar
-64
Credit Spread (CSO1)
Credit Spread (CSO1)
Netherlands
Germany
Germany
Republic of Korea
-129
United States
United States
France
Belgium
China
Netherlands
1 Basis Point Value (BPV) measures the impact on value of a 1 basis point increase in interest rates. The figures include
commodity risk in banking books.
2 Credit Spread Sensitivity (CS01) measures the impact on value of a 1 basis point increase in credit spreads. Exposures to
supranational institutions are not assigned to a specific country.
Market risk
ING Group Annual Report 2021 on Form 20-F
221
Credit spread sensitivities per risk class and sector at year-end (*)
2021
2020
in EUR thousand
Corporate
Financial
Institutions
Corporate
Financial
Institutions
Credit Spread (CSO1)
Risk classes
1 (AAA)
-5
-4
2–4 (AA)
-7
-120
5–7 (A)
-14
8–10 (BBB)
-14
11–13 (BB)
-1
14–16 (B)
-6
-6
17–22 (CCC and NPL)
-6
-12
Not rated
Total
-158
1 Credit Spread Sensitivity (CS01) measures the impact on value of a 1 basis point increase in credit spreads.
Funding liquidity risk
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222
Funding and liquidity risk (*)
Introduction (*)
Funding and liquidity (FL) risk is the risk that ING or one of its subsidiaries cannot meet its financial liabilities
when they are due at reasonable cost and in a timely manner. ING incorporates funding and liquidity
management in its business strategy and has established a funding and liquidity risk framework to manage risks
within pre-defined boundaries.
A high-level overview of the FL framework is provided in the next figure.
Funding liquidity risk
ING Group Annual Report 2021 on Form 20-F
223
Governance (*)
Funding and liquidity risk management within ING falls under the supervision of the ALCO Bank function that
approves the funding and liquidity risk appetite and subsequently cascades it throughout the organisation. ALCO
Bank has delegated the responsibilities concerning the Internal Capital and Liquidity Adequacy Assessment
Process (ICLAAP) and documents, as per the ICLAAP framework of ING, to the ICLAAP Committee. The ICLAAP
Committee therefore focuses on technical liquidity documents and oversees business processes and deliverables
concerning ILAAP. The EB, MBB, staff departments from the CRO and CFO domain as well as Group Treasury have
oversight of and are responsible for managing funding and liquidity risks.
ING’s funding and liquidity risk governance is based on the three lines of defence structure to ensure a clear
division of responsibilities as well as an independent risk control challenging process.
Group Treasury and the business lines have the first line of defence functions. Group Treasury’s main
responsibility is to manage ING’s (regulatory) liquidity and funding position by executing ING’s funding plan,
maintaining access to both the short- and the long-term professional funding markets and managing the liquidity
buffer. Business lines are responsible for managing the funding and liquidity positions from the originated
business, a large part of which is replicated with Group Treasury.
At the second line of defence, Financial Risk is responsible for developing and maintaining ING’s policies,
standards and guidelines on FL risk management as well as for setting the FL risk appetite. Furthermore, the
Financial Risk function measures funding and liquidity risks, executes stress testing, provides management
information and controls the liquidity and funding requirements on commercial products. The Finance function is
responsible for management information and regulatory reporting related to funding and liquidity risk
management.
For the third line of defence Corporate Audit Services is responsible for independently assessing the design,
effectiveness and implementation of the funding and liquidity framework.
Funding and liquidity management strategy and objectives (*)
The main objective of ING’s funding and liquidity risk management is to maintain sufficient liquidity to fund the
commercial activities of ING both under normal and stressed market circumstances across various territories,
currencies and tenors. This requires a diversified funding structure considering relevant opportunities and
constraints.
ING’s funding consists mainly of retail and corporate deposits contributing around 50 percent and 20 percent of
total funding respectively. These funding sources provide a relatively stable funding base. The remainder of the
required funding is attracted primarily through a combination of long-term and short-term professional funding.
Group Treasury manages the professional funding in line with the FL risk appetite to ensure a sufficiently
diversified and stable funding base.
Funding mix
1
(*)
2021
2020
Funding type
Customer deposits (retail)
51%
52%
Customer deposits (corporate)
21%
20%
Interbank
9%
9%
Lending/repurchase agreements
5%
6%
CD/CP
3%
2%
Long-term senior debt
8%
9%
Subordinated debt
2%
2%
Total
100%
100%
1 Liabilities excluding trading securities and IFRS equity
ING’s long-term professional funding is well diversified across maturities and currencies. The main part of it is
EUR and USD denominated which is in line with the currency composition of customer lending. Differently than
last year, the amounts in the tables below exclude Tier 1 instruments. To enable comparability with last year,
these instruments have also been excluded from the table below with the situation per end of 2020.
Funding liquidity risk
ING Group Annual Report 2021 on Form 20-F
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ING Group long-term debt maturity profile by currency at year-end 2021 (*)
in EUR billion (nominal amounts)
2022
2023
2024
2025
2026
2027
Beyond
2027
Total
Currency
EUR
USD
Other
Total
ING Group long-term debt maturity profile by currency at year-end 2020 (*)
in EUR billion (nominal amounts)
2021
2022
2023
2024
2025
2026
Beyond
2026
Total
Currency
EUR
USD
Other
Total
Amounts adjusted to exclude Tier 1 instruments.
Funding and liquidity adequacy and risk appetite (*)
ING distinguishes between several key drivers of future liquidity and funding needs:
◾
Refinancing needs resulting from maturing debt and asset growth;
◾
Current and future regulatory requirements;
◾
Risk appetite statements set by ING’s funding and liquidity risk function;
◾
The outcomes of various stress tests;
◾
Ability to distribute and transfer liquidity across the Group.
Taking into consideration the abovementioned factors, ING regularly assesses its current and future liquidity
adequacy and, if deemed necessary, takes steps to further improve ING’s liquidity position and to ensure
sufficient counterbalancing capacity. A Liquidity Adequacy Statement is formulated at least quarterly to
substantiate and reflect the management’s view on the current funding and liquidity position as well as the
potential future challenges. The quarterly adequacy statement is an important part of ING’s ILAAP process.
ING assesses its FL adequacy through three lenses – stress, sustainable and regulatory:
◾
ING evaluates its ability to withstand a period of prolonged FL stress (idiosyncratic, market-wide and
combined – idiosyncratic plus market-wide) which is characterised by customer deposit outflows,
deterioration of funding markets access and lower liquidity value of the counterbalancing capacity;
◾
ING assesses the extent to which its customers, professional counterparties and investors are comfortable
with extending funding in tenors, currencies and instruments necessary to sustainably fund ING under a
going-concern situation;
◾
ING manages its position to meet current and future regulatory requirements.
For each lens, ING has established a related set of risk appetite statements which define ING’s risk appetite
commensurate with the principles of liquidity adequacy. These risk appetite statements are summarised in the
next graph.
The FL risk appetite statements are translated into a number of metrics with appropriate boundaries and
instruments which are used to measure and manage ING’s funding and liquidity risk.
Funding liquidity risk
ING Group Annual Report 2021 on Form 20-F
225
The risk appetite with respect to the stress lens is set to ensure there is sufficient counterbalancing capacity
under various internally defined stress scenarios. Regarding the sustainability perspective, an internally defined
stable funding to loans (SFtL) ratio (supplemented by other metrics) is used to ensure a diversified funding base
and to prevent overreliance on professional funding. Finally, the liquidity coverage ratio (LCR) and the NSFR
regulatory metrics are monitored in terms of both ING’s risk appetite and regulatory requirements.
The LCR compares the volume of available high-quality liquid assets (HQLA) to net outflows (outflows minus
inflows) over a 30-day stress scenario defined by the regulator. ING’s liquidity buffer forms a part of the
counterbalancing capacity which serves as a liquidity cushion under normal and stressed conditions.
The liquidity buffer consists mainly of high grade Level 1 assets, such as government and central bank assets.
Only assets that are freely available (not pledged under existing contracts) for liquidity purposes are included in
the buffer. The size and composition of the liquidity buffer are driven by ING’s internal risk appetite limits as well
as by regulatory requirements.
The macroeconomic and market environment are also important considerations in ING’s funding and liquidity
framework.
The macroeconomic environment comprises various exogenous factors over which ING has no control, but which
may have a material impact on ING’s FL position. The main macroeconomic factors analysed on a regular basis
include:
◾
Global and local economic performance: e.g. shifts in GDP, inflation rate, unemployment rates and public
deficit/surplus;
◾
Changing geopolitical trends;
◾
Monetary policy with a focus on the unconventional monetary measures employed by central banks in
recent years including the measures taken since the start of the Covid-19 crisis; and
◾
Regulatory requirements: e.g. understanding the changing regulatory landscape as well as the impact of
ING’s actions on existing regulatory boundaries.
The strategic ambitions of ING, together with the design and execution of the funding plan, are assessed under
both current and projected market conditions. Key emphasis is placed on understanding overall market trends
and developments, credit rating changes and peer comparison.
Liquidity stress testing (*)
Funding and liquidity stress testing forms part of the overall FL framework. It allows ING to examine the effects
of severe but plausible future events on ING’s liquidity position and provides insight into which entities, business
lines or portfolios are vulnerable to which types of risk or scenarios.
The stress testing framework encompasses the funding and liquidity risks of the consolidated balance sheet of
ING Group including all entities, business lines as well as on- and off-balance sheet positions. The net liquidity
position is the main stress testing measure, capturing the liquidity position after stressed net outflows, and is
measured at different time buckets. The net liquidity position is impacted differently under specific FL stress
scenarios and parameterisation.
The stress testing framework considers idiosyncratic, market-wide and combined (idiosyncratic and market-wide)
stress scenarios. Moreover, it differentiates between stress events that develop in a gradual and in a fast
manner, allowing ING to assess the net liquidity position at different time horizons. The design of the framework
is based on empirical evidence supplemented by expert judgment. The framework can be extended to additional
ad hoc scenarios. For example, it can be used as input for firm-wide stress testing and reverse stress testing.
The outcomes of the stress testing are taken into account in all the key aspects of ING’s FL risk framework and
FL risk management:
◾
Risk Appetite Framework (through risk appetite statements);
◾
Risk identification and assessment;
◾
Monitoring of the liquidity and funding position;
◾
Business actions (if needed);
◾
Contingency funding plan; and
◾
Early warning indicators.
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The funding and liquidity stress testing framework is also subject to regular internal validation by model
validation.
In line with supervisory expectations, ING’s liquidity position is stress tested at least monthly using scenarios that
are part of the FL risk appetite statement. In addition, the results of all internal stress scenarios are monitored
and assessed on a regular basis. They also serve as input in the decision on additional contingency measures.
Contingent FL risks are addressed in the Contingency Funding Plan with a focus on early warning indicators as
well as organisation and planning of liquidity management in times of stress. The contingency funding measures
are developed in conjunction with the ING Recovery Plan and are tested on a regular basis.
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Environmental, social and governance risk
Introduction
Environmental, social and governance risk is the risk that environmental and social issues stemming from the
bank’s clients result in reputational damages and/or financial losses for ING. Climate risk is the risk that a
financial loss will be incurred due to climate change, either through physical risk (e.g. flooding) or transition risk
(e.g. solar energy instead of gas).
Environmental and Social Risk
Governance
ESR is a risk function part of the second line of defence of ING. The ESR Team is responsible for developing policy
and procedures. The department takes the lead in communicating them internally and in training internal
stakeholders. The ESR Team also performs an advisory role to support the deal principals, senior credit officers
and approval authorities on individual transactions. The degree of the ESR Team engagement in transactions is
dependent upon (i) the risk profile of the project and (ii) ING’s exposure. In some locations an ESR delegated
advisor may be appointed if mutually agreed by the head of ESR and regional head. Such a role would support
the Senior Credit Officer (SCO) who would be responsible for ESR issues in the region.
Committees involved in managing environmental and social risks include the Global Credit Trading Risk
Committee (GCTP ) and the Global Credit Committee GCC(TA ). The GCTP approves the policies, methodologies,
and procedures related to ESR. The GCC(TA) approves transactions that entail taking higher environmental and
social risk.
The ESR function encompasses the following activities:
●
Create and maintain policies for sensitive industry sectors.
●
Assess transactions for environmental and social risk.
●
Monitor high-risk clients to ensure compliance with sustainability criteria.
●
Spread ESR awareness throughout ING.
●
Participate in European and global advisory groups (i.e. OECD advisory group, steering committee to the
Equator Principles, Thun Group of Banks) to help bring all banks to the same high standard.
External developments and ING’s actions
After the UN Paris Agreement and the United Nations Sustainable Development Goals (UN SDGs) were signed by
world leaders in 2015, the European Commission published the European Green Deal in December 2019 with the
overarching aim of making Europe climate-neutral by 2050 and emitting net zero greenhouse gases from then
on. Among other objectives, the Green Deal targets mobilisation of the business community in the transition to a
circular economy, as well as achieving clean energy and a toxic-free environment. The European Climate Law,
provisionally agreed between the European Parliament and the Council in April 2021, is a core element of the
European Green Deal. This outlines a framework for the gradual, irreversible reduction of greenhouse gas
emissions and legally establishes the goal of a climate-neutral Europe by 2050.
The introduction of the United Nations Guiding Principles and the Organisation for Economic Cooperation and
Development (OECD) Guidelines for Multinational Enterprises mark a clear shift towards a more regulated
environment with impact management required on social risks. Legislation aimed at preventing human rights
violations along the supply chain is being introduced in several countries, including a proposal at EU level for
mandatory human rights due diligence.
Other key developments in the regulatory landscape include the EU Taxonomy Regulation that requires
compliance to minimum social and governance safeguards and the EBA consultation on ESG risks, which aims to
incorporate ESG risks into the governance, risk management and supervision of credit institutions and
investment firms. The effects of the recent pandemic also bring a renewed focus on the importance of health and
safety measures on the ground for the projects we finance as well as for the workforce of our clients.
ING joined the Net-Zero Banking Alliance in August 2021 in support of achieving a world with net-zero green-
house gas emissions by 2050. The Alliance was launched by 43 Founding Members on 21 April 2021 and has since
grown to represent over a third of global banking assets. The initiative is part of the UN Race to Zero and is the
banking element of the Glasgow Financial Alliance for Net-Zero. In addition, ING published its first integrated
Climate Report in September 2021, which combined our progress report on Terra and climate risk report into one
comprehensive report. Our integrated approach to climate action is about steering our portfolio to achieve net
zero by 2050, providing green financing and advice to clients, managing climate risk and reaching net zero in our
own operations by 2050 rather than 2070.
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Meanwhile, the Dutch Banking Sector Agreement on Human Rights (DBA) was successfully completed in 2019.
ING updated its human rights policy to reflect its commitment to the United Nations Guiding Principles, and
improved transparency through regular human rights reporting. We continue to work within the framework of
this agreement. We are currently in the process of testing and implementing a tool that will help assess portfolio
and client exposure to salient human rights issues, enabling identification of issues and client engagement. See
also
.
The ESR Framework
ING’s ESR policy framework helps us make transparent choices about how, where and with whom we do
business. In 2021, we updated the ESR Framework as part of the three-year mandatory comprehensive review
cycle. The new release takes account of the recent ESR requirements of the EBA Loan Origination and Monitoring
guidelines, improved controls and comments received from internal and external stakeholders. The update
further aims to improve understanding of existing process and evaluation requirements, with special attention to
supply chain due diligence. Where appropriate, internationally acknowledged certification standards and guiding
principles have been added to or adjusted per the individual sector policies.
In 2021, we continued the implementation of the new ESR self-declaration approach for business banking. The
concept was incorporated in the updated ESR Framework. There is an alternative ESR client assessment
implementation for business banking clients where lending and pre-settlement limits exceed €1 million and
where the client is active in any of the pre-identified sectors (e.g. employment agencies). Such clients will be
required to confirm their compliance with specific statements related to safeguarding labour rights and/or
environmental regulations that are specific for that sector. The initiative has already been rolled out in half of the
countries where we are active with business banking clients globally while other affected ING locations are
expected to implement this in the course of 2022.
Following any key ESR policy updates on restrictions, we engage with affected existing clients and provide them
with the opportunity to reduce their exposure to the new restrictions; in case a reduction is not feasible, we
implement an exit strategy.
We will continue to update and refine our ESR policy to ensure it is reflective of ING’s risk appetite and
sustainability direction.
ESR in practice in 2021
The ESR policy framework includes standards and best practice guidance for ESR-sensitive sectors. It includes
explicit restrictions on activities not in line with ING’s values and harmful to people or the environment (for
example companies involved in clearance of primary forest), which we do not finance.
The way the ESR Framework is applied in practice differs per product type. The largest potential environmental
and social impacts come from large corporates within our Wholesale Banking (WB) segment. WB is therefore the
primary focus of our assessments and where we promote active ESR dialogue and knowledge sharing. We have
been working with wholesale clients for more than 15 years to support them in understanding and managing
their environmental and social impact. A simplified version of the ESR policy framework, following the same
rationale and principles, applies to ING’s business banking clients. The ESR framework minimum requirements
are also included in ING’s procurement policy and apply to the screening of suppliers of ING’s global procurement
activities.
The ESR policy framework is incorporated in ING’s KYC policy framework, meaning the ESR client assessment is
part of regular client on-boarding and review. The ESR policy framework also triggers a dedicated ESR transaction
assessment to corporate clients, which will indicate if such transaction is categorised as ‘ESR high risk’, and thus
require a separate in-depth advice from the ESR team.
While we have a strong ESR policy framework and made progress in enhancing the automation of the checks and
controls in the ESR assessment processes, we acknowledge that we need to further improve our processes to
ensure accuracy and completeness of the data.
Of all Wholesale Banking engagements in scope of the ESR policy framework in 2021, 82 percent were considered
ESR low-risk, 7 percent ESR medium-risk and 11 percent ESR high-risk. ESR high-risk cases require specialised
advice from the global ESR team. The team now consists of 10 dedicated ESR advisors, 9 of whom are in
Amsterdam and one in Geneva. The ESR advice assesses the specific product offered and environmental and
social impacts associated with it, the sector, operating context and geography of the engagement and other
relevant factors. Based on this in-depth research, a binding advice is given that can only be overruled at Global
Credit Committee level. Of the 379 ESR advices given in 2021, which are related to new requests, 60 percent
were positive, 24 percent positive subject to conditions and 16 percent negative.
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Conditions can play an important role in helping clients improve their environmental and social performance and
ensuring their continued compliance with our ESR policy. The following chart shows the concentration of ESR
conditions and engagement across policy sectors.
*Other includes advices reports covering the policy area animal welfare, chemicals and manufacturing.
The ESR team mainly focuses on policy development and transaction advisory. However the team also provides
training (both in-person and via webinars) to hundreds of colleagues around the world every year in risk, front-
office, KYC and compliance teams, so that ESR knowledge is built on and spread.
Further evolving ESG within the bank
Our ESR approach helps us and our clients gradually enhance the implementation of key standards like the UN
Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. But
beyond stimulating better environmental and social performance in our own portfolio, ING actively collaborates
with other institutions, peers and regulators to address the environmental, social and human rights challenges
we face:
◾
ING and the Equator Principles (EPs):
framework adopted by 126 financial institutions worldwide. ING is active in several EP working groups
covering social risks, climate change and scope. ING also co-leads the capacity building and training
workgroup, which is focussing on updating the EP E-learning tool with the changes included in EP4. The
update of the EP e-learning tool has been successfully completed in 2021.
◾
The Covid-19 pandemic
international travel is slowly picking up again, visiting clients and their operations is still done remotely.
On a number of projects the engaged environmental and social consultants were able to conduct virtual
site visits and with the use of drones and video footage successfully visit our clients’ construction areas.
We have seen a number of clients that were confronted with high rates of Covid-19 infections in their
operations. In some cases operations were temporarily halted, but for most the measures, such as
improvement on health and safety protocols, were sufficient to manage further spreading of the virus.
◾
Shift Business Learning Programme:
leading centre of expertise on the UN Guiding Principles on Business and Human Rights. The programme
focuses on the corporate responsibility to respect human rights as set out in the UN Guiding Principles.
Under the leadership of Shift a group of companies active in various business sectors including financial
institutions share challenges and practices through cross-industry workshops and benefit from tailored
strategic support. ING participates in the programme. We are also a member of the Financial Institution
Practitioners’ Circle, a group for selected practitioners in the financial sector to discuss and share
approaches to meeting their responsibility to respect human rights, led by Shift experts.
◾
Responsible Business Conduct Agreement:
commitment on responsible business was formed among Dutch banks. Global Sustainability is leading
the initiative for ING and the ESR team is aligned for any policy implications or client interactions.
◾
Thun Group:
Business and Human Rights into banking activities. The Group is now in the process of establishing itself
as a formal group promoting human rights and sharing best practices among its participant members.
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By taking part in the above-mentioned initiatives, we aim to contribute our viewpoint and those of our clients,
employees and other stakeholders to help form a consensus and develop clear guidelines that can serve as a
standard for our industry.
Climate risk management
Climate change is increasingly exposing society to a range of acute and chronic physical risks. At the same time,
the transition to a net zero economy can also create exposure to transition risks, such as stranded assets.
Managing climate risks covers both physical risks and transition risks:
●
Physical risks: These risks can be climate-related event-driven (acute) such as increased severity of
extreme weather events (e.g. cyclones, droughts, floods and fires) or longer term (i.e. chronic) when
they arises from progressive shifts, such as increasing temperatures, sea level rises, water stress, or
biodiversity loss.
●
Transition risks: these can be climate-related or environmental risks from policy, legal, technology and
market changes occurring in the shift to a lower-carbon economy. This could result in stranded assets
and/or markets by the loss of value of assets that are no longer part of a more sustainable world
The potential impacts that physical and transition risks could have on households, businesses and the macro-
economy ultimately require us to view climate risk as a risk that has an impact on various financial risks.
ING endorses the recommendations of the Financial Stability Board’s (FSB) Task Force on Climate-Related
Financial Disclosures. (TCFD). To further strengthen our understanding and adoption of the TCFD
recommendations, ING is part of the UNEP FI TCFD project. We continue to develop our approach to climate
related and environmental disclosures as we build our approach to quantifying such risks.
Governance
ING’s Climate Change Committee (CCC) is established by the Management Board Banking and mandated to
oversee and set priorities for the implementation of the TCFD recommendations and other strategic climate-
related topics that impact the group. The CCC is chaired by the ING Group CRO and co-chaired by board member
responsible for Wholesale Banking. The CCC meets on a bi-monthly basis and is supported by the Climate Expert
Group with experts from across the business who lead and advise on key climate initiatives. For details please
refer to our approach to climate governance (Sustainability governance) published on our corporate website
ing.com . In 2021 the mandate of the CCC was expanded to include oversight of our approach to biodiversity. In
addition , please refer to the 2021 Climate Report (Managing climate and environmental risks) available on
ing.com.
With the strategic review of the risk organisation structure, that will start as of March 2022, an ESG department
will be established to ensure that ESG regulation is assessed and implemented in accordance with the
expectations of supervisors and society. The department is responsible for the development of the overarching
ESG risk framework, the setting of Risk Appetite Statements and reporting thereon as well as the coordination of
internal and regulatory ESG risk stress testing and scenario analysis.
Environmental, social and governance risk
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As part of our integrated strategy and as per regulatory expectations (ECB Guide on climate-related and
environmental risks), ING has established its climate risk road map as a formalised programme under ING’s global
oversight of regulatory programmes. The programme aims at embedding climate-related and environmental risks
across the organisation, from identification to business strategy and governance to risk appetite and from data
management to internal reporting and external disclosures. Together with ING’s ESR framework and the Terra
approach that was introduced to align our lending portfolio of the most carbon emission intensive sectors with
the decarbonization objectives, the climate risk programme contributes to increase the control over exposure to
climate change.
The governance of the programme has recently been strengthened. Under the ING Group CRO’s sponsorship, the
Steering Committee has been extended with broader representation of Finance, both the first and second line of
defence of the Risk domain and an observer role for the third line of defence.
The Steering Group is responsible for the following tasks:
◾
Set strategic direction and prioritise the programme deliverables
◾
Define KPIs for climate risk integration
◾
Oversight on execution
◾
Manage impediments raised by the workstreams
Workstreams are responsible for the implementation of the specific requirements with regard to strategy and
governance, the risk management framework across all risk categories, scenario and stress testing and reporting
and disclosures. Workstreams for the Wholesale Banking and Retail Banking are responsible for the
implementation in the business lines.
The Workstreams are supported by a Core Team that is responsible for overall management of the programme,
alignment on content across the workstreams, report progress to the Steering Committee and communication
with both internal and external stakeholders to further promote awareness and knowledge of the topic
Progress 2021
Under the governance of the climate risk programme the following progress was made in 2021:
Review of credit risk policies and procedures
Under ING’s governance for policy review, the group-wide policies and procedures for Financial Risk, ESR,
Operational Risk, Compliance and Retail Risk have been assessed for guidance on climate-related and
environmental risks. Focusing on credit risk, the global policies for sector strategy and risk appetite setting, the
credit risk appetite framework, corporate credit assessment and regular review, collateral valuation and loan
renewal, credit risk mitigation, the ESR framework, the investment policy, the methodology for the climate
environmental risk heatmap and the Retail credit risk policy have been updated with specific requirements for
climate-related and environmental risks. The risk rating policy was updated to explicitly include climate-related
and environmental risks as a valid reason to appeal the rating.
Risk identification
In the course of 2021, we worked on further identifying climate-related and environmental risk within our
portfolio. We have created extensive heatmaps to assess each Wholesale Banking sector and the Retail Banking
mortgages, consumer lending and business lending portfolios, from a global perspective, on more than 30
climate-related and environmental risk factors. These heatmaps have been established with the input from ING’s
front office and credit risk management experts. The heatmaps have been challenged for plausibility and ratified
for consistency across the individual sectors and portfolios by responsible Senior Management of the Front Office
and the second line Credit Risk function of Wholesale Banking and Retail Banking.
The table below is an extract from the consolidated heatmap. The aggregated scores on transition risk and
physical risk for each sector are assuming a 5-year horizon, which is relatively short in climate terms. We refer to
ING’s 2021 Integrated Climate Report for more information on the methodology and risk factors used to establish
the heatmaps. Besides, we highlight the fact that these scores represent the financial materiality of climate risk
on ING’s portfolio, as opposed to a generic sector perspective.
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Heatmap
Sectors
Transition risk
Physical risk
EAD 2021 (€ million)
Renewables power
Low
Low
11,203
Upstream OG
High
low-medium
6,266
Mid downstream OG
medium -high
low-medium
12,098
Utilities
low
low
12,173
Metals manufacturing
low-medium
medium
5,135
Metals mining
medium
low-medium
5,153
Fertilizers
low
low-medium
387
Automotive
low-medium
low-medium
8,842
Aviation
low-medium
low-medium
3,905
Shipping
low-medium
low-medium
10,420
Containers logistics
low-medium
low-medium
9,106
Land transport
low-medium
low-medium
3,937
Commercial real estate
1
medium
low
57,766
Residential real estate
medium
medium
329,764
1 Commercial real estate includes Wholesale Banking and business banking (Retail Banking) exposures.
All EAD exposures are from our Wholesale Bank division, except for Commercial real estate which also include
ING’s Business Banking exposure and the residential real estate which represents ING’s Retail Bank’s mortgages.
The heatmaps’ climate risk assessments are based on internal expert judgement and don’t yet include individual
counterparty assessment. The heatmapping exercise is however a useful tool to scan our portfolio on climate risk
and to identify the pockets of exposure which need to be further investigated in priority. The table represents the
portfolios of our balance sheet for which we consider to have the most mature level of expertise to assess
climate risk impact. Going forward, we expect to disclose the assessment on all our portfolios. We use our
heatmaps to inform the Wholesale Bank sector strategy and risk appetite papers and as main climate risk
identification tool for the pilot we are launching to embed climate risk into the Wholesale Bank transaction
approval process
Retail Banking has finalized the preparation of the risk assessment of physical risk exposure of the mortgage
portfolio in cooperation with an external party. Compared with the expert led heatmaps, the physical risk
assessment of the Retail mortgages portfolio provides information on a granular level which allows for a more
quantified impact analysis.
Risk appetite
The heatmaps have been used to introduce climate-related and environmental risk in our 2022 credit RAS cycle.
Starting with a monitoring period, the 2022 credit RAS for Wholesale Banking introduces a mechanism that limits
growth of subsectors with a higher exposure to climate-related and environmental risks while allowing
subsectors with a low exposure to these risks to grow within the overall limit of the sector. A similar approach is
planned for Retail Banking, where the outcome of the physical risk assessment that is will be conducted in the
first half of 2022 is expected to inform the Retail Banking strategy and risk appetite
Risk measurement
We have conducted a climate change scenario analysis pilot project with Baringa Partners, a consulting group
with specific climate change capabilities. The project consisted of running the Climate Change Scenario Model,
developed by Baringa and acquired by BlackRock in June 2021, on a sample of 40 counterparties in the Energy,
Transport Logistics, and Metals Mining sectors. The pilot provided insight on the impact of climate change
pathways on company metrics. Under a 2 degrees orderly climate change scenario, the pilot showed limited
impact on company metrics until 2035 and limited defaults. Under a disorderly 2 degrees scenario in which the
response comes at a later stage and with more sudden actions , the steeper increase of carbon pricing results in a
higher number of company defaults after 2040. In the 4 degrees scenario (“hothouse”) in which no measures to
mitigate the impact from climate change are taken, there is no transition risk but a higher physical risk than in the
2 degrees orderly / disorderly scenarios. The main high level insight from this exercise is that transition risks are
expected to materialize much faster than physical risks given the expected actions to decarbonize the economy.
More concrete conclusions would be expected in case such exercise would be run on a representative part of our
exposure to the various sectors of the economy. The pilot project we did has provided an accelerated experience
of what climate change scenario analysis is on a sample of companies, under specific scenarios. At the same time
the heatmap data for Wholesale Banking sectors will also be integrated in the ING internal credit risk dashboard
to allow senior management to monitor climate risk exposure against the RAS limits. ING is also actively
preparing for the ECB climate risk stress to occur in 2022. For details please refer to our stand-alone ‘Climate
Report 2021’ published on our corporate website ing.com.
Next to the structured approach to measurement of exposure to climate risks and as part of collecting and
analysing empirical data of climate and environmental risk impacts, a separate assessment was made of the
credit losses resulting from the river floodings in Germany, Belgium and The Netherlands that took place in July
2021. The credit losses were assessed not to be material for ING.
Challenges
Environmental, social and governance risk
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Access to actual and consistent data is the key challenge for risk measurement as definitions and methodologies
for the quantification of climate-related and environmental risks are developing. Availability of company data is
scattered across industries and jurisdictions and limited as not all companies are subject to disclosure
requirements w.r.t. climate-related and environmental risk factors. In absence of comprehensive company data,
the use of proxies is required for a consistent assessment of exposures. Because of these limitations and given
the prospective and (very) long term nature of climate risk measurement, the integration of quantified inputs
into risk modelling has not taken place at this stage.
Next steps
In 2022, we aim to further progress with our efforts regarding climate-related risks and opportunities by refining
our methodologies. ING’s leadership objectives in building a sustainable future has been translated into targets
to manage our portfolio’s material ESG risks and quantify the financial impact that are linked to the United
Nations’ Sustainable Development Goals. A specific KPI has been defined for the Management Board Banking to
integrate ESG into ING’s governance. For the implementation of “E”, next to the above mentioned next steps for
the integration of climate-related and environmental risk considerations in the credit risk domain, this includes
working towards standard setting and expanding the scope to the market and liquidity risk and the non-financial
risk / compliance framework. From 2022 onwards, climate-related and environmental risks will be integrated in
the critical policies and procedures for ING’s financial markets, treasury and liquidity risk management function
and the Operational Compliance risk framework. The outcome of internal stress testing will inform the risk
appetite and limit setting process. Where applicable, the governance framework will be updated with roles and
responsibilities for climate-related and environmental risks assigned. With the strengthened climate risk
governance and structured programme management approach, we aim to accelerate the embedding of climate
risk within the ING organisation, moving towards quantification of these risks in our risk management
procedures. This includes the implementation of a global climate risk data management plan, the integration of
climate-related and environmental risk considerations in risk policies and procedures at country level, the further
refinement of our climate-related and environmental risk heatmaps with longer time horizons and geographical
dimension. The outcome of the ECB climate stress test that will be conducted in the first half of 2022 will inform
the approach for standardised internal climate risk stress testing that is planned to start as from 2023. Based on
an inventory of training needs of the critical functions in front office, risk management and leadership, ING will
launch training plans to educate our staff on climate risk.
Non-financial risk
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Non-financial risk
Introduction
Non-financial risk (NFR) is defined as the risk of financial loss, legal or regulatory sanctions, or reputational
damage due to inadequate or failing internal processes, people and systems; a failure to comply with laws,
regulations and standards; or external events.
Governance
The global head of NFR is responsible for developing the framework of NFR policies and standards within ING,
and for monitoring the quality of non-financial risk management in the ING entities.
Non-Financial risk measurement
ING uses an internal model in line with the Advanced Measurement Approach (AMA) to determine the regulatory
and economic capital amounts that are necessary to cover potential losses resulting from non-financial risks. This
model predicts non-financial risk losses by combining a forward-looking and a backward-looking view on non-
financial risk events. ING reports the outcome of its AMA model quarterly.
Risk categories
ING categorises non-financial risks in the following areas:
◾
Information (technology)
risk
to breaches of confidentiality, integrity or availability of information or a lack of information quality
within business processes and/or the supporting IT systems;
◾
Continuity risk
disruptions (loss of people, processes, systems, data, premises);
◾
Control risk
organisational structures and governance procedures (including unclear roles and responsibilities and
inadequate reporting structure);
◾
Processing risk
(transaction) processing (input, execution, output) or failing process management;
◾
Unauthorised activity risk
employees performing outside the normal course of their business, intentionally giving unauthorised
approvals or overstepping their authority;
◾
Personal and physical security risk
damage due to criminal and environmental threats that might endanger the security or safety of ING
personnel at work, people in ING locations, ING assets or assets entrusted to ING, people at ING event
locations, or might have an impact on ING organisation's confidentiality, integrity or availability;
◾
Employment practice risk
acts that are inconsistent with employment, health and/or safety laws, regulations or agreements, from
payment of personal injury claims, or from diversity/discrimination events; and
◾
Fraud
those who intend to deceitfully or unlawfully benefit themselves and/or others. This definition of fraud is
specified in the following two categories of fraud:
Internal fraud
: acts of fraud which involves at least one internal party performed by or in collusion with
an ING employee or agent with the consequence of financial loss, regulatory fines, litigation loss,
business disruption and/or reputational damage for ING.
External fraud
: acts of fraud or scams by individuals and/or parties excluding ING staff (including
contractors), with the consequence of financial loss, regulatory fines, litigation loss, business disruption
and/or reputational damage for ING.
Main developments in 2021
Covid-19
From the start of the global outbreak of the Covid-19 virus in January 2020, ING’s priority has been to protect its
employees and their families and to continue servicing its customers as before, putting extra effort into
supporting them in difficult times. To ensure this ING employees have put immediate focus on ensuring the
bank’s operational resilience and continuity. ING has mobilised a global crisis management organisation –
engaging with all ING entities worldwide – to monitor and manage Covid-19-related operational, health and
safety challenges. Throughout 2021, ING continued to monitor developments in employee well-being and local
Business Continuity Management (BCM) threat levels and aimed to identify, monitor and manage Covid-19
related risks through specific risk assessments. During 2021 ING developed an approach for the new way of
working once Covid-19 measures are lifted. This approach (Hybrid Mode) is based on working partly at home,
and partly in the office according to local health authority guidance.
Non-financial risk
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Cybercrime and fraud
Cybercrime remains a continuous threat to companies in general and to financial institutions in particular. Both
the frequency and the intensity of attacks are increasing on a global scale. The sophistication and implications of
ransomware attacks are a growing concern in the threat landscape. The continuous enhancement of the control
environment to protect from, and detect and respond to, e-banking fraud, distributed denial-of-service (DDoS),
targeted attacks and more specific ransomware attacks is of the highest priority. Based on regular scenario
analysis done in ING’s first line of defence, additional controls continue to be embedded in the organisation as
part of the overall internal control framework and are continuously re-assessed against existing and new threats.
In addition, ING continues to strengthen its global cybercrime and fraud resilience through collaboration with
financial industry peers, law enforcement authorities, government (e.g. National Cyber Security Centre) and
Internet Service Providers (ISPs).
The further digitalisation of banking services, increasing electronic exchange of information via different
consumer channels, use of and dependency on third-party vendors for services, and the implementation of PSD2
are likely to present ongoing cybercrime resilience, fraud management and IT-security challenges; both in the
short- and medium-term as criminal actors target financial and sensitive (payment) data, such as customer user
credentials outside the traditional banking environment. Sensitive (payment) or personal data can be obtained by
criminals via social forums such as WhatsApp and by screen scraping user credentials when a fallback procedure
within PSD2 is allowed. In 2021, these challenges have further increased with more sophisticated phishing
attempts, improved social engineering fraud attempts, an increased risk of external fraud in the lending portfolio
and because people are working from home.
Dealing with current and emerging fraud threats, especially given the ever increasing use of digital and online
banking, effectively requires continuous improvement of fraud management capabilities such as real-time
transaction monitoring and response capabilities. In addition, better alignment and standardisation is needed for
cross-border fraud management across ING and related platforms. With legislation such as EBA PSD2 and the
continuing emphasis on duty of care, financial institutions are potentially becoming more and more responsible
for losses incurred by clients and are taking on more of the burden of reclaiming those losses.
Data risk management
Data – whether customer, financial, risk or other business – is core to ING’s purpose. Data leads to insights and
insights empower people to stay a step ahead in life and in business. The ING Data Strategy is creating a single
vision and governance for data, empowering business users with a harmonised foundation. This encompasses
further embedding data functions and improving (bank-wide) data operations in ING’s Way of Working, and
simplifying, standardising and modernising its technology and data platforms. Recognising that data risk is one of
the top risks of the bank, ING is creating a holistic view on how ING manages risk around data, including personal
data protection, data security, data quality and data ethics.
Identity and access management (IAM)
IAM remains one of the focus areas of ING and an important element in our control framework to prevent and
mitigate the risk of, unauthorised access to IT systems and the data processed and stored therein. This is done by
enforcing IAM global processes and controls which are periodically reviewed and tested. These processes and
controls are supported by technologies, tooling and practices which are managed by a dedicated IAM team, also
ensuring improvements are identified to address developments both inside and outside ING. In 2021, ING
continued to improve, with attention to tooling, standardisation and harmonisation of processes, workflows and
automation of IAM controls.
Personal data protection
As per 25 May 2018, the European General Data Protection Regulation (GDPR) became effective. ING is bound by
the GDPR that affords greater protection to individuals and requires more control on data and transparency
regarding the use of data by companies. In 2021, ING continued to further enhance the data protection of our
clients and employees.
Sourcing Risk
In 2019, a renewed sourcing policy became effective, outlining the inherent critical and high risks that can
materialise during the sourcing life-cycle. In addition, a sourcing guideline was issued to support updated
requirements, issued by EBA in 2019. The controls defined in the support control framework (SCF) sourcing have
been implemented and tested. The scope of sourcing encompasses outsourcing to external providers as well as
intra-group sourcing. During 2019, 2020 and 2021 the relevant service arrangements have been assessed based
on the new Sourcing Policy definition and when applicable updated to comply with the EBA guidelines.
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Compliance risk
Introduction
Compliance risk is defined as a threat posed to ING’s standing resulting from failure to act in line with applicable
laws and regulations, internal rules (including ING’s Orange Code and global Code of Conduct) and/or societal
expectations. A failure to adequately mitigate compliance risk may lead to damage to ING’s reputation and/or
legal/regulatory sanctions, and/or financial loss.
The mission of Compliance is to support ING in conducting its business activities in line with applicable laws and
regulations, taking into account ING’s internal code of conduct and societal expectations. Compliance wants to
drive compliance risk management by desire and design throughout the organisation, unleashing the power of
our data, risk expertise, and people to keep the bank safe and sound, and help drive new and sustainable ways of
doing business.
Within ING, compliance risks are defined as those risks that are within the scope of the ING Compliance Risk
Catalogue. The following three risk categories apply:
◾
Financial crime risk refers to the risks of the bank’s products and services being abused for illicit purpose
generating or disguising financial and/or economic crimes (FEC).
◾
Conduct risk refers to the compliance risks arising from potential or perceived misconduct by ING or its
employees towards its customers, market integrity, business partners and other stakeholders.
◾
Organisational risk refers to the compliance risks arising from actual, potential or perceived flaws in the
way that ING is organised and structured including its regulatory and reporting framework.
Governance
The Compliance organisation (comprised of three roles: Group Compliance, geographical compliance and country
compliance) is part of ING’s second line of defence. Group Compliance sets the methodologies and minimum
standards for the bank as a whole. Geographical compliance (Challengers Growth Markets / Wholesale Banking
/ Market Leaders) together with the functional lines in the countries are responsible for the execution of these
standards and control frameworks, within the boundaries set. Compliance is tasked with instructing, advising,
challenging and having oversight of the first line of defence in their management of compliance risks as well as
raising awareness (via training and communication), influencing and stimulating a sound compliance risk culture.
The scope of the compliance risks is outlined in the ING Compliance Charter.
Compliance is headed by the chief compliance officer (CCO) who reports directly to the CRO. The CCO has direct
access to the Risk Committee of the Supervisory Board. The CCO and the chairman of the Risk Committee had
regular bilateral consultations in 2021.
Strengthening the compliance function
As a global bank in a fast-changing world we want to do the right thing to be safe, secure and compliant for our
customers and for society. To live up to that the OneCompliance strategy was launched in October 2019.
The OneCompliance strategy is a multi-year, global compliance strategy and transformation programme that is
based on a framework that aims to help ING manage risks consistently across the organisation. In 2021 the work
continued on the following programme goals: a global identity and risk view allowing people to assess risks in a
uniform way; a single, risk-based monitoring methodology to accelerate improvements in addressing risks;
simplified work processes through a uniform framework, to allow people to focus on what matters; the necessary
skills and resources to deliver at the desired quality; intuitive, actionable and insightful management information
and global dashboard to take smart decisions and steer within risk appetite and our global direction (steering) to
support everyone in Compliance. As we operate in a dynamic and challenging environment we are continuously
learning and improving while getting to a more sustainable and mature level within the compliance function.
Financial crime
Financial crime risk results from illicit activity in the form of money laundering, terrorist financing, bribery and
corruption, sanctions evasion, fraud and customer tax offences. It arises in the course of ING’s day-to-day
banking operations if our customers, employees or third parties undertake or facilitate financial crime, or if our
products and services are misused for illicit purposes to generate or disguise financial crime.
We have zero tolerance for deliberately or knowingly facilitating financial crime - keeping ING safe, secure and
compliant remains a top priority in order to protect our business and society at large from financial crime and its
corrosive effects upon individuals and communities.
Financial crime risk management
The Non-Financial Risk Committee, chaired by ING’s chief risk officer, is the principal risk management forum for
financial crime risk. This committee reviews and escalates, where appropriate, key financial crime topics and risks
across ING to the Executive Board and Management Board Banking. Responsibility for the oversight of ING’s
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compliance with our legal and regulatory obligations in relation to financial crime risk resides with the global
head Financial Crime Compliance who reports to ING’s chief compliance officer, with oversight by the chief risk
officer. The Global KYC Committee, chaired by the chief operating officer, is mandated by the Management
Board Banking to steer, prioritise and approve KYC-related topics undertaken across ING, and to oversee
compliance with international standards and laws and internal policies related to KYC.
We believe all of our people have a key role to play in the fight against financial crime. Having a robust and sound
risk culture embedded in our day-to-day way of working is a foundational element of our financial crime risk
control environment. We define the accountabilities and responsibilities of our staff in accordance with the three
lines of defence model, considering our business, geographical and functional structure.
As an organisation, we’re committed to meeting our legal and regulatory requirements and the standards we
also expect from ourselves. ING remains subject to regulatory investigations and scrutiny in certain jurisdictions,
and we’re committed to executing and implementing the identified enhancements required to our financial
crime risk framework in a sustainable way for the longer-term.
Key risk management processes
ING strives to play its part in contributing to the safeguarding of the financial system against illicit financial
activity, in the context of heightened and changing regulatory expectations and as financial crime risks continue
to evolve. To fulfil our responsibility as a global financial institution in combatting financial crime, we believe it is
essential to comply with anti-money laundering and counter terrorism financing (AML/CFT) laws and regulations,
establish a reasonable and risk-based control framework to mitigate financial crime risk, and to seek to provide
useful information to relevant government agencies. We also believe it is important to respond swiftly and
proactively to new financial crime threats and techniques (which can be increasingly sophisticated as financial
criminals harness and misuse new technological capabilities) as well as to relevant media reporting, such as on
the Pandora Papers and the Congo Hold-Up.
To mitigate financial crime risks, we apply a framework of preventative and detective systems and controls,
underpinned by policy, procedures and related control standards across our global business in all locations where
we operate. In 2021, we remained focused on continuing to strengthen this financial crime risk management
framework in order to support sustainable remediation of known issues. At the same time, we acknowledge that
the continuous maturing of the financial crime risk management framework, as well as other developments such
as regulatory and legislative changes, will keep asking for our attention and commitment in future years. For that
purpose we’ve initiated the Financial Economic Crime Controls Maturity Programme (FCMP). See also ‘Know your
customer (KYC)’.
In 2021, we refreshed and further enhanced the annual Systematic Integrity Risk Analysis (SIRA) across our global
footprint, which assesses inherent and residual integrity risks related to financial crime, and the effectiveness of
the associated processes and controls ING has in place. This provides insights into the financial crime integrity
risks that ING may be exposed to, so we can appropriately manage these risks in accordance with our risk
appetite. Our risk-based surveillance (screening and monitoring) controls are also designed to identify activity
that may require additional investigation or other risk management actions, and where appropriate, reporting to
the relevant authorities.
We monitor our compliance in relation to financial crime risk and our tolerance levels on a regular basis against a
set of quantitative and qualitative financial crime Risk Appetite metrics that were updated in 2021 and approved
by the Non-Financial Risk Committee.
Bribery and Corruption
Corruption curbs economic growth and impedes the development of societies. It undermines business
confidence and corporate integrity, hinders fair business competition and harms international trade. ING takes
these risks seriously: bribery and corruption risks are part of our non-financial risk framework, and are included in
the client and third-party due diligence and monitoring measures in our financial crime risk management
framework. We will continue to further structurally strengthen our response to bribery and corruption risks in
key areas as part of our multi-year enhancement programme and FCMP, and in support of our zero tolerance
approach for bribery and corruption.
Customer Tax Compliance
ING remains committed to its reporting obligations under the Foreign Account Tax Compliance Act (FATCA) and
Common Reporting Standards (CRS). Throughout 2021, we have worked to improve the quality of reports
provided to tax authorities and reacted to the implementation of mandatory disclosure rules for EU jurisdictions
(implemented via the amendment to Directive 2011/16 (DAC6)). We also continue to focus on customer tax
integrity, as we do not want to be involved in or facilitating tax-related financial crime through servicing our
customers.
Key developments in 2021
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Covid-19 taskforce
Opportunistic criminals have been quick to exploit the disruption caused by the Covid-19 pandemic. During 2021,
the activities of the ING financial crime Covid-19 taskforce continued to focus on protecting customers from
fraud and cyber-related crimes, as well as identifying evolving criminal money laundering methods. The taskforce
worked with data analysts and business-aligned teams globally to share guidance with regional teams on the
thematic financial crime risks relating to Covid-19, including potential risk scenarios and datapoints to assist
regional and local teams identify unusual transactions.
Evolving external landscape
Financial institutions continue to face considerable regulatory scrutiny in relation to detecting and preventing
financial crime, and increasing costs of compliance. In 2021, this saw some participants in the Dutch banking
sector streamlining their workforces or increasing their account fees for higher risk customers. In addition, the
complexity of the regulatory landscape continues to give rise to potential tension between data privacy (GDPR),
anti-money laundering/counter terrorism financing and anti-corruption laws and regulations. This includes
requirements for sharing information within ING in relation to financial crime in order to manage our risk
exposure, while also complying with relevant data legislation (which can differ significantly depending on
jurisdiction). Society’s expectations that financial institutions are accountable for safeguarding the financial
system also create an increasingly demanding environment.
We take this gatekeeper responsibility seriously. We believe that by proactively participating in public-private
partnerships and collaborating with other banks, as well as investing in new and innovative technological
capabilities, we can be more effective in the collective fight against financial crime. We also recognise the
essential role played by certain other financial services providers in safeguarding the financial system against
illicit funds.
Payment Service Providers
The position of payment service providers (PSPs) in the financial service industry has become prominent and
permanent over the years. PSPs face continuous challenges to demonstrate compliance with industry standards
and recommendations, such as the guidance provided by the Wolfsberg Group and Financial Action Task Force
(FATF) on payment transparency. Having limited transparency on transactions initiated through the different
payment platforms increases the challenge of monitoring whether PSPs and banks are potentially misused to
facilitate tax evasion, money laundering and terrorist financing.
ING will continue to contribute to dialogues with PSPs, regulators and industry bodies on these challenges;
ensuring we obtain the required transparency on payment information. This supports compliance with the
applicable laws and regulations and internal policies and instructions as well as monitoring to ensure that ING
stays within its financial crime risk appetite.
EU AML/CFT legislative package
In mid-2021 the European Commission adopted a package of legislative proposals aimed at strengthening anti-
money laundering (AML) and counter terrorism financing (CFT) rules. This included amendments to existing
legislation to tackle emerging challenges linked to technological innovations, such as virtual assets, as well as the
increasingly global nature of terrorist organisations. It also included centralisation of EU AML/CFT supervision
(the European Anti Money Laundering Authority) and establishing a single EU AML/CFT rulebook, which provides
financial institutions with harmonised and directly applicable AML/CFT rules.
ING welcomes this harmonisation, which removes a degree of regulatory complexity. We have considered
amendments in the context of drafting the updated ING Financial Crime Policy framework. We have also
participated in workstreams and analyses prepared by global banking associations such as the Dutch Banking
Association and the European Banking Federations to assist us in assessing the potential impact of the AML
legislative package on the bank.
Virtual Assets
The rise in price and use of virtual assets, accompanied by the growth of virtual assets service providers was a key
theme throughout 2020 and continued in 2021 to attract regulatory attention for potential tax evasion, money
laundering and terrorist financing concerns. Although the industry’s assessment of financial crime risks in these
areas is beginning to mature, the evolving regulatory environment and understanding of how the virtual assets
ecosystem may be potentially abused for financial crime purposes continues to present a challenge for financial
institutions.
We believe it is important to contribute to ongoing dialogue with regulators on this topic. In 2021, we created
guidance that has been shared across the bank to develop a deeper knowledge and understanding of virtual
assets and the associated financial crime risk landscape, an important step towards our goal of ensuring that ING
remains a safe and compliant bank.
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Environmental crime
Environmental crime risks also came to the fore in 2021; including a wide range of activities such as the illegal
wildlife trade, the illegal extraction and trade of forestry and natural resources as well as illegal land clearance
and waste trafficking, all of which have a socio-economic impact on the population and earth. There is a growing
convergence between environment crime and other serious crimes including corruption and trade-based fraud,
among others.
In 2021, we examined the risks arising from the illegal wildlife trade and how to detect suspicious financial flows
linked to it. We joined the United for Wildlife Financial Taskforce, which brings together private, public and third-
sector partners to identify, disrupt and prevent illegal wildlife trade.
Know your customer (KYC)
Know your customer and financial crime compliance play a key role in ensuring we only engage and do business
with people and companies that meet regulatory requirements and are within our risk appetite. Knowing who we
do business with is vital to keeping ING safe, secure and compliant. As part of our ongoing anti-money laundering
efforts, we continuously assess relationships with customers and monitor and screen transactions. Potentially
unusual or suspicious transactions are reviewed and, where applicable, reported to the relevant authorities.
We’re continuously working to strengthen the implementation of KYC and build sustainable KYC practices. This
includes enhancing customer due diligence files (documentation, data and identity verification) and making
structural improvements in five areas: policy and risk appetite statements, digital tooling, governance,
monitoring and screening, and KYC knowledge and behaviour. All of these enhancements are being integrated
into our business-as-usual practices.
To reinforce this foundation, the Financial Economic Crime Controls Maturity Programme, set up in 2020,
broadens the scope of certain aspects of financial crime such as sanctions, customer tax, new and existing FEC
threats and internal quality controls. Its holistic approach aims to take into account new developments in the
complex and dynamic environment that we operate in and is jointly managed by the Financial Crime Compliance
(FCC) and KYC departments.
Our regulators keep a close eye on the measures we have in place against money laundering and terrorism
financing and to manage compliance risks, as well as improvements we’ve made to address shortcomings that
had been identified in some countries. In February 2021, the French regulator, the Autorité de contrôle
prudentiel et de résolution (ACPR), confirmed ING had put in place the necessary corrective measures following
its reprimand in 2018 and a sanction of €3 million.
Public-private partnerships
To continue to be more effective in our efforts to counter financial economic crime, we work closely with our
peers, regulators and law enforcement.
We have elected to centrally coordinate our proactive participation in various public-private partnerships across
our footprint. This ensures a holistic, streamlined and strategically orientated approach towards ING’s
participation in external partnerships and improves our ability to meet regulatory obligations, satisfy moral and
integrity expectations and improve the operational efficiency of managing financial and economic crime-related
risks.
To this end, in 2021 we participated in several projects leveraging intelligence from public-private partnerships in
the areas of trade-based money laundering and synthetic drug production in the Netherlands. We also continue
to support supranational initiatives, such as Europol’s project on the financial crime risks associated with virtual
assets.
Throughout 2021, ING continued to work in a consortium of Dutch banks on Transaction Monitoring Netherlands
(TMNL). The initiative, which monitors transactions within a combined database, is operational and intersecting
with thematic areas of focus for law enforcement, enabling us to better understand potential criminal money
flows, and improve our detection controls in response to these insights. In the Netherlands, ING also works with
the government’s Financial Intelligence Unit and three other banks in the Fintell Alliance. In a pilot, the alliance
investigated and analysed alerts generated by TMNL. It detected complex financial crime networks that none of
the banks could have found alone, illustrating the benefits of multilateral information exchange.
In Germany, ING joined the public-private partnership Anti-Financial Crime Alliance (AFCA) to foster mutual
exchange of information within the financial system. The alliance consists of 30 members, amongst them public
authorities, the largest financial institutions as well as representatives from the real estate sector. We also
continue to contribute in various fora to the further development of industry-wide standards.
KYC policy framework
The KYC policy and related control standards (the KYC policy framework) set the minimum requirements and
control objectives for all ING entities to guard against the involvement in financial crime activity. The KYC policy
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framework reflects relevant national and international laws, regulations, guidance documents and guidelines
from national, European and international authorities, (supra)national risk assessments and industry standards
related to:
◾
financial crime, covering money laundering, terrorist financing, bribery and corruption, export trade
controls, proliferation financing, sanctions (economic, financial and trade), countries designated by ING
as ultra-high-risk countries (UHRC).
◾
customer tax compliance, covering customer tax integrity (CTI), FATCA, CRS, mandatory disclosure
requirements (MDR).
◾
environmental and social risk (ESR) client assessment, specifically the initial customer screening for
environmental and social risk.
The KYC policy framework is mandatory and applies to all ING entities (i.e. all branches and majority-owned
subsidiaries of ING Groep N.V., including ING Bank N.V., or where ING exercises control), their corporate
functions and their branches, including outsourcing partners to whom ING entities have sourced KYC-related
responsibilities. The KYC policy framework also reflects relevant national and international laws, regulations and
industry standards related to business partners and overarching requirements with regards to record retention,
training and awareness. ING entities have local procedures in place, aimed at enabling them to comply with local
laws and regulations and the KYC policy framework. Where local laws and regulations are more stringent, these
have to be applied.
As a result of frequent evaluation of the business from economic, strategic and risk-based perspectives, ING, with
limited exception, does not engage in business involving certain countries including Cuba, Iran, North Korea,
Sudan, Syria and the Crimea region. ING has a policy not to enter into new relationships with clients from these
countries and processes are in place to discontinue existing relationships involving these countries.
Global approach
ING updated its KYC policy in line with external regulatory developments in anti-money laundering and financial
sanctions. In 2021, we finalised the implementation of our continuous adverse media screening tool in all of
ING’s Wholesale and Retail Banking businesses. This allows us to continuously screen customers against news
intelligence related to financial and economic crime, creating an additional control to monitor our customers on
relevant news updates on a daily basis, instead of during the periodic CDD reviews only. As a result, the business
is better able to identify customers involved in potential criminal activity. We also enhanced our screening
control environment, reducing false positives to prevent potential transaction delays for our customers.
Substituting local tools with centralised global tools enables us to further improve the way we onboard, monitor
and screen customers using a standardised approach across the world.
Knowledge and behaviour
We believe all our people play a role in keeping ING safe, secure and compliant and that a sound risk culture
requires us to act with integrity above all. We want to empower our employees with the skills and knowledge
they need to fight financial crime, and encourage them to speak up if they have concerns relating to financial
crime risk management.
In 2021, the Global KYC Academy further matured and rolled out new learnings to KYC employees, in addition to
the regular curriculum. These included trainings on customer tax offences, environmental and social risks,
sanctions and KYC tools. It also continued to partner with ACAMS (Association of Certified Anti-Money
Laundering Specialists) to develop and deliver tailored, certified training for our employees. The ACAMS training
portfolio focuses on learning paths that provide professional foundational skills or advance expertise in a range of
topics including customer due diligence, screening, transaction monitoring and sanctions. Over 8,000 ACAMS
trainings were enrolled in 2021. Virtual Instructor Led Training (VILT) was also rolled out to enable innovative and
flexible learning, especially with many employees working from home due to the coronavirus pandemic. In
addition we introduced a mobile app quiz to engage employees and stimulate learning on KYC topics.
To increase understanding and share best practices on financial crime risk management, awareness sessions
were held for all employees and bi-annual bootcamps are organised for money laundering reporting officers. Our
training framework is currently being enhanced to provide more targeted and specialist training on risks related
to bribery and corruption. We are also working on further developing dedicated centres of expertise to use our
centralised expertise more effectively and harmonise standards across ING.
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In 2021, behavioural risk assessments were carried out at ING in Italy and in Wholesale Banking in the UK and
Germany. These focused on identifying behavioural patterns and driving appropriate escalation behaviour.
Feedback sessions and dialogue starters to initiate open conversations around these assessments were also held
in Italy, while behavioural interventions were held in Poland and Romania, aimed at improving the desired
behaviours around leadership and decision-making. In addition, two KYC world cafes were held for all KYC
employees to create a shared understanding, collective purpose and uniformed approach to solving problems
when dealing with common behavioural risks.
Conduct Compliance Culture
Conduct risk is defined by anything that can result either in client detriment or impacts market integrity. Conduct
compliance includes client protection and transparency (Treating Customers Fairly), market conduct (including
market manipulation) and conflicts of interest.
A sound risk culture is paramount at ING as it determines the way in which employees identify, understand,
discuss, and act on the risks we are confronted with and the risks we take. The proper embedding of our global
Code of Conduct, Orange Code and the Whistleblower policy into our processes is key to managing our culture
and ethics risk.
Treating Customers Fairly
Building on work done in 2020 to strengthen our compliance with the Markets in Financial Services Directive
(MiFID) and to create a more effective Client Protection and Product Approval (CPAC) framework, in 2021 we
created several training sessions on investment services, issued guidelines and closely monitored the
remediation of improvements to the MiFID implementation to ensure a common understanding of our approach
to MiFID group-wide. CPAC governance was further strengthened to ensure strong challenge and a consistent
application globally of risk appetite when offering investment services to our customers. Preparations for the
implementation of the Mifid Quickfix have progressed in line with implementation in 2022.
Alongside direct consumer protection requirements as laid down in the specific regulations (e.g. Mifid II) ING is
bound by local consumer protection laws and has adopted its own minimum standards, such as the Customer
Golden Rules. These minimum standards are regularly reviewed to stay in sync with legal developments and
expectations from society. One of the elements we take into account in the review, is the outcome of the various
discussions we have with consumer associations. Sometimes such review and discussions also lead to an offer to
compensate certain customers, as we have done for certain customers with mortgages in Swiss franc in Poland
and for certain Dutch retail customers in connection with certain revolving consumer loans with variable interest.
See for more detail Note 46 ‘Legal proceedings’ to the consolidated financial statements.
Transaction reporting activities were improved considerably with the creation of a group-wide governance
framework and controls, as well as participating in the market wide upload of backlog in close cooperation with
the relevant supervisory authorities and the reporting agencies.
To support our objectives, we expanded our focus to other key areas: In relation to insurance products, we rolled
out a global policy and controls in order to align with the EU Insurance Distribution Directive (IDD). To safeguard
client interests during the IBOR transition, best practices focused on client conduct and shared by the relevant
supervisory authorities have been implemented.
Finally, in response to the increasing importance of sustainable products for our clients and the need for ESG
considerations to form an integral part of our products and services to clients, alongside the development and
roll out of policy on SFDR. ESG is being embedded within the ING organisation across all three lines of defence.
Market Conduct
Market conduct risk stems from undertaking activities that impact market integrity. The smooth functioning and
public confidence in markets are crucial for economic growth and wealth. As part of our work in 2021 to
strengthen our market conduct framework, an update of our market abuse policy was completed, together with
a revised set of key controls owned by the first line and rolled out to all ING entities, alongside an updated
mandatory e-learning on market abuse. To support ING entities in the maintenance of information barriers and
the communication of confidential and inside information, new global procedures are in the process of being
rolled out to ING entities.
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Conflicts of Interest
ING is committed to identify conflicts of interest and act on them. The Conflicts of Interest policy sets the
obligations to identify, assess and manage conflicts of interest, when personal or organisational interests are in
conflict over the interest of our client(s), employees or other stakeholders (e.g. when related to personal account
dealing). In 2021 the Conflicts of Interest policy was revised to further align with the standards as defined by
enterprise risk management. The policy incorporates key requirements for both personal and organisational
conflicts of interest in line with the European Bank Association Guidelines on Internal Governance. Next to the
updated policy, mandatory instructions on conflict of interest registers were developed including templates,
which provide more guidance on identifying, assessing and keeping audit trail of our conflict of interest risks.
Culture Ethics
In 2021, ING executed the risk culture programme that was developed based on the 2020 self-assessment. Some
key results are the formalisation of ING’s risk culture principles, the development of a risk culture dashboard, and
the development and roll-out of an approach to increase awareness and dialogue on Non-Financial Risk. The
dashboard is developed to monitor and facilitate meaningful conversations on our risk culture and it leverages
different instruments for insight generation. Instruments include amongst others a survey to capture employee
perceptions, quantitative indicators from existing data sources and systems and a structured approach to
capturing the professional judgements of Compliance officers. The risk culture programme is actively discussed
by the MBB and the SB on a quarterly basis.
In February 2021, ING launched a programme to further enhance the global Whistleblower process. The
programme aims to further strengthen risk management through more automated data collection and reporting
and to continuously enhance psychological safety and trust by strengthening the whistleblowing confidentiality
and employee protection. The quarterly whistleblowing report is shared with the MBB and the SB.
To preserve risk awareness and risk judgement in the area of risk culture, ING continued its efforts towards
embedding the Orange Code decision making model that supports ethical and well-balanced decision-making
throughout ING further by inserting referral to using the model in several local PARP frameworks.
Innovation, analytics and digitalisation
We continue to seek to harness new and innovative technological capabilities to keep our clients safer and to
enhance their digital journey with ING. In 2021, we consolidated disruptive client-focussed innovation activities
across the Group under a single dedicated business area, ING Neo. We also continue to prioritise more
incremental innovation, under the oversight of our KYC Innovation Committee and RegTech Innovation Board.
In 2021, we rolled out the CoorpID platform which digitalises the know your customer process for our corporate
clients improving the KYC journey of our customers, in four countries and will aim to continue to expanding in
throughout 2022. Furthermore, we rolled out the Blacksmith solution to improve the KYC journey for financial
institutions in six countries. We also continued to develop and leverage an AI-supported platform to help us to
respond swiftly and effectively to the changing regulatory landscape and underlying policies in relation to
financial crime.
Tax risk
Tax policies, procedures and a tax control framework have been implemented to support management in
mitigating potential tax risks in a prudent manner. Internal monitoring, control and reporting of tax-related risks
take place on a continuous basis with regular reporting to various stakeholders. For 404/SOX purposes (section
404 of the Sarbanes-Oxley Act), an ‘effectiveness of internal control statement’ with respect to tax controls has
been provided. Tax risk management is subject to Corporate Audit testing and evaluation. In the Netherlands and
also in other countries, ING’s position is to be cooperatively tax compliant, this implies to have transparency
about and disclosure of relevant tax risks towards tax authorities. Tax risks not only refer to ING’s own tax
position, but also to the risks in relation to our customers. In this respect, we have integrated a tax integrity
assessment in our overall customer risk assessment process.
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Model risk
Introduction
Model risk is the risk that the financial or reputational position of ING is negatively impacted as a consequence of
the use of models. Model risk can arise from errors in the development, implementation, use or interpretation of
models, or from incomplete or wrong data etc., leading to inaccurate, non-compliant or misinterpreted model
outputs.
A model is defined as a quantitative method, system, or approach that applies statistical, economic, financial, or
mathematical theories, techniques, and assumptions to process input data into quantitative estimates or whose
inputs are partially or wholly qualitative or based on expert judgement.
Governance (*)
The head of Model Risk Management (MoRM) reports to the ING chief risk officer. The Model Risk Management
Committee (MoRMC) is the dedicated authority within ING for model risk management. It is a committee
designated by the Management Board of ING bank. It is chaired by the ING chief risk officer and co-chaired by the
head of MoRM.
Model lines of defence (*)
ING’s model risk and control structure is based on the three model lines of defence (MLoD) approach. This
approach aims to provide a sound governance framework for model risk management by defining and
implementing three different management layers with distinct roles and oversight responsibilities.
Model risk
ING Group Annual Report 2021 on Form 20-F
244
The composition and main activities within the three model lines of defence (MLoD):
◾
The 1
st
development, and is accountable for, among others, the development, implementation and use of the
models as well as monitoring models’ performance;
◾
The 2
nd
management framework, proposes the model risk appetite, provides challenge to model risk
identification and assessment and provides an independent validation of models used within ING;
◾
The 3
rd
of defence and provide assurance over the 1st and 2nd line model risk management activities.
Model risk appetite (Model RAS) (*)
The model risk appetite is designed to determine the level of model risk ING is willing to accept in pursuit of its
strategic objectives. The initial iteration of Model RAS was introduced in 2020 and was monitored throughout
2021. At the end of 2021, the data captured by the initial Model RAS was evaluated, resulting in the
implementation of thresholds and early warning limits for selected metrics.
Model risk management (*)
Model risk management is executed via processes such as: model identification, model classification, model risk
identification and assessment, and model validation. During 2021, these processes were further enhanced by
incorporating model identification in the product approval and review process and by inclusion of model ethics
principles as an element for assessing model risk. Dedicated model validation frameworks are in place for the key
model types such as Credit, Market, Liquidity, Operational Risk, IRRBB and advanced analytics. These frameworks
are continuously being enhanced to keep up to date with latest development.
On an aggregated level model risk is monitored via analysis of data from the global model inventory. The insights,
from aggregated data analysis, are reported to the MoRMC and to the MBB for senior management to take well-
informed decisions on acceptance or further mitigation of model risk.
Model lifecycle (*)
The next figure provides a schematic overview of the model lifecycle, where orange represents the activities of
the 1
st
nd
rd
processes are outlined below (reference).
Initiation or change
: The initiation of the development of a new model or change of an existing model can be
triggered by different factors. These may be (i) internal, such as the introduction of a new product that cannot be
handled by the existing models, a change in ING’s organisation, financial or commercial strategy or findings and
issues by an auditor, validator or based on monitoring; or (ii) external, such as innovation/new technology that
Model risk
ING Group Annual Report 2021 on Form 20-F
245
becomes available (for example the Fintech models), new or upcoming supervisory regulations or ongoing
technical developments.
Data collection
for model development. The process includes the definition of the data needed, assessment of data availability
and quality, assumptions and limitations, as well as the gathering of the data needed for the analyses, impact
study and testing during the model development process.
Model development
is a structured process that leads to a model that is ready for validation and subsequent
use. Depending on the development approach these first stages can be separate or integrated. An example of the
latter is data science-based application development.
Pre-approval validation
objectivity and effective challenge, the model validator is independent from other model parties such as the
model developer, model owner or model approver. Model validation applies equally to in-house developed and
third-party models.
The objective of the
model approval
formal decision to the internal approver before a model can be deployed and used. The recommendations and
validation report prepared by the model validator are key inputs for the approval.
During the
implementation
In the
model use
can only be used after formal approval for use of the model.
The objective of model
performance monitoring
after possible changes in the commercial, organisational or legal environment. Model performance monitoring
begins when model use has started and continues until the model has officially been decommissioned.
Periodic validation:
During the life-time of a model its ongoing validity must be safeguarded. This is done by
periodic independent (re)validation that assesses whether the model is still valid for its intended use and if it is
used as intended. There are two types of validation: (1) periodic, such as annual, which is mandatory for
regulatory models, or (2) ad hoc, for example triggered by changes in the model, the business or financial
instruments etc. The actual frequency of periodic validation depends on the model risk, model type and
applicable regulation.
A model that is / will no longer be used must be decommissioned.
Decommissioning
for example, be triggered because (1) the product, organisation or risk the model is made for has changed
considerably or no longer exists, (2) the model is outdated, underperforming or better alternatives are available,
(3) the model became obsolete or (4) the external approver withdraws its approval for the model.
Continuous model inventory and reporting
: Keeping an inventory of all models and their status during their
lifecycle is a continuous process. It supports management and control of the models in scope, both per individual
model and the overarching management of all ING’s models. Periodic model risk reporting provides the relevant
internal and external stakeholders with an overview of the models in use and the associated model risk given the
defined model risk appetite.
Business risk
ING Group Annual Report 2021 on Form 20-F
246
Business risk
Introduction
Business risk for ING has been defined as the exposure to value loss due to fluctuations in volumes/margins, net
fee and commission income as well as expenses. It is the risk inherent to strategy decisions, internal efficiency
and the business environment. Business risk economic capital is calculated via the variance-covariance
methodology for these risks, covering the risk that volume/margins, net fee and commission income and
operating expenses will deviate from the expected expenses over the horizon of the relevant activities.
Governance and risk management
ING applies an explicit risk appetite statement regarding business risk, focusing on earnings stability and
diversification of the business mix. Diversification reduces the risk that volumes and/or margins will suddenly
drop due to unexpected changes in the business environment for certain markets and products. Furthermore,
the underlying risk types (expense risk, volume-margin risk, and net fee and commission income risk) are
mitigated and managed differently. Expense risk is monitored and managed via the financial performance of the
bank and the local units, whereby the reported expense numbers are compared quarterly with the projected
cost/income ratio. Deviations from this ambition are monitored as part of the financial projections that are
discussed continuously within different parts of the organisation.
Selected statistical information on banking operations
ING Group Annual Report 2021 on Form 20-F
247
Selected Statistical Information on Banking
Operations
Reference is made to Note 1 ‘ Basis of preparation and significant accounting policies’ of the Consolidated
financial statements for information on Changes in accounting principles, estimates and presentation of the
consolidated financial statements and related notes.
The information in this section sets forth selected statistical information regarding the Group’s operations.
Information for 2021, 2020 and 2019 is set forth under IFRS-IASB. Unless otherwise indicated, average balances,
when used, are calculated from monthly data and the distinction between domestic and foreign is based on the
location of the office where the assets and liabilities are booked, as opposed to the domicile of the customer.
However, the Company believes that the presentation of these amounts based upon the domicile of the
customer would not result in material differences in the amounts presented in this section.
Average balances and interest rates
The following tables show the Group’s operations, average interest-earning assets and average interest -bearing
liabilities, together with average rates, for the periods indicated. The interest income, interest expense and
average yield figures do not reflect interest income and expense on derivatives and other interest income and
expense not considered to be directly related to interest-bearing assets and liabilities. These items are reflected
in the corresponding interest income, interest expense and net interest income figures in the consolidated
financial statements. A reconciliation of the interest income, interest expense and net interest income figures to
the corresponding line items in the consolidated financial statements is provided hereunder.
ASSETS
Interest-earning assets
2021
2020
2019
Average
balance
Interest
income
Average
yield %
Average
balance
Interest
income
Average
yield %
Average
balance
Interest
income
Average
yield %
(EUR millions)
(EUR millions)
(EUR millions)
Time deposits with banks
domestic
2,818
33
1.2
3,495
39
1.1
4,516
49
1.1
foreign
3,718
41
1.1
4,788
57
1.2
4,433
121
2.7
Loans and advances
domestic
186,022
4,313
2.3
187,189
4,831
2.6
190,118
5,673
3.0
foreign
438,174
9,437
2.2
431,665
10,606
2.5
428,646
12,825
3.0
Securities purchased with
agreements to resell
domestic
3,768
0
0.0
5,242
3
0.1
3,722
52
1.4
foreign
61,137
322
0.5
55,682
573
1.0
63,337
1,939
3.1
Interest-earning securities
1
domestic
31,662
242
0.8
33,400
313
0.9
29,892
347
1.2
foreign
53,276
622
1.2
54,542
708
1.3
50,156
917
1.8
Other interest-earning assets
domestic
50,713
13
0.0
43,417
27
0.1
30,659
56
0.2
foreign
71,055
56
0.1
48,453
44
0.1
24,978
66
0.3
Total
902,341
15,080
1.7
867,875
17,201
2.0
830,456
22,047
2.7
Non-interest earning assets
51,012
48,761
54,459
Derivatives assets
23,505
29,423
25,322
Total assets
976,857
946,059
910,238
Percentage of assets
applicable to foreign
operations
68.9%
69.7%
70.0%
Interest income on
derivatives
4,386
4,546
5,499
Other
2
1,585
812
617
Total interest income
21,051
22,559
28,163
1 Substantially all interest-earning securities held by the banking operations of the Company are taxable securities.
2 Other includes negative interest expense.
Selected statistical information on banking operations
ING Group Annual Report 2021 on Form 20-F
248
LIABILITIES
Interest-bearing liabilities
2021
2020
2019
Average
balance
Interest
expense
Average
yield
Average
balance
Interest
expense
Average
yield
Average
balance
Interest
expense
Average
yield
(EUR millions)
%
(EUR millions)
%
(EUR millions)
%
Time deposits from banks
domestic
51,928
3
0.0
35,079
10
0.0
17,673
28
0.2
foreign
24,497
76
0.3
18,888
123
0.7
14,270
200
1.4
Demand deposits
domestic
98,236
110
0.1
82,639
121
0.1
66,667
498
0.7
foreign
144,706
19
0.0
124,337
12
0.0
108,193
32
0.0
Time deposits
1
domestic
12,508
35
0.3
11,798
129
1.1
14,019
336
2.4
foreign
5,926
90
1.5
9,538
132
1.4
14,114
300
2.1
Savings deposits
domestic
97,862
–324
–0.3
95,455
77
0.1
93,911
114
0.1
foreign
257,796
482
0.2
267,713
627
0.2
266,470
1,301
0.5
Securities sold under
agreements to repurchase
domestic
3,205
0
–
0
–
36
33
92.8
foreign
55,300
133
0.2
46,225
317
0.7
52,158
1,429
2.7
Commercial paper
domestic
2,712
3
0.1
10,127
12
0.1
13,554
21
0.2
foreign
12,873
23
0.2
13,360
163
1.2
14,143
350
2.5
Short term debt
domestic
3,484
7
0.2
8,995
97
1.1
9,005
159
1.8
foreign
4,190
11
0.3
3,389
28
0.8
3,784
55
1.5
Long term debt
domestic
55,511
1,167
2.1
64,418
1,387
2.2
72,012
1,700
2.4
foreign
14,490
168
1.2
14,994
234
1.6
14,110
317
2.2
Subordinated liabilities
domestic
15,364
573
3.7
16,676
616
3.7
15,304
664
4.3
foreign
–
–0
–
–
77
3
4.3
Other interest
‑
bearing
liabilities
domestic
3,470
12
0.4
2,960
31
1.1
1,472
113
7.6
foreign
6,557
28
0.4
8,173
44
0.5
9,101
121
1.3
Total
870,615
2,616
0.3
834,764
4,159
0.5
800,076
7,773
0.8
Non-interest bearing
liabilities
30,839
31,711
35,010
Derivatives liabilities
21,173
27,232
24,376
Total Liabilities
922,627
893,707
859,461
Group Capital
54,230
52,353
50,777
Total liabilities and capital
976,857
946,059
910,238
Percentage of liabilities
applicable to foreign
operations
60.4%
62.3%
63.5%
Other interest expense:
Interest expenses on
derivatives
3,305
4,227
5,925
other
2
1,130
622
654
Total interest expense
7,051
9,007
14,353
Total net interest result
14,000
13,552
13,811
1 These captions do not include deposits from banks.
2 Other includes negative interest income.
Selected statistical information on banking operations
ING Group Annual Report 2021 on Form 20-F
249
Analysis of changes in net interest income
The following table allocates changes in the Group’s operations’ interest income and expense and net interest
result between changes in average balances and rates for the periods indicated. Changes due to a combination of
volume and rate have been allocated to changes in average volume. The net changes in interest income, interest
expense and net interest result, as calculated in this table, have been reconciled to the changes in interest
income, interest expense and net interest result in the consolidated financial statements. See introduction to
“Average Balances and Interest Rates” for a discussion of the differences between interest income, interest
expense and net interest result as calculated in the following table and as set forth in the consolidated financial
statements.
2021 over 2020
2020 over 2019
Increase (decrease)
due to changes in
Increase (decrease)
due to changes in
Average
volume
Average
rate
Net
change
Average
volume
Average
rate
Net
change
(EUR millions)
(EUR millions)
Interest-earning assets
Time deposits to banks
domestic
–8
1
–6
–11
1
–10
foreign
–13
–3
–16
10
–74
–64
Loans and advances
domestic
–55
–463
–518
–78
–764
–842
foreign
140
–1,309
–1,169
96
–2,316
–2,220
Securities purchased with agreements to
resell
Domestic
–1
–2
–3
21
–69
–48
foreign
56
–307
–251
–234
–1,132
–1,366
Interest-earning securities
Domestic
–16
–55
–71
41
–75
–35
foreign
–16
–69
–85
80
–290
–210
Other interest-earning assets
domestic
5
–18
–14
23
–52
–29
foreign
20
–8
12
62
–84
–22
Interest income
domestic
–75
–537
–612
–4
–960
–964
foreign
187
–1,696
–1,509
14
–3,895
–3,882
Total
112
–2,233
–2,121
9
–4,855
–4,846
Other interest income
613
–759
Total interest income
–1,508
–5,604
Selected statistical information on banking operations
ING Group Annual Report 2021 on Form 20-F
250
2021 over 2020
2020 over 2019
Increase (decrease)
due to changes in
Increase (decrease)
due to changes in
Average
volume
Average
rate
Net
change
Average
volume
Average
rate
Net
change
(EUR millions)
(EUR millions)
Interest-bearing liabilities
Time deposits from banks
domestic
5
–12
–7
28
–46
–18
foreign
36
–83
–47
65
–142
–77
Demand deposits
domestic
23
–34
–12
119
–496
–377
foreign
2
5
7
5
–24
–20
Time deposits
domestic
8
–101
–93
–53
–154
–207
foreign
–50
8
–42
–97
–70
–167
Savings deposits
domestic
2
–403
–401
2
–39
–37
foreign
–26
–119
–146
6
–680
–674
Short term debt
domestic
–59
–31
–90
–0
–62
–62
foreign
7
–23
–17
–6
–22
–27
Securities sold under agreements to
repurchase
domestic
–145
144
–0
–41
8
–33
foreign
62
–245
–183
–162
–950
–1,113
Commercial paper
domestic
–8
–1
–9
–5
–4
–10
foreign
–6
–134
–140
–19
–168
–187
Long term debt
domestic
–192
–28
–219
–179
–134
–313
foreign
–8
–58
–66
20
–103
–83
Subordinated liabilities
domestic
–49
6
–43
59
–107
–47
foreign
–
–
–
–3
0
–3
Other interest-bearing liabilities
domestic
5
–24
–19
114
–195
–81
foreign
–9
–7
–16
–12
–64
–77
Interest expense
domestic
–409
–483
–892
44
–1,230
–1,186
foreign
8
–658
–650
–205
–2,224
–2,428
Total
–401
–1,141
–1,542
–161
–3,454
–3,615
Other interest expense
–414
–1,731
Total interest expense
–1,956
–5,345
Net interest
domestic
334
–53
281
–48
270
222
foreign
179
–1,039
–859
218
–1,672
–1,454
Net interest
513
–1,092
–579
170
–1,402
–1,231
Other net interest result
1,027
972
Net interest result
448
–259
The following table shows the interest spread and net interest margin for the past two years.
2021
2020
Average rate
Average rate
%
%
Interest spread
Domestic
1.1
1.1
Foreign
1.5
1.7
Total
1.3
1.5
Net interest margin
Domestic
1.0
1.0
Foreign
1.5
1.7
Total
1.3
1.5
Selected statistical information on banking operations
ING Group Annual Report 2021 on Form 20-F
251
Investments in debt securities
The following tables show the weighted average yield of ING’s investments on debt securities measured at
amortised cost and fair value through other comprehensive income. The weighted average yield is calculated as
follows:
Nominal value * coupon rate * remaining maturity
Weighted average yield
2021
1 year or
less
Between
1 and 5
years
Between 5
and 10
years
Over 10
years
Fair value through other comprehensive income
Government bonds
2.61%
2.02%
1.34%
3.00%
Sub-sovereign, Supranationals and Agencies
3.01%
2.40%
0.51%
0.66%
Covered bonds
0.73%
0.28%
0.21%
Corporate bonds
0.88%
0.82%
0.13%
Financial institutions bonds
0.47%
1.25%
0.06%
ABS portfolio
0.14%
0.11%
0.13%
(1) Since substantially all investment securities held by the banking operations of the Company are taxable securities, the yields are on tax-
equivalent basis.
Weighted average yield
2021
1 year or
less
Between
1 and 5
years
Between 5
and 10
years
Over 10
years
Securities at amortised cost
Government bonds
2.13%
2.44%
1.18%
4.43%
Sub-sovereign, Supranationals and Agencies
2.07%
1.37%
0.42%
0.40%
Covered bonds
0.67%
0.37%
0.10%
Corporate bonds
1.25%
0.12%
0.67%
Financial institutions bonds
0.52%
1.11%
0.18%
ABS portfolio
0.02%
1.20%
0.69%
(1) Since substantially all investment securities held by the banking operations of the Company are taxable securities, the yields are on tax-
equivalent basis.
Loan Portfolio
Loans and advances to banks and customers
Loans and advances to banks include all receivables from credit institutions, except for cash, current accounts
and deposits with other banks (including central banks). Loans and advances to customers includes lending
facilities to corporate and private customers encompass among others, loans, overdrafts and finance lease
receivables.
Maturities and sensitivity of loans to changes in interest rates
The following table analyses loans and advances to banks and customers by time remaining until maturity as of
31 December 2021.
Selected statistical information on banking operations
ING Group Annual Report 2021 on Form 20-F
252
2021
1 year
or less
1 year
to 5 years
5 years
through 15
years
After 15
years
Total
By domestic offices:
Loans guaranteed by public authorities
1,028
2,323
9,499
10,920
23,770
Loans secured by mortgages
5,857
18,858
43,806
46,329
114,849
Loans guaranteed by credit institutions
6,362
900
16
7,278
Other private lending
859
835
704
179
2,577
Other corporate lending
25,507
14,348
2,647
274
42,777
Total domestic offices
39,613
37,264
56,673
57,701
191,251
By foreign offices:
Loans guaranteed by public authorities
3,970
6,297
6,353
942
17,563
Loans secured by mortgages
25,805
63,766
85,516
74,656
249,743
Loans guaranteed by credit institutions
16,938
2,039
1,362
2,277
22,616
Other private lending
6,941
12,279
3,784
1,679
24,682
Other corporate lending
62,708
67,958
16,702
785
148,153
Total foreign offices
116,364
152,339
113,717
80,338
462,758
Total gross loans and advances to banks and customers
155,977
189,602
170,390
138,039
654,009
The following table analyzes loans and advances to banks and customers by interest rate sensitivity by maturity
as of 31 December 2021 for loans and advances due after one year.
Predetermined
interest rates
Floating or
adjustable interest
rates
(1)
Loans guaranteed by public authorities
27,230
9,106
Loans secured by mortgages
233,819
99,133
Loans guaranteed by credit institutions
3,309
3,262
Other private lending
15,789
3,671
Other corporate lending
19,727
82,987
Total
299,873
198,159
(1) Loans that have an interest rate that remains fixed for more than one year and which can then be changed are classified as “adjustable
interest rates”.
Allowance for credit losses
The following table presents the movements in allocation of the provision for loan losses on loans accounted for
as loans and advances to banks and customers for 2021, 2020 and 2019 under IFRS-IASB.
Movements in allocation of the provision for loan losses on loans
2021
2020
2019
Balance on 1 January
5,854
4,645
4,568
Effect of changes in accounting policy
Change in the composition of the Group
Write-offs
-854
-1,200
-1,030
Recoveries
45
39
55
Net write-offs
-809
-1,160
-975
Additions and other adjustments (included in value Adjustments to receivables of the Banking
operations)
324
2,369
1,052
Balance on 31 December
5,368
5,854
4,645
Average loans and advances to banks and customers
644,853
645,134
644,139
Ratio of net charge
‑
offs to average loans and advances to banks and customers
0.13%
0.18%
0.15%
Ratio of allowance for credit losses to total loans and advances to banks and customers
outstanding
0.82%
0.94%
0.72%
Although Covid-19 has had a negative impact on the global economy, defaults in our portfolio have been limited
in 2021. This both reflects the quality of our loan portfolio and the impact of government support schemes.
However, due to the ongoing pandemic as well as strained supply chains, staffing shortage and rising prices,
uncertainty remains. As it is expected that additional defaults as a result of the Covid-19 crisis will still come in,
especially in certain sectors, a sector-based management adjustment was calculated. Risk costs further include
management adjustment related to residential mortgages to reflect the potential impact of higher inflation and
rising interest rates on customers’ ability to pay and expected negative impact on property valuations. Reference
is made to Note 1 ‘Basis of preparation and significant accounting policies’ and ‘Additional information – Risk
Management’ for detailed information on loan loss provisioning.
Selected statistical information on banking operations
ING Group Annual Report 2021 on Form 20-F
253
Deposits
Reference is made to ‘Additional information – Average balances and interest rates’ for detailed information on
average amount of and the average rate paid on deposit categories.
For the years ended 31 December 2021, 2020 and 2019 the aggregate amount of deposits by foreign depositors
in domestic offices was EUR 29,696 million, EUR 27,850 million and EUR 27,649 million, respectively.
Uninsured deposits
For the years ended 31 December 2021 and 2020 the amount of uninsured deposits, which were not covered by
DGS, was EUR 162,983 million and EUR 171,802 million, respectively.
Deposit guarantee schemes (DGS) reimburse a limited amount to compensate depositors whose bank has failed.
A fundamental principle underlying DGS is that they are funded entirely by banks, and that no taxpayer funds are
used. Under EU rules, the Deposit Guarantee Scheme (DGS) guarantees deposits up to a maximum of EUR
100,000 per depositor in case of a bank failure.
On 31 December 2021, the amount of time deposits in excess of (local) deposit insurance regime and time
deposits which are otherwise uninsured is as follows:
Time deposits in excess on
deposit insurance regime
Other uninsured
Time deposits
(EUR millions)
(EUR millions)
3 months or less
1,954
18,381
6 months or less but over 3 months
416
3,140
12 months or less but over 6 months
467
1,138
Over 12 months
542
69,525
Total
3,380
92,184
For further detailed information on deposits reference is made to Note 12 ‘Deposits from banks’ and Note 13 ‘
Customer deposits’ of the consolidated financial statements.
ING Group Annual Report 2021 on Form 20-F
F -254
Contents
Consolidated financial statements
F-
F-
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Notes to the consolidated financial statements
F-
Notes to the consolidated statement of financial position
F-
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F-
F-294
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F-
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Notes to the consolidated statement of profit or loss
F-
F-
F-
F-
F-
F-
F-
F-
F-
F-
F-
Notes to the consolidated statement of cashflows
F-
F-
F-
ING Group Annual Report 2021 on Form 20-F
F -255
Segment reporting
F-
F-
Additional notes to the consolidated financial statements
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49
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ING Group Annual Report 2021 on Form 20-F
F -256
To the Shareholders and the Supervisory Board ING Groep N.V.
Opinion on the consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of ING Groep N.V. and subsidiaries (the
Company) as of December 31, 2021 and 2020, the related consolidated statements of profit or loss, comprehensive
income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2021, the
related notes and the specific disclosures described in Note 1 as being part of the consolidated financial statements
(collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its
operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with
International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria
established in
Internal Control – Integrated Framework (2013)
the Treadway Commission and our report dated March 7, 2022 expressed an unqualified opinion on the effectiveness of
the Company’s internal control over financial reporting.
Changes in Accounting Principles
As discussed in Note 1.4.1 to the financial statements, the Company changed its method of accounting and disclosures
for certain financial Instruments as of January 1, 2021 due to the adoption of ‘Interest Rate Benchmark Reform – Phase 2
– amendments to IFRS9, IAS 39, IFRS7, IFRS 4 and IFRS 16’.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to
accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgements. The communication of a critical audit matter does not alter in any way
our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it
relates.
Assessment of expected credit losses on loans and advances to customers and loans and advances
to banks
As discussed in the Credit Risk section on pages 163-205 and in Note 3 and Note 7 in the consolidated financial
statements, the loans and advances to customers amount to EUR 625 billion and loans and advances to banks amount to
EUR 24 billion as at 31 December 2021. These loans and advances are measured at amortised cost, less expected credit
losses (‘ECL’) of EUR 5.3 billion.
Management estimated ECL using three components: probability of default (‘PD’), loss given default (‘LGD’) and
exposure at default (‘EAD’). Management applied forward looking economic scenarios with associated weights. Relevant
macroeconomic factors include the gross domestic product (‘GDP’), house price index (‘HPI’) and unemployment rate.
The recent economic conditions are outside the bounds of historical experience used to develop ECL model
methodologies and result in greater uncertainties to estimate ECLs. These uncertainties are addressed by judgemental
overlays by management.
ING Group Annual Report 2021 on Form 20-F
F -257
We identified the assessment of ECL on loans and advances to customers and loans and advances to banks as a critical
audit matter because of the significant and complex auditor judgment and specialized skills and knowledge required to
evaluate the following elements of the overall ECL estimate:
—
the judgements used to develop PD, LGD and EAD, including model or manual determined expected future recovery
cash flow assessments of individual loan provisions for impaired loans;
—
the recalibration of existing IFRS 9 credit risk models and redevelopment of IFRS 9 credit risk models to reflect the
new definition of default applied in credit risk management of the bank and the update of data history;
—
use of forward-looking macroeconomic forecasts in the ECL, including GDP, HPI and unemployment rate;
—
the consistent identification and application of criteria for significant increase in credit risk (‘SICR’);
—
calculation of management overlays to the modelled ECL due to the increased uncertainty in the forecast of future
economic conditions. These management overlays included specific sectorial wholesale and retail lending overlays
and overlays to residential mortgages.
The following are the primary procedures we performed to address this critical audit matter.
—
We evaluated the design and tested the operating effectiveness of certain internal controls related to the ECL
process for loans and advances to customers and banks. This included controls related to the assumptions (including
PD, LGD, EAD and macroeconomic forecasts), review of model outputs, the application of the new definition of
default, the update of data history, governance and monitoring of the ECL, reconciliations, determination of credit risk
ratings, the estimated future recovery cash flows of individual loan provisions and management overlays to the
modelled ECL.
—
We involved credit risk professionals with specialised skills and knowledge who assisted in evaluating the
assumptions to determine the PD, LGD, and EAD parameters in models used by the Company to determine the
collective provisions including the evaluation of the recalibrated and redeveloped credit risk models. In addition,
assessing management overlays recorded to the ECL, including sectorial wholesale and retail lending overlays and
overlays to residential mortgages. This included reperforming back testing of certain models to evaluate current
model performance. We considered the impact these overlays have on model calculations and results when reaching
our conclusions.
—
We involved economic professionals with specialised skills and knowledge, who assisted in assessing the
Company’s methodology to determine the macroeconomic forecasts used in the ECL. We tested the reasonableness
of management’s forecasts against other external benchmarks and our own internal forecasts.
—
We involved corporate finance professionals with specialised skills and knowledge, who assisted in examining the
methodologies, cash flows and collateral values used in expected future recovery cash flow assessments of
individual loan provisions for impaired loans. We challenged management’s use of recovery scenarios and expected
cash flows considering industry trends and comparable benchmarks, recalculated recovery amounts and performed
reconciliations.
—
We evaluated the identification of SICR in loans by challenging the scope of management’s criteria used in staging
assessments, consistent application of the thresholds applied within each criterion, and the ability of staging criteria
to identify SICR prior to loans being credit impaired.
/s/ KPMG Accountants N.V.
We have served as the Company’s auditor since 2016.
Amstelveen, The Netherlands
March 7, 2022
ING Group Annual Report 2021 on Form 20-F
F -258
Consolidated statement of financial position
As at 31 December
in EUR million
2021
2020
2021
2020
Assets
Liabilities
Cash and balances with central banks
Deposits from banks
Loans and advances to banks
Customer deposits
Financial assets at fair value through profit or loss
Financial liabilities at fair value through profit or loss
– Trading assets
– Trading liabilities
– Non-trading derivatives
– Non-trading derivatives
– Designated as at fair value through profit or loss
– Designated as at fair value through profit or loss
– Mandatorily at fair value through profit or loss
Current tax liabilities
Financial assets at fair value through other comprehensive income
Deferred tax liabilities
Securities at amortised cost
Provisions
Loans and advances to customers
Other liabilities
Investments in associates and joint ventures
Debt securities in issue
Property and equipment
Subordinated loans
Intangible assets
Total liabilities
Current tax assets
Deferred tax assets
Equity
Other assets
Share capital and share premium
Other reserves
-540
Retained earnings
Shareholders’ equity (parent)
Non-controlling interests
Total equity
Total assets
Total liabilities and equity
References relate to the accompanying notes. These are an integral part of the Consolidated financial
statements.
ING Group Annual Report 2021 on Form 20-F
F -259
Consolidated statement of profit or loss
for the years ended 31 December
in EUR million
2021
2020
2019
2021
2020
2019
Continuing operations
Interest income using effective interest rate method
Addition to loan loss provisions
Other interest income
Staff expenses
Total interest income
Other operating expenses
Total expenses
Interest expense using effective interest rate method
-5,085
-7,402
-11,268
Other interest expense
-1,966
-1,605
-3,084
Result before tax
Total interest expense
-7,051
-9,007
-14,353
Taxation
Net interest income
Net result
Fee and commission income
Net result (before non-controlling interests)
Fee and commission expense
-1,487
-1,503
-1,571
Net result attributable to Non-controlling interests
Net fee and commission income
Net result attributable to shareholders of the parent
Valuation results and net trading income
-159
in EUR
Investment income
Earnings per ordinary share
Share of result from associates and joint ventures
Basic earnings per ordinary share
Impairment of associates and joint ventures
-3
-235
-34
Diluted earnings per ordinary share
Result on disposal of group companies
-29
-3
Net result on derecognition of financial assets measured at amortised cost
-0
Other income
Total income
References relate to the accompanying notes. These are an integral part of the Consolidated financial
statements.
ING Group Annual Report 2021 on Form 20-F
F -260
Consolidated statement of comprehensive income
for the years ended 31 December
in EUR million
2021
2020
2019
Net result (before non-controlling interests)
Other comprehensive income
Items that will not be reclassified to the statement of profit or loss:
Realised and unrealised revaluations property in own use
-2
-7
Remeasurement of the net defined benefit asset/liability
Net change in fair value of equity instruments at fair value through other comprehensive
income
-335
Change in fair value of own credit risk of financial liabilities at fair value through profit or loss
-19
-116
Items that may subsequently be reclassified to the statement of profit or loss:
Net change in fair value of debt instruments at fair value through other comprehensive income
-186
-42
Realised gains/losses on debt instruments at fair value through other comprehensive income
reclassified to the statement of profit or loss
-42
-34
-34
Changes in cash flow hedge reserve
-1,955
Exchange rate differences
-1,620
-29
Share of other comprehensive income of associates and joint ventures and other income
-3
Total comprehensive income
Comprehensive income attributable to:
Non-controlling interests
-247
Equity holders of the parent
References relate to the accompanying notes. These are an integral part of the Consolidated financial
statements.
For the disclosure on the income tax effects on each component of the other comprehensive income reference is
made to Note 38 ‘Taxation’.
ING Group Annual Report 2021 on Form 20-F
F -261
Consolidated statement of changes in equity
in EUR million
Share capital
and share
premium
Other
reserves
Retained
earnings
Shareholders'
equity (parent)
Non-
controlling
interests
Total
equity
Balance as at 31 December 2020
Net change in fair value of equity instruments at fair value through other comprehensive income
-6
Net change in fair value of debt instruments at fair value through other comprehensive income
-173
-173
-13
-186
Realised gains/losses on debt instruments at fair value through other comprehensive income reclassified to the statement of profit or loss
-40
-40
-1
-42
Changes in cash flow hedge reserve
-1,603
-1,603
-352
-1,955
Realised and unrealised revaluations property in own use
-13
-2
-2
Remeasurement of the net defined benefit asset/liability
Exchange rate differences and other
-10
Share of other comprehensive income of associates and joint ventures and other income
-21
-3
-3
Change in fair value of own credit risk of financial liabilities at fair value through profit or loss
Total amount recognised directly in other comprehensive income net of tax
-1,465
-1,442
-375
-1,817
Net result
Total comprehensive income net of tax
-1,274
-247
Dividends and other cash distributions
-2,342
-2,342
-40
-2,382
Share buyback programme
-1,604
-140
-1,744
-1,744
Changes in treasury shares
-4
-4
-4
Employee stock option and share plans
Balance as at 31 December 2021
-540
References relate to the accompanying notes. These are an integral part of the Consolidated financial
statements. Changes in individual Reserve components are presented in Note 19 ‘Equity’.
ING Group Annual Report 2021 on Form 20-F
F -262
Consolidated statement of changes in equity - continued
in EUR million
Share capital
and share
premium
Other
reserves
Retained
earnings
Shareholders'
equity (parent)
Non-
controlling
interests
Total
equity
Balance as at 31 December 2019
Net change in fair value of equity instruments at fair value through other comprehensive income
-399
-337
-335
Net change in fair value of debt instruments at fair value through other comprehensive income
Realised gains/losses on debt instruments at fair value through other comprehensive income reclassified to the statement of profit or loss
-33
-33
-1
-34
Changes in cash flow hedge reserve
Realised and unrealised revaluations property in own use
-33
-7
-0
-7
Remeasurement of the net defined benefit asset/liability
Exchange rate differences and other
-1,557
-1,557
-63
-1,620
Share of other comprehensive income of associates and joint ventures and other income
-37
Change in fair value of own credit risk of financial liabilities at fair value through profit or loss
-3
-16
-19
-19
Total amount recognised directly in other comprehensive income net of tax
-1,770
-1,656
-1,601
Net result
Total comprehensive income net of tax
-1,676
Dividends
-3
-3
Changes in treasury shares
Employee stock option and share plans
0
Changes in the composition of the group and other changes
-1
-1
Balance as at 31 December 2020
References relate to the accompanying notes. These are an integral part of the Consolidated financial
statements. Changes in individual Reserve components are presented in Note 19 ‘Equity’.
ING Group Annual Report 2021 on Form 20-F
F -263
Consolidated statement of changes in equity - continued
in EUR million
Share capital
and share
premium
Other
reserves
Retained
earnings
Shareholders'
equity (parent)
Non-
controlling
interests
Total
equity
Balance as at 31 December 2018
Net change in fair value of equity instruments at fair value through other comprehensive income
-335
Net change in fair value of debt instruments at fair value through other comprehensive income
-43
-43
-42
Realised gains/losses on debt instruments at fair value through other comprehensive income reclassified to the statement of profit or loss
-33
-33
-1
-34
Changes in cash flow hedge reserve
Realised and unrealised revaluations property in own use
-0
Remeasurement of the net defined benefit asset/liability
Exchange rate differences and other
-36
-36
-29
Share of other comprehensive income of associates and joint ventures and other income
-69
Change in fair value of own credit risk of financial liabilities at fair value through profit or loss
-123
-116
-116
Total amount recognised directly in other comprehensive income net of tax
Net result
Total comprehensive income net of tax
Dividends
-2,650
-2,650
-29
-2,679
Changes in treasury shares
Employee stock option and share plans
0
Changes in the composition of the group and other changes
-23
-0
Balance as at 31 December 2019
References relate to the accompanying notes. These are an integral part of the Consolidated financial
statements. Changes in individual Reserve components are presented in Note 19 ‘Equity’.
ING Group Annual Report 2021 on Form 20-F
F -264
Consolidated statement of cash flows
for the years ended 31 December
in EUR million
2021
2020
2019
2021
2020
2019
Cash flows from operating activities
32
Disposals and redemptions:
– Associates and joint ventures
Result before tax
– Disposal of subsidiaries, net of cash disposed
-3
Adjusted for:
– Depreciation and amortisation
- Financial assets at fair value through other
comprehensive income
– Addition to loan loss provisions
- Securities at amortised cost
– Other non-cash items in Result before tax
-1,190
– Property and equipment
Taxation paid
-1,873
-1,734
-2,345
– Loans sold
Changes in:
– Net change in Loans and advances to/from banks, not
available/payable on demand
-3,911
– Other investments
– Net change in Trading assets and Trading liabilities
-5,620
-2,568
Net cash flow from/(used in) investing activities
-8,487
-2,495
– Loans and advances to customers
-27,860
-16,687
– Customer deposits
Cash flows from financing activities
33
– Other
32
-7,175
-3,856
Proceeds from debt securities
Net cash flow from/(used in) operating activities
-14,943
Repayments of debt securities
-76,150
-99,212
-94,497
Proceeds from issuance of subordinated loans
Cash flows from investing activities
Repayments of subordinated loans
-2,449
-2,786
-933
Investments and advances:
- Acquisition of subsidiaries, net of cash acquired
-17
Repayments of principal portion of lease liabilities
-301
-273
-271
- Associates and joint ventures
-91
-24
-507
Purchase/sale of treasury shares
-1,608
- Financial assets at fair value through other comprehensive
income
-13,186
-16,949
-16,270
Dividends paid
-2,382
-3
-2,679
- Securities at amortised cost
-44,945
-37,522
-12,268
Other financing
-1
– Property and equipment
-184
-287
-355
Net cash flow from/(used in) financing activities
-34,796
-4,154
– Other investments
-179
-300
-395
Net cash flow
-3,335
Cash and cash equivalents at beginning of year
34
Effect of exchange rate changes on cash and cash equivalents
-565
-425
Cash and cash equivalents at end of year
34
ING Group Annual Report 2021 on Form 20-F
F -265
Consolidated statement of cash flows - continued
As at 31 December 2021, Cash and cash equivalents includes cash and balances with central banks of EUR
ING’s participation of EUR
mainly placed on deposit with the ECB as at 31 December 2020, and by increased customer deposits. Reference is
made to Note 34 ‘Cash and cash equivalents’.
References relate to the accompanying notes. These are an integral part of the Consolidated financial
statements.
The table below presents the Interest and dividend received and paid.
in EUR million
2021
2020
2019
Interest received
Interest paid
-8,705
-9,672
-14,550
Dividend received
1
Dividend paid
-2,382
-3
-2,679
1
Includes dividends received as recognized within Investment Income, from equity securities included in the Financial assets at fair value
through profit or loss, Financial assets at fair value through OCI, and from Investments in associates and joint ventures. Dividend paid and
received from trading positions have been included.
Dividends received from associates and joint ventures are included in investing activities, interest received,
interest paid and other dividends received are included in operating activities and dividend paid is included in
financing activities in the Consolidated statement of cash flows.
1 Basis of preparation and significant accounting policies
ING Group Annual Report 2021 on Form 20-F
F -266
Notes to the Consolidated financial statements
1 Basis of preparation and significant accounting policies
1.1 Reporting entity and authorisation of the Consolidated financial statements
ING Groep N.V. is a company domiciled in Amsterdam, the Netherlands. Commercial Register of Amsterdam,
number 33231073. These Consolidated financial statements, as at and for the year ended 31 December 2021,
comprise ING Groep N.V. (the Parent company) and its subsidiaries, together referred to as ING Group. ING
Group is a global financial institution with a strong European base, offering a wide range of retail and
wholesale banking services to customers in over
The ING Group Consolidated financial statements, as at and for the year ended 31 December 2021, were
authorised for issue in accordance with a resolution of the Executive Board on 7 March 2022. The Executive
Board has the power to amend the financial statements as long as these are not adopted by the General
Meeting of Shareholders. The General Meeting of Shareholders may decide not to adopt the financial
statements, but may not amend these.
1.2 Basis of preparation of the Consolidated financial statements
The ING Group Consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards as issued by the International Accounting Standards Board for purposes of
reporting with the U.S. Securities and Exchange Commission (SEC), including financial information contained in
this Annual report on Form 20-F. The term ‘IFRS-IASB’ is used to refer to International Financial Reporting
Standards as issued by the International Accounting Standards Board, including the decisions ING Group made
with regard to the options available under IFRS-IASB.
The ING Group Consolidated financial statements have been prepared on a going concern basis and there are
no significant doubts about the ability of ING Group to continue as a going concern. In 2021 ING Group’s capital
and liquidity position remained strong despite the Covid-19 impact and ING Group has sufficient buffers to
withstand certain adverse scenarios without breaching currently applicable and likely future requirements.
Strong capital position allowed ING Group to pay cash dividends and other cash distributions to the
shareholders during 2021, as well as to announce and to start execution of a share buyback programme.
Reference is made to Note 19 ‘Equity’.
The Consolidated financial statements are presented in euros and rounded to the nearest million, unless stated
otherwise. Amounts may not add up due to rounding.
1.2.1 Presentation of Risk management disclosures
To improve transparency, reduce duplication and present related information in one place, certain disclosures
of the nature and extent of risks related to financial instruments required by IFRS 7 ‘Financial instruments:
Disclosures’ are included in the ‘Risk management’ section of the Annual Report.
These disclosures are an integral part of ING Group Consolidated financial statements and are indicated in the
‘Risk management’ section by the symbol (*). Chapters, paragraphs, graphs or tables within the risk
management section that are indicated with this symbol in the respective headings or table header are
considered to be an integral part of the Consolidated financial statements.
1.2.2 Reconciliation between IFRS-EU and IFRS-IASB
The published 2021 Consolidated financial statements of ING Group are prepared in accordance with IFRS-EU.
IFRS-EU refers to International Financial Reporting Standards (‘IFRS’) as adopted by the European Union (EU),
including the decisions ING Group made with regard to the options available under IFRS as adopted by the EU.
IFRS-EU differs from IFRS-IASB in respect of certain paragraphs in IAS 39 ‘Financial Instruments: Recognition
and Measurement’ regarding hedge accounting for portfolio hedges of interest rate risk.
1 Basis of preparation and significant accounting policies
ING Group Annual Report 2021 on Form 20-F
F -267
Under IFRS-EU, ING Group applies fair value hedge accounting for portfolio hedges of interest rate risk (fair
value macro hedges) in accordance with the EU carve-out version of IAS 39. Under the EU IAS 39 carve-out,
hedge accounting may be applied, in respect of fair value macro hedges, to core deposits and hedge
ineffectiveness is only recognised when the revised estimate of the amount of cash flows in scheduled time
buckets falls below the original designated amount of that bucket and is not recognised when the revised
amount of cash flows in scheduled time buckets is more than the original designated amount. Under IFRS-IASB,
hedge accounting for fair value macro hedges cannot be applied to core deposits and ineffectiveness arises
whenever the revised estimate of the amount of cash flows in scheduled time buckets is either more or less
than the original designated amount of that bucket.
This information is prepared by reversing the hedge accounting impacts that are applied under the EU ‘carve-
out’ version of IAS 39. Financial information under IFRS-IASB accordingly does not take account of the
possibility that had ING Group applied IFRS-IASB as its primary accounting framework it might have applied
alternative hedge strategies where those alternative hedge strategies could have qualified for IFRS-IASB
compliant hedge accounting. These decisions could have resulted in different shareholders’ equity and net
result amounts compared to those indicated in this Annual Report on Form 20-
F.
A reconciliation between IFRS-EU and IFRS-IASB is included below.
Both IFRS-EU and IFRS-IASB differ in several areas from accounting principles generally accepted in the United
States of America (US GAAP).
Reconciliation net result under IFRS-EU and IFRS-IASB
in EUR million
2021
2020
2019
In accordance with IFRS-EU (attributable to the shareholders of the parent)
Adjustment of the EU IAS 39 carve-out
-410
-1,181
Tax effect of the adjustment
1)
-429
Effect of adjustment after tax
-234
-878
In accordance with IFRS-IASB (attributable to the shareholders of the parent)
1)
Reconciliation shareholders’ equity under IFRS-EU and IFRS-IASB
in EUR million
2021
2020
2019
In accordance with IFRS-EU (attributable to the shareholders of the parent)
Adjustment of the EU IAS 39 carve-out
-2,490
-4,081
-3,658
Tax effect of the adjustment
Effect of adjustment after tax
-1,853
-3,018
-2,773
In accordance with IFRS-IASB Shareholders’ equity
1.3 Impact of Covid-19
In 2021, the Covid-19 pandemic continued to have an impact on people, businesses and the economy. While
vaccination rates continued to increase and Covid-19 related restrictions were lifted in some jurisdictions in the
first part of 2021, the end of 2021 was again marked by new waves of infections, supply chain disruptions,
rising energy prices and increasing inflation impacting companies and consumers. In many countries,
governments have adopted economic support programs. In addition, various initiatives have been taken by ING
to support our clients to manage these extraordinary times by way of granting, amongst others, temporary
payment holidays.
Governments in almost all Retail Banking countries have adopted measures providing for payment holidays.
During 2020 and 2021, in line with the EBA moratoria guidelines, approximately
been granted payment holidays under schemes that were eligible under the EBA moratoria guidelines. The
total exposure of loans for which a payment holiday was granted amounts to EUR
% were for customers located in the Netherlands and Belgium. At the end of 2021,
% of granted
payment holidays had expired.
As government support measures will, or have already ended, and Covid-19 remains a threat as was evidenced
with the emergence of the omicron variant at the end of 2021, Covid-19 is still bringing uncertainties and risks.
Certain sector were particularly impacted by the Covid-19 pandemic. An economic sector-based adjustments of
EUR
crisis, mainly as a result of government support programmes, while GDP growth forecasts as well as
unemployment rates and house prices improved over 2021 and which triggered releases of the model based
provisions.
1 Basis of preparation and significant accounting policies
ING Group Annual Report 2021 on Form 20-F
F -268
For further information on payments holidays and management adjustments applied, reference is made to the
‘Credit risk’ paragraph of the ‘Risk management’ section.
As a result of the economic effects of Covid-19 estimation uncertainty and level of management judgement
remains at an elevated level in 2021 compared to before the Covid-19 pandemic, particularly in the estimation
of loan loss provisions (including the need for management adjustments) and impairment assessment of an
investment in an associate. Reference is made to paragraph
1.5 ‘Significant judgements and critical accounting
estimates and assumptions’ for further explanation.
1.4 Changes to accounting policies and presentation
ING Group has consistently applied its accounting policies to all periods presented in these Consolidated
financial statements.
In 2021, in note 21 ‘Net fee and commission income’, ING Group changed the presentation of net fee and
commission income to better align with internal management and monitoring. Comparative figures for 2020
and 2019 have been updated accordingly.
1.4.1 Changes in IFRS effective in 2021
The following amended standards became effective in 2021:
◾
Amendments to IFRS 9 ‘Financial Instruments’, IAS 39 ‘Financial Instruments: Recognition and
Measurement’, IFRS 16 ‘Leases’, IFRS 4 ‘Insurance Contracts’ and IFRS 7 ‘Financial Instruments:
Disclosures’: ‘IBOR Reform and its Effects on Financial Reporting – Phase 2’ (issued in August 2020);
◾
Amendments to IFRS 16 ‘Leases’: ‘Covid-19-Related Rent Concessions’ (issued in May 2020).
The IBOR Reform – Phase 2 amendments relate mainly to accounting for changes in the basis for determining
the contractual cash flows of financial assets and liabilities due to the IBOR reform and impact on hedge
accounting when an existing benchmark rate is reformed or replaced with an alternative risk free rate.
Specifically, Phase 2 amendments require that the effective interest rate on debt financial instruments is
adjusted, and hedge accounting continues on transition to risk free rates, but only to the extent that the
modifications made to financial instruments are those necessary to implement the IBOR Reform and that the
new basis for calculating cash flows is ‘economically equivalent’ to the previous basis. By applying these
mandatory amendments, ING Group avoids recognising modification gains and losses on debt instruments that
would otherwise be required in the absence of Phase 2 amendments (changes to debt instruments resulting
from IBOR Reform are treated as a reset to the instrument’s variable interest rate). In addition, ING Group
avoids hedge accounting discontinuations when modifying both hedged items and hedging instruments (and
related hedge documentation) as a consequence of IBOR reform that would otherwise be required in the
absence of Phase 2 amendments. Refer to ‘Risk Management’ section – ‘Market Risk’ for more details.
Although ING Group has significant exposures to IBORs, the transition to the new risk free rates did not have a
material impact in 2021 partially due to the IBOR amendments to IFRS 9 and IAS 39 as described above.
The amendments to IFRS 16 ‘Leases’ provide lessees with an exemption from assessing whether a Covid-19-
related rent concession is a lease modification. As ING Group did not receive rent concessions as a lessee,
these amendments had no impact on the accounting policies of ING Group.
ING Group has not early adopted any standard, interpretation or amendment in 2021 which has been issued,
but is not yet effective.
1.4.2 Upcoming changes in IFRS after 2021
The following published amendments are not mandatory for 2021 and have not been early adopted by ING
Group. ING Group is still currently assessing the detailed impact of these amendments. However, the
implementation of these amendments is expected to have no significant impact on ING Group’s Consolidated
financial statements.
Effective in 2022:
◾
Amendments to IFRS 3 ‘Business Combinations’: Reference to the Conceptual Framework (issued in May
2020).
◾
Amendments to IAS 16 ‘Property, Plant and Equipment’: Proceeds before Intended Use (issued in May
2020).
◾
Amendments to IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’: Onerous Contracts —
Cost of Fulfilling a Contract (issued in May 2020).
◾
Annual improvements to IFRS Standards 2018-2020 Cycle: Amendments to IFRS 1 ‘First-time Adoption of
International Financial Reporting Standards’, amendments to IFRS 9 ‘Financial Instruments’ and
amendments to IFRS 16 ‘Leases’ (issued in May 2020).
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Effective in 2023:
◾
Amendments to IAS 1 ‘Presentation of Financial Statements’: Classification of Liabilities as Current or Non-
current (issued in January 2020).
◾
Amendments to IAS 1 ‘Presentation of Financial Statements’: Disclosure of Accounting Policies (issued in
February 2021).
◾
Amendments to IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’: Definition of
Accounting Estimates (issued in February 2021).
◾
Amendments to IAS 12 ‘Income Taxes’: Deferred Tax Related to Assets and Liabilities Arising From a Single
Transaction (issued in May 2021).
IFRS 17 ‘Insurance contracts’ – effective in 2023
In May 2017, the IASB issued IFRS 17 ‘Insurance Contracts’, a new accounting standard for insurance contracts
covering recognition and measurement, presentation and disclosure. Once effective, IFRS 17 will replace IFRS 4
‘Insurance Contracts’, which allowed diversity in accounting practices for insurance contracts. In June 2020, the
IASB published amendments to IFRS 17 including a scope exclusion for credit card contracts and similar
contracts that provide insurance coverage, and an optional scope exclusion for loans with death waivers. ING
Group does not have insurance business, but mainly sells insurance products as a broker where it does not run
the insurance risk. ING Group is currently assessing the detailed impact of adopting this Standard
.
1.5 Significant judgements and critical accounting estimates and assumptions
The preparation of the Consolidated financial statements requires management to make judgements in the
process of applying its accounting policies and to use estimates and assumptions. The estimates and
assumptions affect the reported amounts of the assets and liabilities and the amounts of the contingent assets
and contingent liabilities at the balance sheet date, as well as reported income and expenses for the year. The
actual outcome may differ from these estimates. The process of setting assumptions is subject to internal
control procedures and approvals.
ING Group has identified areas that require management to make significant judgements and use critical
accounting estimates and assumptions based on the information and financial data that may change in future
periods. These areas are:
◾
Loan loss provisions (financial assets);
◾
The determination of the fair values of financial assets and liabilities;
◾
Impairment assessment of an investment in associate;
◾
Provisions; and
◾
Accounting for Targeted Longer-Term Refinancing Operations (TLTRO).
For further discussion of the significant judgements and critical accounting estimates and assumptions in these
areas, reference is made to the relevant parts in paragraph 1.6 ‘Financial instruments’ (specifically 1.6.8
‘Impairment of financial assets’, 1.6.3 for ‘Fair values of financial assets and liabilities’, 1.10 ‘Investments in
associates and joint ventures’, 1.16 ‘Provisions, contingent liabilities and contingent assets’ and 1.6.9
‘Accounting for Targeted Longer-Term Refinancing Operations (TLTRO)’) of this note and the applicable notes
to the Consolidated financial statements.
1.6 Financial instruments
1.6.1 Recognition and derecognition of financial instruments
Recognition of financial assets
Financial assets are recognised in the balance sheet when ING Group becomes a party to the contractual
provisions of the instrument. For a regular way purchase or sale of a financial asset, trade date and settlement
date accounting is applied depending on the classification of the financial asset.
Derecognition of financial assets
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired
or where ING Group has transferred the rights to receive the cash flows from the financial asset or assumed an
obligation to pass on the cash flows and has transferred substantially all the risks and rewards of the asset. If
ING Group neither transfers nor retains substantially all the risks and rewards of ownership of a financial asset,
it derecognises the financial asset if it no longer has control over the asset. The difference between the
carrying amount of a financial asset that has been extinguished and the consideration received is recognised in
profit or loss.
Recognition of financial liabilities
Financial liabilities are recognised on the date that the entity becomes a party to the contractual provisions of
the instrument.
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Derecognition of financial liabilities
Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial liability that has been extinguished and the
consideration paid is recognised in profit or loss.
1.6.2 Classification and measurement of financial instruments
Financial assets
ING Group classifies its financial assets in the following measurement categories:
◾
those to be measured subsequently at fair value (either through OCI, or through profit or loss); and
◾
those to be measured at amortised cost (AC).
At initial recognition, ING Group measures a financial asset at its fair value plus, in the case of a financial asset
not at FVPL, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction
costs of financial assets carried at fair value through profit or loss (FVPL) are expensed in the statement of
profit or loss.
Financial assets - Debt instruments
The classification depends on the entity’s business model for managing the financial assets and the contractual
terms of the cash flows at initial recognition.
Business models
Business models are classified as Hold to Collect (HtC), Hold to Collect and Sell (HtCS) or Other depending on
how a portfolio of financial instruments as a whole is managed. ING Group’s business models are based on the
existing management structure of the bank, and refined based on an analysis of how businesses are evaluated
and reported, how their specific business risks are managed and on historic and expected future sales. Sales
are permissible in a HtC business model when these are due to an increase in credit risk, take place close to the
maturity date (where the proceeds from the sales approximate the collection of the remaining contractual cash
flows), are insignificant in value (both individually and in aggregate) or are infrequent.
Contractual cash flows Solely Payments of Principal and Interest (SPPI)
The contractual cash flows of a financial asset are assessed to determine whether they represent SPPI. Interest
includes consideration for the time value of money, credit risk and also consideration for liquidity risk and costs
associated with holding the financial asset for a particular period of time. In addition, interest can include a
profit margin that is consistent with a basic lending arrangement. Financial assets with embedded derivatives
are considered in their entirety when determining whether their cash flows are SPPI.
In assessing whether the contractual cash flows are SPPI, ING Group considers the contractual terms of the
instrument. This includes assessing whether the financial asset contains a contractual term that could change
the timing or amount of contractual cash flows such that it would not meet this condition.
Based on the entity’s business model for managing the financial assets and the contractual terms of the cash
flows, there are three measurement categories into which ING Group classifies its debt instruments:
◾
Amortised Cost (AC):
Debt instruments that are held for collection of contractual cash flows under a HtC business model where
those cash flows represent SPPI are measured at AC. Interest income from these financial assets is
included in Interest income using the EIR method. Any gain or loss arising on derecognition is recognised
directly in profit or loss. Impairment losses are presented as a separate line item in the statement of
profit or loss.
◾
FVOCI:
Debt instruments that are held for collection of contractual cash flows and for selling the financial assets
under a HtCS business model, where the assets’ cash flows represent SPPI, are measured at FVOCI.
Movements in the carrying amount are recognised in OCI, except for the recognition of impairment gains
or losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss.
When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is
reclassified from equity to profit or loss and presented in Investment income or Other income, based on
the specific characteristics of the business model. Interest income from these financial assets is included
in Interest income using the EIR method. Impairment losses are presented as a separate line item in the
statement of profit or loss.
◾
FVPL:
Debt instruments that do not meet the criteria for AC or FVOCI are measured at FVPL. This includes debt
instruments that are held-for-trading (presented separately as Trading assets) and all other debt
instruments that do not meet the criteria for AC or FVOCI (presented separately as Mandatorily at FVPL).
ING Group may in some cases, on initial recognition, irrevocably designate a financial asset as classified
and measured at FVPL. This is the case where doing so eliminates or significantly reduces an accounting
mismatch that would otherwise arise on assets measured at AC or FVOCI. Fair value movements on
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trading securities, trading loans and deposits (mainly reverse repo’s) are presented fully within valuation
result and net trading income, this also includes interest. The interest arising on financial assets
designated as at FVPL is recognised in profit or loss and presented within Interest income or Interest
expense in the period in which it arises. The interest arising on a debt instrument that is part of a hedge
relationship, but not subject to hedge accounting, is recognised in profit or loss and presented within
Interest income or Interest expense in the period in which it arises.
ING Group reclassifies debt instruments if, and only if, its business model for managing those financial assets
changes. Such changes in business models are expected to be very infrequent. There have been no
reclassifications during the reporting period.
Financial assets - Equity instruments
All equity investments are measured at fair value. ING Group applies the fair value through OCI option to
investments which are considered strategic, consisting of investments that add value to ING Group’s core
banking activities.
There is no subsequent recycling of fair value gains and losses to profit or loss following the derecognition of
investments if elected to be classified and measured as FVOCI. However, the cumulative gain or loss is
transferred within equity to retained earnings on derecognition of such equity instruments. Dividends from
such investments continue to be recognised in profit or loss as Investment income when ING Group’s right to
receive payments is established. Impairment requirements are not applicable to equity investments classified
and measured as FVOCI.
Other remaining equity investments are measured at FVPL. All changes in the fair value are recognised in
Valuation result and Net trading income in the Consolidated statement of profit or loss.
Financial liabilities
Financial liabilities are classified and subsequently measured at AC, except for financial guarantee contracts,
derivatives and liabilities designated at FVPL. Financial liabilities classified and measured at FVPL are presented
as follows:
◾
the amount of change in the fair value that is attributable to changes in own credit risk of the liability
designated at FVPL is presented in OCI. Upon derecognition this Debit Valuation Adjustment (DVA) impact
does not recycle from OCI to profit or loss; and
◾
the remaining amount of change in the fair value is presented in profit or loss in ‘Valuation results and net
trading income’. Interest on financial liabilities at FVPL is also recognised in the valuation result, except for
items voluntarily designated as FVPL for which interest is presented within ‘Other interest income
(expense).
A financial guarantee contract is a contract that requires ING Group to make specified payments to reimburse
the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with
the original or modified terms of a debt instrument. Such a contract is initially recognised at fair value and is
subsequently measured at the higher of (a) the amount determined in accordance with impairment provisions
of IFRS 9 ‘Financial instruments’ (see section “Impairment of financial assets”) and (b) the amount initially
recognised less, when appropriate, cumulative amortisation recognised in accordance with the revenue
recognition principle of IFRS 15 ‘Revenue from contracts with customers’.
1.6.3 Fair values of financial assets and liabilities
All financial assets and liabilities are recognised initially at fair value. The fair value of a financial instrument on
initial recognition is generally its transaction price (that is, the fair value of the consideration given or received).
However, if there is a material difference between the transaction price and the fair value of financial
instruments whose fair value is based on a valuation technique using significant unobservable inputs, the
entire day one difference (a ‘Day One profit or loss’) is deferred. ING Group defers the Day One profit or loss
relating to financial instruments classified as Level 3 and financial instruments with material unobservable
inputs into CVA which are not necessarily classified as Level 3. The deferred Day One profit or loss is recognised
in the statement of profit or loss over the life of the transaction until the transaction matures or until the
observability improves. In all other cases, ING Group recognises the difference as a gain or loss at inception.
Subsequently, except for financial assets and financial liabilities measured at amortised cost, all the other
financial assets and liabilities are measured at fair value.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. It assumes that market participants
would use and take into account the characteristics of the asset or liability when pricing the asset or liability.
Fair values of financial assets and liabilities are based on unadjusted quoted market prices where available.
Such quoted market prices are primarily obtained from exchange prices for listed financial instruments. Where
an exchange price is not available, quoted prices in an active market may be obtained from independent
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market vendors, brokers, or market makers. In general, positions are valued at the bid price for a long position
and at the offer price for a short position or are valued at the price within the bid-offer spread that is most
representative of fair value in the circumstances. In some cases where positions are marked at mid-market
prices, a fair value adjustment is calculated.
For certain financial assets and liabilities, quoted market prices are not available. For such instruments, fair
value is determined using valuation techniques. These range from discounting of cash flows to various
valuation models, where relevant pricing factors including the market price of underlying reference
instruments, market parameters (volatilities, correlations and credit ratings), and customer behaviour are
taken into account. ING Group maximises the use of market observable inputs and minimises the use of
unobservable inputs in determining the fair value. It can be subjective dependent on the significance of the
unobservable input to the overall valuation. All valuation techniques used are subject to internal review and
approval. Most data used in these valuation techniques are validated on a daily basis when possible.
When a group of financial assets and liabilities are managed on the basis of their net risk exposures, the fair
value of a group of financial assets and liabilities are measured on a net portfolio level.
To include credit risk in fair value, ING Group applies both Credit and Debit Valuation Adjustments (CVA, DVA,
also known as Bilateral Valuation Adjustments or BVA). Own issued debt and structured notes that are
designated at FVPL are adjusted for ING Group’s own credit risk by means of a DVA. Additionally, derivatives
valued at fair value are adjusted for credit risk by a BVA. The BVA is of a bilateral nature as both the credit risk
on the counterparty (CVA) as well as the credit risk on ING Group (DVA) are included in the adjustment. All
input data that is used in the determination of the BVA is based on market implied data. Additionally, wrong-
way risk (when exposure to a counterparty is increasing and the credit quality of that counterparty
deteriorates) and right-way risk (when exposure to a counterparty is increasing and the credit quality of that
counterparty improves) are taken into account in the measurement of the valuation adjustment.
To include the funding risk, ING Group applies an additional ‘Funding Valuation Adjustment’ (FVA) to the
uncollateralised derivatives based on the market price of funding liquidity.
ING Group also applies to certain positions other valuation adjustments to arrive at the fair value: Bid-Offer
adjustments, Model Risk Adjustments and Collateral Valuation Adjustments (CollVA).
Significant judgements and critical accounting estimates and assumptions:
Even if market prices are available, when markets are less liquid there may be a range of prices for the same
security from different price sources. Selecting the most appropriate price requires judgement and could result
in different estimates of fair value.
Valuation techniques are subjective in nature and significant judgement is involved in establishing fair values
for certain financial assets and liabilities. Valuation techniques involve various assumptions regarding pricing
factors. The use of different valuation techniques and assumptions could produce significantly different
estimates of fair value.
Price testing is performed to assess whether the process of valuation has led to an appropriate fair value of the
position and to minimise the potential risks of economic losses due to incorrect or misused models.
Assessing whether a market is active, and whether an input is observable and significant, requires judgement.
ING Group categorises its financial instruments that are either measured in the statement of financial position
at fair value or of which the fair value is disclosed, into a three level hierarchy based on the observability and
significance of the valuation inputs. The use of different approaches to assess whether a market is active,
whether an input is observable, and whether an unobservable input is significant could produce different
classification within the fair value hierarchy as well as potentially different deferral of the Day One profit or
loss.
Reference is made to note 39 ‘Fair value of assets and liabilities’ and to the ‘Market risk’ paragraph in the ‘Risk
management’ section of the Annual Report for the basis of the determination of the fair value of financial
instruments and related sensitivities.
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1.6.4 Derivatives and hedge accounting
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and
are subsequently measured at fair value. Fair values are obtained from quoted market prices in active markets,
including market transactions and valuation techniques (such as discounted cash flow models and option
pricing models), as appropriate. All derivatives are carried as assets when their fair value is positive and as
liabilities when their fair value is negative. Fair value movements on derivatives are presented in profit or loss
in Valuation result and net trading income, except for derivatives in either a formal hedge relationship and so-
called economic hedges that are not in a formal hedge accounting relationship where a component is
presented separately in interest result in line with ING Group’s risk management strategy.
Embedded derivatives are separated from financial liabilities and other non-financial contracts and accounted
for as a derivative if, and only if:
a)
the economic characteristics and risks of the embedded derivative are not closely related to the economic
characteristics and risks of the host contract;
b)
a separate instrument with the same terms as the embedded derivative would meet the definition of a
derivative; and
c)
the combined instrument is not measured at fair value with changes in fair value reported in profit or loss.
If an embedded derivative is separated, the host contract is accounted for as a similar free-standing contract.
The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated
as a hedging instrument, and if so, the nature of the item being hedged. ING Group designates certain
derivatives as hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedge),
hedges of highly probable future cash flows attributable to a recognised asset or liability or a forecast
transaction (cash flow hedge), or hedges of a net investment in a foreign operation. Hedge accounting is used
for derivatives designated in this way provided certain criteria are met.
At the inception of the transaction ING Group documents the relationship between hedging instruments and
hedged items, its risk management objective, together with the methods selected to assess hedge
effectiveness. ING Group also documents its assessment, both at hedge inception and on an ongoing basis, of
whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair
values or cash flows of the hedged items.
ING Group applies also macro cash flow hedge accounting to hedge the variability in future cash flows of non-
trading assets and liabilities due to the interest rate risk and foreign currency exchange rate risk. The
designated hedged items are floating rated assets or liabilities, such as floating rate mortgages and corporate
loans. The effective portion of changes in the fair value of the derivatives are recognised in the Other
Comprehensive Income.
Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in
the statement of profit or loss, together with fair value adjustments to the hedged item attributable to the
hedged risk. If the hedge relationship no longer meets the criteria for hedge accounting, the cumulative
adjustment of the hedged item is, in the case of interest bearing instruments, amortised through the
statement of profit or loss over the remaining term of the original hedge or recognised directly when the
hedged item is derecognised. For non-interest bearing instruments, the cumulative adjustment of the hedged
item is recognised in the statement of profit or loss only when the hedged item is derecognised.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges are recognised in the Other Comprehensive Income. The gain or loss relating to the ineffective portion
is recognised immediately in the statement of profit or loss. Amounts accumulated in the Other
Comprehensive Income are recycled to the statement of profit or loss in the periods in which the hedged item
affects net result. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria
for hedge accounting, any cumulative gain or loss existing in the Other Comprehensive Income at that time
remains in the Other Comprehensive Income and is recognised when the forecast transaction is ultimately
recognised in the statement of profit or loss. When a forecast transaction is no longer expected to occur, the
cumulative gain or loss that was reported in the Other Comprehensive Income is transferred immediately to
the statement of profit or loss.
Net investment hedges
Hedges of net investments in foreign operations are accounted for in a similar way to cash flow hedges. Any
gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in the Other
Comprehensive Income and the gain or loss relating to the ineffective portion is recognised immediately in the
statement of profit or loss. Gains and losses accumulated in the Other Comprehensive Income are included in
the statement of profit or loss when the foreign operation is disposed.
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IBOR Transition - specific policies applicable from 1 January 2019 for hedges directly affected
by IBOR reform
As further explained in the ‘IBOR Transition’ paragraph of the ‘Risk management’ section, the financial markets
are going through a significant reform of interbank offered rates (IBOR) and financial institutions are obligated
to implement a replacement of major interest rate reference rates.
Given that IBOR reform may have various accounting implications, the International Accounting Standards
Board (IASB) has undertaken a two phase project. Phase 1 addresses those issues that affect financial reporting
before the replacement of an existing benchmark (Phase 1 amendments to IFRS were issued by the IASB in
2019). Phase 2 focuses on issues that may affect financial reporting when the existing benchmark rate is
reformed or replaced. Phase 2 amendments to IFRS were issued by the IASB in 2020.
In 2019, ING Group early adopted the Phase 1 amendments to IFRS which allowed ING Group to apply a set of
temporary exceptions to continue hedge accounting even when there is uncertainty about contractual cash
flows arising from the reform. Under these temporary exceptions, interbank offered rates are assumed to
continue unaltered for the purposes of hedge accounting until such time as the uncertainty is resolved.
More specifically, the following temporary reliefs are part of the Phase 1 amendments:
◾
Highly probable requirement for cash flow hedges
◾
When determining whether a forecast transaction is highly probable, it is assumed that the interest rate
benchmark on which the hedged cash flows are based is not altered as a result of the reform.
◾
Prospective assessment of hedge effectiveness
◾
When performing the prospective assessment it is assumed that the interest rate benchmark on which the
hedged cash flows are based is not altered as a result of the reform.
◾
Retrospective assessment of hedge effectiveness
◾
When performing the retrospective assessment hedges are allowed to pass the assessment even if actual
results are outside the 80-125% range, during the period of uncertainty arising from the IBOR reform.
◾
Designation of a component of an item as a hedged item
◾
For hedges of the benchmark component of interest rate risk affected by the reform, the separately
identifiable requirement only needs to be demonstrated at the inception of such hedging relationships
(including macro hedges).
The amendments are relevant given that ING Group hedges and applies hedge accounting to benchmark
interest rate exposure part of IBOR reform. ING Group hedges are being progressively amended, where
necessary, to incorporate the new benchmark rates. During 2021, ING Group transitioned significant portions
of its financial instruments (designated in hedge accounting relationships) linked to benchmarks ceasing in
2021. In the coming year, ING Group will shift the focus to USD LIBOR contracts (USD LIBOR tenors will
continue to be published until the end of June 2023).
As at 31 December 2021, ING Group still maintains hedging instruments and hedged items indexed by the IBOR
benchmark rates (mainly, USD LIBOR). Therefore, although the path for IBOR transition is well progressed
(including the timeline of IBOR cessation and for some contracts the replacement rate and spread adjustment),
some uncertainties still remain in 2021 over the timing and the amount of the replacement rate cash flows
and, thus, temporary exceptions under Phase 1 continued to be relevant for ING Group as at 31 December
2021. ING Group will completely cease to apply the amendments when this uncertainty is no longer present or
when the hedging relationship is discontinued. Refer to note 40 ‘Derivatives and hedge accounting’ for the
disclosures relating to the application of the amendments as part of Phase 1. Refer to note ‘Risk management/
IBOR Transition’ for more information regarding the end of Phase 1 reliefs for ING Group’s hedging
relationships.
In 2021 Phase 2 amendments became effective for ING Group. For hedge accounting, Phase 2 amendments
require that hedge accounting continues on transition to risk free rates provided that the modifications made
to financial instruments are those necessary to implement the IBOR Reform and that the new basis for
calculating cash flows is ‘economically equivalent’ to the previous basis. Particularly, Phase 2 amendments
allow the continuation of hedging relationships, subject to amending their documentation to reflect changes in
hedged instruments, hedging instruments, hedged risk, and/or the method for measuring effectiveness during
the transition to the new benchmark rates.
More specifically, the following temporary reliefs are part of the Phase 2 amendments:
◾
Relief from discontinuing hedging relationships
o
Amendments in the hedge documentation as a consequence of changes required by the IBOR reform
do not result in the discontinuation of the hedge relationship nor the designation of a new hedge
relationship. The changes can be in form of designating an alternative benchmark rate as a hedged
risk, the description of the hedging instrument, the description of the hedged item, or the method to
measure the effectiveness.
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o
When the hedged item is amended as a consequence of the IBOR reform (or if the hedge has
previously been discontinued), amounts accumulated in the cash flow hedge reserve are deemed to
be based on the RFR. This results in the release of the cash flow hedge reserve to profit or loss in the
same period or periods in which the hedged cash flows that are now based on the RFR affect profit or
loss.
o
When the items within a designated group of hedged items are amended as a consequence of the
IBOR reform, the hedging strategy remains and is not discontinued. As items within the hedged
group transition at different times from IBORs to RFRs, they are transferred to sub-groups of
instruments that reference RFRs as the hedged risk. The existing IBORs remain designated as the
hedged risk for the other sub-group of hedged items, until they are also updated to reference the
new RFR. The usual hedge accounting requirements are applied to the hedge relationship in its
entirety.
◾
For the assessment of retrospective hedge effectiveness, the cumulative fair value changes may be reset to
zero when the exception to the retrospective assessment of the Phase 1 reliefs ends. This election is made
separately for each hedging relationship (i.e., on a hedge-by-hedge basis).
◾
Temporary relief from having to meet the separately identifiable requirement: a RFR is considered a
separately identifiable risk component if it is reasonably expected to meet the separately identifiable
requirement within 24 months from the date it is first designated as a non-contractually specified risk
component (i.e. when the entity first designates the RFR as a non-contractually specified risk component).
This relief applies to each RFR on a rate-by-rate basis.
Reference is made to paragraph 1.4.1 ‘Changes in IFRS effective in 2021’ of this note.
Non-trading derivatives that do not qualify for hedge accounting
Derivative instruments that are used by ING Group as part of its risk management strategies, but which do not
qualify for hedge accounting under ING Group’s accounting policies, are presented as non-trading derivatives.
Non-trading derivatives are measured at fair value with changes in the fair value taken to the statement of
profit or loss.
1.6.5 Offsetting of financial assets and financial liabilities
Financial assets and financial liabilities are offset, and the net amount reported, in the statement of financial
position when ING Group has a current legally enforceable right to set off the recognised amounts and intends
to either settle on a net basis or to realise the asset and settle the liability simultaneously. Offsetting is applied
to certain interest rate swaps for which the services of a central clearing house are used.
1.6.6 Repurchase transactions and reverse repurchase transactions
Securities sold subject to repurchase agreements (repos), securities lending and similar agreements continue
to be recognised in the Consolidated statement of financial position. The counterparty liability is measured at
FVPL (designated) and included in Other financial liabilities at FVPL if the asset is measured at FVPL. Otherwise,
the counterparty liability is included in Deposits from banks, Customer deposits, or Trading, as appropriate.
Securities purchased under agreements to resell (reverse repos), securities borrowings and similar agreements
are not recognised in the Consolidated statement of financial position. The consideration paid to purchase
securities is recognised as Loans and advances to customers, Loans and advances to banks, Other financial
assets at FVPL or Trading assets, as appropriate. The difference between the sale and repurchase price is
treated as interest and amortised over the life of the agreement using the effective interest method for
instruments that are not measured at FVPL.
1.6.7 Credit risk management classification and maximum credit risk exposure
Credit risk management disclosures are provided in the ‘Credit risk’ paragraph ‘Credit risk categories’ of the
‘Risk management’ section in the Annual Report.
The maximum credit risk exposure for items in the statement of financial position is generally the carrying
value for the relevant financial assets. For the off-balance sheet items the maximum credit exposure is the
maximum amount that could be required to be paid. Reference is made to Note 45 ‘Contingent liabilities and
commitments’ for these off-balance sheet items. Collateral received is not taken into account when
determining the maximum credit risk exposure.
The manner in which ING Group manages credit risk and determines credit risk exposures for that purpose is
explained in the Credit risk paragraph ‘Credit Risk Appetite and Concentration Risk Framework’ of the ‘Risk
management’ section in the Annual Report.
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1.6.8 Impairment of financial assets
An Expected Credit Loss (ECL) model is applied to financial assets accounted for at AC or FVOCI such as loans,
debt securities and lease receivables, as well as off-balance sheet items such as undrawn loan commitments,
certain financial guarantees issued, and undrawn committed revolving credit facilities. Under the ECL model
ING Group calculates the expected credit losses (ECL) by considering on a discounted basis the cash shortfall it
would incur in case of a default and multiplying the shortfall by the probability of a default occurring. The ECL is
the sum of the probability-weighted outcomes. The ECL estimates are unbiased and include reasonable and
supportable information about past events, current conditions, and forecasts of future economic conditions.
ING Group’s approach leverages the Advanced Internal Ratings Based (AIRB) models that are used for
regulatory purposes. Adjustments are applied to make these models suitable for determining ECL. ECL is
recognised on the balance sheet as loan loss provisions (LLP).
Three stage approach
Financial assets are classified in one of the below three Stages at each reporting date. A financial asset can
move between Stages during its lifetime. The Stages are based on changes in credit quality since initial
recognition and defined as follows:
◾
Stage 1
Financial assets that have not had a significant increase in credit risk since initial recognition (i.e. no Stage 2
or 3 triggers apply). Assets are classified as Stage 1 upon initial recognition (with the exception of
purchased or originated credit impaired (POCI) assets) and ECL is determined by the probability that a
default occurs in the next 12 months (12 months ECL);
◾
Stage 2
Financial assets showing a significant increase in credit risk since initial recognition. For assets in Stage 2
ECL reflects an estimate on the credit losses over the remaining maturity of the asset (lifetime ECL); or
◾
Stage 3
Financial assets that are credit-impaired. Also for these assets ECL is determined over the remaining
maturity of the asset.
Significant increase in credit risk
ING Group established a framework, incorporating quantitative and qualitative indicators, to identify and
assess significant increases in credit risk (SICR). This is used to determine the appropriate ECL Stage for each
financial asset.
The main determinate of SICR is a quantitative test, whereby the lifetime Probability of Default (PD) of an asset
at each reporting date is compared against its lifetime PD determined at the date of initial recognition. If the
delta is above pre-defined absolute or relative thresholds the item is considered to have experienced a SICR.
Consequently, the item moves from Stage 1 to Stage 2 (unless the item is credit-impaired). In these instances,
items are no longer assigned a 12 month ECL and instead are assigned a lifetime ECL. Items can return to Stage
1 if there is sufficient evidence that there is no longer a significant increase in credit risk. Refer to ‘Criteria for
identifying a significant increase in credit risk’ in the ‘Risk Management’ section of the Annual Report for more
details on relative and absolute PD thresholds, including quantitative disclosures on those thresholds.
ING Group also relies on a number of qualitative indicators to identify and assess SICR. These include:
◾
Forbearance status;
◾
Watch List status. Loans on the Watch List are individually assessed for Stage 2 classification;
◾
Intensive care management;
◾
Substandard Internal rating; and
◾
Arrears status (including 30 days past due used as a backstop).
An asset that is in Stage 2 will move back to Stage 1 when none of the above criteria are in place anymore.
However, if the asset was moved to Stage 2 based on the forbearance status, then the asset stays in Stage 2 for
at least 24 months. If the asset was classified as Stage 2 due to 30 days past due trigger, then the asset is
moved back to Stage 1 only after three months from when the trigger no longer applies.
Credit-impaired financial assets (Stage 3)
Financial assets are assessed for credit-impairment at each reporting date and more frequently when
circumstances warrant further assessment. Evidence of credit-impairment includes arrears of over
any material credit obligation, indications that the borrower is experiencing significant financial difficulty, a
breach of contract, bankruptcy or distressed restructuring. The definition of credit-impaired under IFRS 9
(Stage 3) is aligned with the definition of default used by ING Group for internal risk management purposes,
which is also the definition used for regulatory purposes.
An asset (other than a POCI asset) that is in Stage 3 will move back to Stage 2 when, as at the reporting date, it
is no longer considered to be credit-impaired subject to certain probation periods. The asset will migrate back
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to Stage 1 when its credit risk at the reporting date is no longer considered to have increased significantly since
initial recognition.
Macroeconomic scenarios
ING Group has established a quarterly process whereby forward-looking macroeconomics scenarios and
probability weightings are developed for the purpose of ECL. ING Group applies data predominantly from a
leading service provider (Oxford Economics (OE)) enriched with the internal ING Group view. A baseline, up-
scenario and a down-scenario are determined to reflect an unbiased and probability-weighted ECL amount. As
a baseline scenario, ING Group applies the market-neutral view combining consensus forecasts for economic
variables such as unemployment rates, GDP growth, house prices, commodity prices, and short-term interest
rates. Applying market consensus in the baseline scenario ensures unbiased estimates of the expected credit
losses.
The alternative scenarios are based on observed forecast errors in the past, adjusted for the risks affecting the
economy today and the forecast horizon. The probabilities assigned are based on the likelihoods of observing
the three scenarios and are derived from confidence intervals on a probability distribution. The forecasts for
the economic variables are adjusted on a quarterly basis.
Measurement of ECL
ING Group applies a collective assessment method to measure ECL for Stage 1, Stage 2, and certain Stage 3
assets. Other credit-impaired assets subject to ECL measurement apply the individual assessment method.
Collectively assessed assets (Stages 1 to 3)
For collective assessed assets, ING Group applies a model-based approach. ECL is determined by, expressed
simplistically, multiplying the probability of default (PD) with the loss given default (LGD) and exposure at
default (EAD), adjusted for the time value of money. Assets that are collectively assessed are grouped on the
basis of similar credit risk characteristics, taking into account loan type, industry, geographic location, collateral
type, past due status and other relevant factors. These characteristics are relevant to the estimation of future
cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according
to the contractual terms of the assets being evaluated and the loss in case the debtor is not able to pay all
amounts due.
For Stage 3 assets the PD equals 100% and the LGD and EAD represent a lifetime view of the losses based on
characteristics of defaulted facilities.
For the purpose of ECL, ING Group’s expected credit loss models (PD, LGD, EAD) used for regulatory purposes
have been adjusted. These adjustments include removing embedded prudential conservatism (such as floors)
and converted through-the-cycle estimates to point-in-time estimates. The models assess ECL on the basis of
forward-looking macroeconomic forecasts and other inputs. For most financial assets, the expected life is
limited to the remaining maturity. For overdrafts and certain revolving credit facilities, such as credit cards, the
maturity is estimated based on historical data as these do not have a fixed term or repayment schedule.
Individually assessed assets (Stage 3)
ING Group estimates ECL for individually significant credit-impaired financial assets within Stage 3 on an
individual basis. ECL for these Individually assessed assets are determined using the discounted expected
future cash flow method. To determine expected future cash flows, one or more scenarios are used. Each
scenario is analysed based on the probability of occurrence and include forward looking information.
In determining the scenarios, all relevant factors impacting the future cash flows are taken into account. These
include expected developments in credit quality, business and economic forecasts, and estimates of if/when
recoveries will occur taking into account ING Group’s restructuring/recovery strategy.
The best estimate of ECL is calculated as the weighted-average of the shortfall (gross carrying amount minus
discounted expected future cash flow using the original EIR) per scenario, based on best estimates of expected
future cash flows. Recoveries can arise from, among others, repayment of the loan, collateral recovery and the
sale of the asset. Cash flows from collateral and other credit enhancements are included in the measurement
of ECL of the related financial asset when it is part of or integral to the contractual terms of the financial asset
and the credit enhancement is not recognised separately. For the individual assessment, with granular
(company or asset-specific) scenarios, specific factors can have a larger impact on the future cash flows than
macroeconomic factors.
When a financial asset is credit-impaired, interest is no longer recognised based on the accrual income based
on the gross carrying amount of the asset. Rather, interest income is calculated by applying the original EIR to
the AC of the asset, which is the gross carrying amount less the related loan loss provision.
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Purchased or Originated Credit Impaired (POCI) assets
POCI assets are financial assets that are credit-impaired on initial recognition. Impairment on a POCI asset is
determined based on lifetime ECL from initial recognition. POCI assets are recognised initially at an amount net
of ECL and are measured at AC using a credit-adjusted effective interest rate. In subsequent periods any
changes to the estimated lifetime ECL are recognised in profit or loss. Favourable changes are recognised as an
impairment gain even if the lifetime ECL at the reporting date is lower than the estimated lifetime ECL at
origination.
Modifications
In certain circumstances ING Group grants borrowers postponement, reduction of loan principal and/or
interest payments on a temporary period of time to maximise collection opportunities, and if possible, avoid
default, foreclosure, or repossession. When such postponement, reduction of loan principal and/or interest
payments is executed based on credit concerns it is also referred to as forbearance (refer to the ‘Risk
Management’ section of the Annual Report for more details). In such cases, the net present value of the
postponement, reduction of loan principal and/or interest payments is taken into account in the determination
of the appropriate level of ECL. If the forbearance results in a substantial modification of the terms of the loan,
the original loan is derecognised and a new loan is recognised at fair value at the modification date. ING Group
determines whether there has been a substantial modification using both quantitative and qualitative factors.
Write-off and debt forgiveness
Loans and debt securities are written off (either partially or in full) when there is no reasonable expectation of
recovery and/or collectability of amounts due. The following events can lead to a write-off:
◾
After a restructuring has been completed and there is a high improbability of recovery of part of the
remaining loan exposure (including partial debt forgiveness);
◾
In a bankruptcy liquidation scenario;
◾
After divestment or sale of a credit facility at a discount;
◾
Specific fraud cases with no recourse options.
When a loan is uncollectable, it is written off against the related loan loss provision. Subsequent recoveries of
amounts previously written off are recognised in ‘Addition to loan loss provisions’ in the Consolidated
statement of profit or loss.
Debt forgiveness (or debt settlement) involves write-off but additionally involves the forgiveness of a legal
obligation, in whole or in part. This means that ING Group forfeits the legal right to recover the debt. As a
result, the financial asset needs to be derecognised. Distinction is made in situations where ING Group ends
the relationship with the client and situations where ING Group (partially) continues the financing of the client.
Presentation of ECL
ECL for financial assets measured at AC are deducted from the gross carrying amount of the assets. For debt
instruments at FVOCI, the ECL is recognised in OCI, instead of deducted the carrying amount of the asset. ECL
also reflects any credit losses related to the portion of the loan commitment that is expected to be drawn
down over the remaining life of the instrument. The ECL on issued financial guarantee contracts, in scope of
IFRS 9 and not measured at FVPL, are recognised as liabilities and presented in Other provisions. ECL are
presented in profit or loss in Addition to loan loss provision.
Significant judgements and critical accounting estimates and assumptions:
Considerable management judgement is exercised in determining the amount of ECL for financial assets
assessed on both a collective and an individual basis. The need for management judgement has increased even
further due to the Covid-19 pandemic. In particular, this judgement requires ING Group to make various
assumptions about the risk of default, the credit loss rates in case of a default and expected future cash flows.
These assumptions are based on a combination of ING Group’s past history, existing market conditions and
forward-looking estimates at the end of each reporting period. Changes in these assumptions may lead to
changes in the ECL over time. Given they are subjective and complex in nature, and because the ECL and the
underlying exposures subject to ECL are material, these assumptions are considered critical accounting
assumptions. The sensitivity of these assumptions is assessed in the credit risk section of the ‘Risk
Management’ section in the Annual Report.
The use of forward-looking macroeconomic scenarios in both collective and individual impairment assessments
Forward-looking macroeconomic scenarios are uncertain in nature. The process ING Group follows involves
two internal groups, the Macroeconomics Scenarios Team and the Macroeconomics Scenarios Expert Panel.
The latter team consists of senior management representatives from the Business, Risk and Finance. These
groups review inputs obtained from a third party provider and subject these to internal expert challenge to
ensure the inputs used in the models reflect ING Group’s view on the macro economy. The use of alternate
forward-looking macroeconomic scenarios can produce significantly different estimates of ECL. This is
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demonstrated in the sensitivity analysis in the ‘Risk Management’ section of the Annual Report, where the un-
weighted ECL under each of the three scenarios for some significant portfolios is disclosed.
The probability weights applied to each of the three scenarios
ING Group uses three macroeconomic scenarios when determining IFRS 9 ECL (baseline, upside and downside).
Management judgement is applied in the design of the approach used to determine the weights of each
scenario and in selecting the parts of the distribution of forecast errors from which the weights are derived.
Reference is made to the ‘Alternative scenarios and probability weights’ and the sensitivity analysis in the ‘Risk
Management’ section of the Annual Report for further details.
The criteria for identifying a significant increase in credit risk
When determining whether the credit risk on a financial asset has increased significantly, ING Group considers
reasonable and supportable information to compare the risk of default occurring at reporting date with the risk
of a default occurring at initial recognition of the financial asset. Whilst judgement is required in applying a PD
rating to each financial asset, there is significant judgement used in determining the Stage allocation PD
banding thresholds. The process of comparing a financial asset’s PD with the PD banding thresholds determines
its ECL Stage. Assets in Stage 1 are allocated a 12 month ECL, and those in Stage 2 are allocated a lifetime ECL,
and the difference is often significant. As such, the judgement made in assigning financial asset PDs and the PD
banding thresholds constitute a significant judgement. Analysis of the sensitivity associated with the
assessment of significant increase in credit risk is presented in the ‘Risk Management’ section of the Annual
Report.
The definition of default
Judgement is exercised in management’s evaluation of whether there is objective evidence that larger
exposures are credit-impaired. Management judgement is required in assessing evidence of credit-impairment.
Management adjustments applied as at 31 December 2021
As Covid-19 continues to bring uncertainties, management adjustments to the model-based ECL were still
necessary as at 31 December 2021, although they decreased compared to 2020. The Covid-19 related
management adjustments comprised EUR 373 million as at 31 December 2021 (31 December 2020: EUR 638
million) consisting of economic sector-based and payment holidays management adjustments. Reference is
made to the ‘Management adjustments applied this year’ paragraph in the ‘Risk management’ section of the
Annual Report.
1.6.9 Accounting for Targeted Longer-Term Refinancing Operations (TLTRO )
ING Group participates in Targeted Longer-Term Refinancing Operations (TLTRO III), reference is made to Note
12 ‘Deposits from banks’.
ING Group considers TLTRO funding provided by the ECB to banks to be on market terms on the basis that the
ECB has established a separate market with TLTRO programmes. They have specific terms which are different
from other sources of funding available to banks, including those provided by the ECB. Consequently, the rate
under TLTRO is considered to be a market conforming rate and TLTRO funding is recognized fully as a financial
liability.
ING Group interprets the whole rate set by the ECB under TLTRO as a floating rate on the financial liability,
being the market rate for each specific period in time. This results in discrete rates for discrete interest periods
over the life of TLTRO. The change in the applicable rate between interest periods is seen as a change in the
floating rate and is accounted for prospectively. Similarly, if the ECB announces changes in the rate for the
amounts already drawn under the existing TLTRO, then such changes also represent a change in a floating rate.
Following this, such changes lead to the recognition of an increased interest in the relevant period of life of the
exposure, rather than by the recognition of an immediate modification gain or loss at the moment of the
change of terms by the ECB.
Furthermore, the change in the TLTRO rate driven by changes in expectations of meeting the targets impacts
interest income. As a result, interest income which relates to the period that already passed until the moment
when the change in expectations occurs, is recognised as a catch up adjustment in Consolidated statement of
profit or loss. This change occurs only when ING Group has a reasonable expectation that the lending targets
will be met.
ING Group views ‘reasonable expectation’ in case of TLTRO funding as a high hurdle. This is the moment when
it becomes highly probable, i.e. the probability of meeting the lending targets is substantially greater than the
probability that it will not. As a result, if interest income is recognised during the period based on the
expectation of meeting the targets, there should only be a limited possibility that the interest may need to be
reversed in future reporting periods.
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Reference is made to note 12 ‘Deposits from banks’ and to note 20 ‘Net interest income’ for the presentation
of ING Group’s participation in TLTRO programmes .
Significant judgements:
Significant management judgement is exercised in determining the accounting treatment of TLTRO
transactions. In particular, ING Group applied judgement in:
◾
assessing and concluding that in ING Group’s view the rate under TLTRO is considered to be a market
conforming rate and, hence, accounting for TLTRO in accordance with IFRS 9; and
◾
selecting accounting policies regarding the calculation of the effective interest rate under TLTRO, including
treatment of changes in expectations of meeting the lending targets.
In addition, estimation uncertainty exists when the end of the observation period for lending growth does not
coincide with the end of the reporting period. At 31 December 2021, however, limited estimation uncertainty
exists as the lending targets were met as at 31 December 2021 (subject to the final confirmation by the ECB),
which is the end of the observation period 2 and determines the conditional rate applicable during the period
between June 2021 and June 2022.
1.7 Consolidation
ING Group comprises ING Groep N.V. (the Parent Company), ING Bank N.V. and all other subsidiaries.
Subsidiaries are entities controlled by ING Groep N.V. Control exists if ING Groep N.V. is exposed or has rights
to variable returns and has the ability to affect those returns through the power over the investee. Control is
usually achieved through situations including, but not limited to:
◾
Ownership, directly or indirectly, of more than half of the voting power;
◾
Ability to appoint or remove the majority of the board of directors;
◾
Power to govern operating and financial policies under statute or agreement; and
◾
Power over more than half of the voting rights through an agreement with other investors.
The existence and effect of potential voting rights that are currently exercisable or convertible are considered
in assessing whether Group controls another entity.
For interests in structured entities, the existence of control requires judgement as these entities are designed
so that voting or similar rights are not the dominant factor in deciding who controls the entity. This judgement
includes, for example, the involvement in the design of the structured entity, contractual arrangements that
give rights to direct the structured entities relevant activities and commitment to ensure that the structured
entity operates as designed.
A list of principal subsidiaries is included in Note 48 ‘Principal subsidiaries’.
A list containing the information referred to in Section 379 (1), Book 2 of the Dutch Civil Code has been filed
with the office of the Commercial Register of Amsterdam, in accordance with Section 379 (5), Book 2 of the
Dutch Civil Code.
The results of the operations and the net assets of subsidiaries are included in the statement of profit or loss
and the statement of financial position from the date control is obtained until the date control is lost. On
disposal, the difference between the sales proceeds, net of directly attributable transaction costs, and the net
assets is included in net result.
A subsidiary which ING Group has agreed to sell but is still legally owned by ING Group may still be controlled
by ING Group at the balance sheet date and therefore, still be included in the consolidation. Such a subsidiary
may be presented as a held for sale disposal group if certain conditions are met.
All intercompany transactions, balances and unrealised surpluses and deficits on transactions between group
companies are eliminated. Where necessary, the accounting policies used by subsidiaries are changed to
ensure consistency with group policies. In general, the reporting dates of subsidiaries are the same as the
reporting date of ING Groep N.V.
ING Groep N.V. and its Dutch group companies are subject to legal restrictions regarding the amount of
dividends they can pay to their shareholders. The Dutch Civil Code contains the restriction that dividends can
only be paid up to an amount equal to the excess of the company’s own funds over the sum of the paid-up
capital and reserves required by law. Certain Group companies are also subject to other restrictions in certain
countries, in addition to the restrictions on the amount of funds that may be transferred in the form of
dividends, or otherwise, to the parent company.
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Furthermore, in addition to the restrictions in respect of minimum capital requirements that are imposed by
industry regulators in the countries in which the subsidiaries operate, other limitations exist in certain
countries.
1.8 Segment reporting
An operating segment is a distinguishable component of ING Group, engaged in providing products or services,
whose operating results are regularly reviewed by the Executive Board of ING Group and the Management
Board Banking (together the Chief Operating Decision Maker (CODM)) to make decisions about resources to be
allocated to the segments and assess its performance. A geographical area is a distinguishable component of
ING Group engaged in providing products or services within a particular economic environment that is subject
to risks and returns that are different from those of segments operating in other economic environments.
The CODM examines ING Group’s performance both by line of business and geographic perspective and has
identified
the office from which the transactions are originated.
1.9 Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of ING Group’s entities are measured using the currency of
the primary economic environment in which the entity operates (the functional currency). The Consolidated
financial statements are presented in euros, which is ING Group’s presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at
the date of the transactions. Exchange rate differences resulting from the settlement of such transactions and
from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the statement of profit or loss, except when deferred in equity as part of
qualifying cash flow hedges or qualifying net investment hedges.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction.
Exchange rate differences on non-monetary items, measured at fair value through profit or loss, are reported
as part of the fair value gain or loss. Non-monetary items are retranslated at the date the fair value is
determined. Exchange rate differences on non-monetary items measured at fair value through other
comprehensive income are included in other comprehensive income and get accumulated in the revaluation
reserve in equity.
Exchange rate differences in the statement of profit or loss are generally included in ‘Valuation results and net
trading income’. Reference is made to Note 22 ‘Valuation results and net trading income’, which discloses the
amounts included in the statement of profit or loss. Exchange rate differences relating to the disposal of debt
and FVPL equity securities are considered to be an inherent part of the capital gains and losses recognised in
Investment income. As mentioned below, in Group companies relating to the disposals of group companies,
any exchange rate difference deferred in equity is recognised in the statement of profit or loss in ‘Result on
disposal of group companies’. Reference is also made to Note 19 ‘Equity’, which discloses the amounts
included in the statement of profit or loss.
Group companies
The results and financial positions of all group companies that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
◾
Assets and liabilities included in each statement of financial position are translated at the closing rate at
the date of that statement of financial position;
◾
Income and expenses included in each statement of profit or loss are translated at average exchange rates
(unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are translated at the dates of the transactions);
and
◾
All resulting exchange rate differences are recognised in a separate component of equity.
On consolidation, exchange rate differences arising from the translation of a monetary item that forms part of
the net investment in a foreign operation, and of borrowings and other instruments designated as hedges of
such investments, are taken to shareholders’ equity. When a foreign operation is sold, the corresponding
exchange rate differences are recognised in the statement of profit or loss as part of the gain or loss on sale.
Goodwill and fair value adjustments arising from the acquisition of a foreign operation are treated as assets
and liabilities of the foreign operation and translated at the exchange rate prevailing at the balance sheet date.
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1.10 Investments in associates and joint ventures
Associates are all entities over which ING Group has significant influence but not control. Significant influence
is the ability to participate in the financial and operating policies of the investee. It generally results from a
shareholding of between 20% and 50% of the voting rights or through situations including, but not limited to
one or more of the following:
◾
Representation on the board of directors;
◾
Participation in the policymaking process; and
◾
Interchange of managerial personnel.
Joint ventures are entities over which ING Group has joint control. Joint control is the contractually agreed
sharing of control over an arrangement or entity, which exists only when decisions about the relevant activities
require the unanimous consent of the parties sharing control. Joint control means that no party to the
agreement is able to act unilaterally to control the activity of the entity. The parties to the agreement must act
together to control the entity and therefore exercise the joint control.
Investments in associates and joint ventures are initially recognised at cost and subsequently accounted for
using the equity method of accounting.
ING Group’s investment in associates and joint ventures (net of any accumulated impairment loss) includes
goodwill identified on acquisition. ING Group’s share of its associates and joint ventures post-acquisition profits
or losses is recognised in the statement of profit or loss, and its share of post-acquisition changes in reserves is
recognised in equity. The cumulative post-acquisition changes are adjusted against the carrying amount of the
investment. When ING Group’s share of losses in an associate or joint venture equals or exceeds its interest in
the associate or joint venture, including any long-term interests in the associate like uncollateralised loans that
are neither planned nor likely to be settled in the foreseeable future, ING Group does not recognise further
losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture.
Unrealised gains on transactions between ING Group and its associates and joint ventures are eliminated to the
extent of ING Group’s interest in the associates and joint ventures. Unrealised losses are also eliminated unless
they provide evidence of an impairment of the asset transferred. Accounting policies of associates and joint
ventures have been changed where necessary to ensure consistency with the policies adopted by ING Group.
The recoverable amount, being the higher of fair value less cost of disposal and value in use, of the investment
in associate and joint venture is determined when there is an indication of potential (reversal of) impairment.
An impairment loss is recognised when the carrying amount of the investment exceeds its recoverable amount.
Goodwill on acquisitions of interests in associates and joint ventures is not tested separately for impairment,
but is assessed as part of the carrying amount of the investment. An impairment loss is subsequently reversed
if there is indication of a reversal and there is a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed to the extent that the recoverable amount exceeds its carrying
amount, but cannot exceed the original impairment loss.
Significant judgements and critical accounting estimates and assumptions:
The most significant estimates and assumptions relate to the assessment of (reversal of) impairment of the
investment in TMBThanachart Bank Public Company Limited (hereafter: TTB) which involves estimation of
value in use.
Management’s best estimate of TTB’s expected future earnings are based on forecasts derived from broker
consensus over the short to medium term and TTB observable targets for steady state earnings into perpetuity.
A capital maintenance charge is applied, which is management’s forecast of the earnings that need to be
withheld in order for TTB to meet target regulatory requirements over the forecast period. Both of these
factors are subject to a high degree of uncertainty.
Key assumptions used in estimating TTB’s value in use and the sensitivity of the value in use calculations to
different assumptions are described in note 8 ‘Investments in associates and joint ventures’.
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1.11 Property and equipment
Property in own use
Land and buildings held for own use are stated at fair value at the balance sheet date. Increases in the carrying
amount arising on revaluation of land and buildings held for own use are credited to the revaluation reserve in
shareholders’ equity. Decreases in the carrying amount that offset previous increases of the same asset are
charged against the revaluation reserve directly in equity; all other decreases are charged to the statement of
profit or loss. Increases that reverse a revaluation decrease on the same asset previously recognised in net
result are recognised in the statement of profit or loss. Depreciation is recognised based on the fair value and
the estimated useful life (in general
–
disposal, the related revaluation reserve is transferred to retained earnings.
The fair values of land and buildings are appraised annually by independent qualified valuers. Subsequent
expenditure is included in the asset’s carrying amount when it is probable that future economic benefits
associated with the item will flow to ING Group and the cost of the item can be measured reliably.
Equipment
Equipment is stated at cost less accumulated depreciation and any impairment losses. The cost of the assets is
depreciated on a straight line basis over their estimated useful lives, which are generally as follows: for data
processing equipment
two
five
four
ten
maintenance and repairs is recognised in the statement of profit or loss as incurred. Expenditure incurred on
major improvements is capitalised and depreciated.
Disposals of property and equipment
The difference between the proceeds on disposal and net carrying value is recognised in the statement of
profit or loss under Other income.
Right-of-use assets
ING Group as the lessee
A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset
and a corresponding liability representing its obligation to make lease payments at the date at which the
leased asset is available for use by ING Group. Each lease payment is allocated between the repayment of the
liability and finance cost. The finance costs are charged to profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use
asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include
the net present value of the following lease payments:
◾
Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
◾
Variable lease payments that are based on an index or a rate;
◾
Amounts expected to be payable by the lessee under residual value guarantees;
◾
The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
◾
Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay
to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with
similar terms and conditions. This rate is approximated by using the risk free rate applicable to the lease term,
the currency of the lease payment and jurisdiction, with the Fund Transfer Pricing (FTP) rate as an add-on. The
FTP rate is used to transfer interest rate risk and funding and liquidity risk positions between the ING Group
business and treasury departments. It is determined by either ING Group or Local Asset and Liability
Committee (ALCO). Reference is made to the ‘Risk management’ section of the Annual Report.
Right-of-use assets are measured at cost comprising the amount of the initial measurement of the lease
liability, any lease payments made at or before the commencement date less any lease incentives received and
any initial direct costs and restoration costs.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line
basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-
value assets comprise mainly IT-equipment (for example mobile phones or laptops) and small items of office
furniture.
The right-of-use asset is included in the statement of financial position line-item ‘Property and equipment’, the
lease liability is included in the statement of financial position line-item ‘Other liabilities’. Refer to note 9
‘Property and equipment’ and to note 16 ‘Other liabilities’.
Subsequent to initial recognition, the right-of-use asset amortises using a straight-line method to the income
statement over the life of the lease. The lease liability increases for the accrual of interest and decrease when
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payments are made. Any remeasurement of the lease liability due to a lease modification or other
reassessment results in a corresponding adjustment to the carrying amount of the right-of-use asset.
ING Group as the lessor
When ING Group acts as a lessor, a distinction should be made between finance leases and operating leases.
For ING Group as a lessor these are mainly finance leases. The present value of the lease payments is
recognised as a receivable under Loans and advances to customers or Loans and advances to banks. The
difference between the gross receivable and the present value of the receivable is unearned finance lease
income. Lease income is recognised over the term of the lease using the net investment method (before tax),
which reflects a constant periodic rate of return.
1.12 Acquisitions, goodwill and other intangible assets
Goodwill resulting from a business combination
ING Group’s business combinations are accounted for using the acquisition method of accounting. The
consideration for each business combination is measured at the aggregate of the fair values (at the date of
exchange) of assets given, liabilities incurred or assumed, and equity instruments issued in exchange for
control of the acquiree. Goodwill, being the difference between the cost of the acquisition (including assumed
debt) and the Group’s interest in the fair value of investee's identifiable assets, liabilities and contingent
liabilities as at the date of acquisition, is capitalised as an intangible asset. Goodwill is only recognised
separately on acquisitions. The results of the operations of the acquired companies are included in the
statement of profit or loss from the date control is obtained.
Where applicable, the consideration for the business combination includes any asset or liability resulting from
a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair
value. Contingent consideration arrangements classified as an asset or a liability, are subsequently measured at
fair value and the changes in fair value will be recognised in the statement of profit or loss. Changes in the fair
value of the contingent consideration classified as equity, are not recognised.
Where a business combination is achieved in stages, ING Group’s previously held interests in the assets and
liabilities of the acquired entity are remeasured to fair value at the acquisition date (i.e. the date ING Group
obtains control) and the resulting gain or loss, if any, is recognised in the statement of profit or loss. Amounts
arising from interests in the acquiree prior to the acquisition date that have previously been recognised in
other comprehensive income are reclassified to the statement of profit or loss, where such treatment would
be appropriate if that interest were disposed of. Acquisition related costs are recognised in the statement of
profit or loss as incurred and presented in the statement of profit or loss as Other operating expenses.
The initial accounting for the fair value of the net assets of the companies acquired during the year may be
determined only provisionally as the determination of the fair value can be complex and the time between the
acquisition and the preparation of the Financial statements can be limited. The initial accounting shall be
completed within a year after acquisition. Adjustments to the fair value as at the date of acquisition of
acquired assets and liabilities, that are identified within one year after acquisition are recognised as an
adjustment to goodwill; any subsequent adjustment is recognised as income or expense. On disposal of group
companies where control is lost, the difference between the sale proceeds and carrying value (including
goodwill) and the unrealised results (including the currency translation reserve in equity) is included in the
statement of profit or loss.
Impairment of goodwill and other non-financial assets
ING Group assesses at each reporting period, whether there is an indication that a non-financial asset may be
impaired. Irrespective of whether there is an indication of impairment, intangible assets with an indefinite
useful life, including goodwill acquired in a business combination, and intangible assets not yet available for
use, are tested annually for impairment. Goodwill is allocated to groups of CGUs (that is, the group of cash
generating units or CGUs) for the purpose of impairment testing. These groups of CGUs represent the lowest
level at which goodwill is monitored for internal management purposes. Goodwill is tested for impairment by
comparing the carrying value of the group of CGUs to the recoverable amount of that group of CGUs. The
carrying value is determined as the IFRS net asset value including goodwill. The carrying value is determined on
a basis that is consistent with the way in which the recoverable amount of the CGU is determined. The
recoverable amount is estimated as the higher of fair value less costs of disposal and value in use. Impairment
of goodwill, if applicable, is included in the statement of profit or loss in Other operating expenses and is not
subsequently reversed.
Computer software
Computer software that has been purchased or generated internally for own use is stated at cost less
amortisation and any impairment losses. Amortisation is calculated on a straight-line basis over its useful life.
This period will generally not exceed five years. Amortisation is included in Other operating expenses.
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Other intangible assets
Other intangible assets are capitalised and amortised over their expected economic life, which is generally
between three and ten years. Intangible assets with an indefinite life are not amortised.
1.13 Taxation
Income tax on the result for the year consists of current and deferred tax. Income tax is recognised in the
statement of profit or loss but it is recognised directly in equity if the tax relates to items that are recognised
directly in equity.
Deferred income tax
Deferred income tax is provided in full, using the liability method, for temporary differences arising between
the tax basis of assets and liabilities and their carrying amounts in the Consolidated statement of financial
position. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively
enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled. Deferred tax assets and liabilities are not discounted.
Deferred tax assets are recognised when it is probable that future taxable profit will be available against which
the temporary differences can be utilised. Deferred income tax is provided for temporary differences arising
from investments in subsidiaries and associates, except where the timing of the reversal of the temporary
difference is controlled by ING Group and it is probable that the difference will not reverse in the foreseeable
future. The tax effects of income tax losses available for carry forward are recognised as an asset where it is
probable that future taxable profits will be available against which these losses can be utilised.
Fair value remeasurements of debt and equity instruments measured at FVOCI and cash flow hedges are
recognised directly in equity. Deferred tax related to this fair value remeasurement is also recognised directly
in equity and is subsequently recognised in the statement of profit or loss together with the deferred gain or
loss.
Uncertain tax positions are assessed continually by ING Group and in case it is probable that there will be a
cash outflow, a current tax liability is recognised.
1.14 Other assets
Investment property
Investment properties are recognised at fair value at the balance sheet date. The fair values of investment
properties are appraised annually by independent qualified valuers. Changes in the carrying amount resulting
from revaluations are recognised in the statement of profit or loss. On disposal, the difference between the
sale proceeds and carrying value is recognised in the statement of profit or loss.
Property obtained from foreclosures
Property obtained from foreclosures is stated at the lower of cost and net realisable value. Net realisable value
is the estimated selling price, less applicable variable selling expenses. Property obtained from foreclosures is
included in Other assets - Property development and obtained from foreclosures.
Property development
Property developed and under development is included in Other assets – Property development and obtained
from foreclosures. Depending on the intention of ING Group after completion of the development, the
property is measured as follows:
◾
Intention to sell: at the lower of cost and net realisable value;
◾
Intention to use as a real estate investment: at fair value.
1.15 Disposal groups held for sale and discontinued operations
Disposal groups (and non-current assets) are classified as held for sale if their carrying amount will be
recovered principally through a sale transaction rather than through continuing use. This is only the case when
the sale is highly probable and the disposal group (or non-current assets) is available for immediate sale in its
present condition; management must be committed to the sale, which is expected to occur within one year
from the date of classification as held for sale.
Upon classification as held for sale, the disposal group is measured at the lower of its carrying amount and fair
value less costs to sell, except where specifically exempt from IFRS 5 ‘Non-current Assets Held for Sale and
Discontinued Operations. An impairment loss is recognised for any initial or subsequent write-down of the
disposal group to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less
costs to sell of the disposal group, but not in excess of any cumulative impairment loss previously recognised. A
gain or loss not previously recognised by the date of the sale of the disposal group is recognised at the date of
derecognition. Assets within the disposal group are not depreciated or amortised while they are classified as
held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for
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sale continue to be recognised. The assets of the disposal group classified as held for sale are presented
separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for
sale are presented separately from other liabilities in the balance sheet.
When a group of assets that is classified as held for sale represents a major line of business or geographical
area the disposal group is classified as discontinued operations. Upon classification of a business as held for
sale and discontinued operations the individual income and expenses are presented within the Total net result
from discontinued operations instead of being presented in the usual line items in the Consolidated statement
of profit or loss. All comparative years in the Consolidated statement of profit or loss are restated and
presented as discontinued operations for all periods presented. Furthermore, the individual assets and
liabilities are presented in the Consolidated statement of financial position as Assets and liabilities held for sale
and are no longer included in the usual line items in the Consolidated statement of financial position. Changes
in assets and liabilities as a result of classification as held for sale are included in the notes in the line ‘Changes
in composition of the group and other changes’.
1.16 Provisions, contingent liabilities and contingent assets
A provision is a present obligation arising from past events, the settlement of which is expected to result in an
outflow of resources embodying economic benefits, however the timing or the amount is uncertain. Provisions
are discounted when the effect of the time value of money is significant using a pre-tax discount rate.
Reorganisation provisions include employee termination benefits when ING Group is demonstrably committed
to either terminate the employment of current employees according to a detailed formal plan without
possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary
redundancy.
A liability is recognised for a levy when the activity that triggers payment, as identified by the relevant
legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the liability is recognised
only upon reaching the specified minimum threshold.
A contingent liability is a possible obligation that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within
the control of ING Group; or a present obligation that arises from past events but is not recognised because it
is either not probable that an outflow of economic benefits will be required to settle the obligation or the
amount of the obligation cannot be measured reliably. Contingent liabilities are not recognised in the
statement of financial position, but are rather disclosed in the notes unless the possibility of the outflow of
economic benefits is remote.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only
by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of
ING Group. Contingent assets are recognised in the statement of financial position only when realisation of the
income that arises from such an asset is virtually certain. Contingent assets are disclosed in the notes when an
inflow of economic benefits is probable.
Significant judgements and critical accounting estimates and assumptions:
The recognition and measurement of provisions is an inherently uncertain process involving using judgement
to determine when a present obligation exists and estimates regarding probability, amounts and timing of cash
flows.
ING Group may become involved in governmental, regulatory, arbitration and legal proceedings and
investigations and may be subject to third party claims. With or without reference to the above, ING Group
may also offer compensation to certain of its customers. Judgement is required to assess whether a present
obligation exists and to estimate the probability of an unfavourable outcome and the amount of potential loss.
The degree of uncertainty and the method of making the accounting estimate depends on the individual case,
its nature and complexity. Such cases are usually one of a kind. For the assessment of related provisions ING
Group consults with internal and external legal experts. Even taking into consideration legal experts’ advice,
the probability of an outflow of economic benefits can still be uncertain and the provision recognised can
remain sensitive to the assumptions used. Reference is made to note 15 ‘Provisions’. For proceedings where it
is not possible to make a reliable estimate of the expected financial effect, that could result from the ultimate
resolution of the proceedings, no provision is recognised, however disclosure is included in the financial
statements, where relevant. Reference is made to note 46 ‘Legal proceedings’.
Critical accounting estimates and assumptions for the reorganisation provision are in estimating the amounts
and timing of cash flows as the announced transformation initiatives are implemented over a period of several
years. Reference is made to note 15 ‘Provisions’.
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1.17 Other liabilities
Defined benefit plans
The net defined benefit asset or liability recognised in the statement of financial position in respect of defined
benefit pension plans is the fair value of the plan assets less the present value of the defined benefit obligation
at the balance sheet date.
Plan assets are measured at fair value at the balance sheet date. For determining the pension expense, the
return on plan assets is determined using a high quality corporate bond rate identical to the discount rate used
in determining the defined benefit obligation.
Changes in plan assets that effect Shareholders’ equity and/or Net result, include mainly:
◾
Return on plan assets using a high quality corporate bond rate at the start of the reporting period which
are recognised as staff costs in the statement of profit or loss; and
◾
Remeasurements which are recognised in Other comprehensive income.
The defined benefit obligation is calculated by internal and external independent qualified actuaries through
actuarial models and calculations using the projected unit credit method. This method considers expected
future payments required to settle the obligation resulting from employee service in the current and prior
periods, discounted using a high quality corporate bond rate. Inherent in these actuarial models are
assumptions including discount rates, rates of increase in future salary and benefit levels, mortality rates,
consumer price index and the expected level of indexation. The assumptions are based on available market
data as well as management expectations and are updated regularly. The actuarial assumptions may differ
significantly from the actual results due to changes in market conditions, economic and mortality trends, and
other assumptions. Any changes in these assumptions could have a significant impact on the defined benefit
plan obligation and future pension costs.
Changes in the defined benefit obligation that effects Shareholders’ equity and/or Net result, include mainly:
◾
Service cost which are recognised as staff costs in the statement of profit or loss;
◾
Interest expenses using a high quality corporate bond rate at the start of the period which are recognised
as staff costs in the Statement of profit or loss; and
◾
Remeasurements which are recognised in Other comprehensive income (equity).
Remeasurements recognised in other comprehensive income are not recycled to profit or loss. Any past service
cost relating to a plan amendment is recognised in profit or loss in the period of the plan amendment. Gains
and losses on curtailments and settlements are recognised in the statement of profit or loss when the
curtailment or settlement occurs.
The recognition of a net defined benefit asset in the Consolidated statement of financial position is limited to
the present value of any economic benefits available in the form of refunds from the plans or reductions in
future contributions to the plans.
Defined contribution plans
For defined contribution plans, ING Group pays contributions to publicly or privately administered pension
insurance plans on a mandatory, contractual or voluntary basis. ING Group has no further payment obligations
once the contributions have been paid. The contributions are recognised as staff expenses in the profit or loss
when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a
reduction in the future payments is available.
Other post-employment obligations
Some group companies provide other post-employment benefits to former employees. The entitlement to
these benefits is usually conditional on the employee remaining in service up to retirement age and the
completion of a minimum service period. The expected costs of these benefits are accrued over the period of
employment using an accounting methodology similar to that for defined benefit pension plans.
1.18 Treasury shares
Treasury shares (own equity instruments bought back by ING Group or its subsidiaries) are deducted from
Equity (Other reserves). No gain or loss is recognised in the statement of profit or loss when purchasing, selling
or cancelling these shares. Treasury shares are not taken into account when calculating earnings per ordinary
share or dividend per ordinary share as they are not considered to be outstanding.
Treasury shares can be purchased by ING as part of a share buyback programme. If a share buyback is executed
by a broker and the agreement with the broker is irrevocable, ING has a contractual obligation to purchase its
own shares that is unavoidable once it signs the agreement with the broker. This is the moment when ING
recognises a financial liability measured at the present value of the redemption amount with a corresponding
reduction in equity (Retained earnings). During the share buyback programme, ING settles this liability for the
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actual purchase price paid for the shares bought on a daily basis. Actual shares bought back and held by ING
are presented as Treasury shares within Other reserves in equity.
1.19 Income recognition
Interest
Interest income and expense are recognised in the statement of profit or loss using the effective interest
method. The effective interest method is a method of calculating the amortised cost of a financial asset or a
financial liability and of allocating the interest income or interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the
expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of
the financial asset or financial liability. When calculating the effective interest rate, ING Group estimates cash
flows considering all contractual terms of the financial instrument (for example, prepayment options) but does
not consider future credit losses.
The calculation includes all fees and points paid or received between parties to the contract that are an integral
part of the effective interest rate, transaction costs and all other premiums or discounts. Once a financial asset
or a group of similar financial assets has been written down as a result of an impairment loss, interest income
is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the
impairment loss.
Interest results on instruments classified at Amortised Cost, assets measured at FVOCI and derivatives in a
formal hedge accounting relationship is presented in ‘Interest income (expense) using effective interest rate
method’. Interest result on financial assets and liabilities voluntarily designated as at FVPL and derivatives in so
called economic hedges and instruments designated at fair value are presented in ‘Other interest income
(expense)’. Interest result on all other financial assets and liabilities at FVTPL is recognised in ‘Valuation results
and net trading income’.
Fees and commissions
Fees and commissions are generally recognised as the service is provided. Loan commitment fees for loans that
are likely to be drawn down are deferred (together with related direct costs) and recognised as an adjustment
to the effective interest rate on the loan. Loan syndication fees are recognised as income when the
performance obligation has been satisfied based on the particular contract and ING Group has retained no part
of the loan package for itself or has retained a part at the same effective interest rate as the other participants.
Commission and fees arising from negotiating, or participating in the negotiation of, a transaction for a third
party – such as the arrangement of the acquisition of shares or other securities or the purchase or sale of
businesses – are recognised on completion of the underlying transaction. Portfolio and other management
advisory and service fees are recognised based on the applicable service contracts as the service is provided.
Asset management fees related to investment funds and investment contract fees are recognised on a pro-rata
basis over the period the service is provided. The same principle is applied for wealth management, financial
planning and custody services that are continuously provided over an extended period of time. Fees received
and paid between banks for payment services are classified as commission income and expenses.
Lease income
The proceeds from leasing out assets under operating leases are recognised on a straight-line basis over the life
of the lease agreement. Lease payments received in respect of finance leases when ING Group is the lessor are
divided into an interest component (recognised as interest income) and a repayment component based on a
pattern reflecting a constant periodic rate of return on the lessor’s net investment in the lease.
1.20 Expense recognition
Expenses are recognised in the statement of profit or loss as incurred or when a decrease in future economic
benefits related to a decrease in an asset or an increase in a liability has arisen that can be measured reliably.
Fee and commission expenses are generally a result from a contract with ING service providers in order to
perform the service for ING Group’s customers. Costs are generally presented as ‘Commission expenses’ if they
are specific, incremental, directly attributable and identifiable to generate commission income.
Share-based payments
ING Group only engages in share-based payment transactions with its staff and directors. Share-based payment
expenses are recognised as a staff expense over the vesting period. A corresponding increase in equity is
recognised for equity-settled share-based payment transactions. A liability is recognised for cash-settled share-
based payment transactions. The fair value of equity-settled share-based payment transactions are measured
at the grant date, and the fair value of cash-settled share-based payment transactions are measured at each
balance sheet date. Rights granted will remain valid until the expiry date, even if the share based payment
scheme is discontinued. The rights are subject to certain conditions, including a pre-determined continuous
period of service.
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1.21 Earnings per ordinary share
Earnings per ordinary share is calculated on the basis of the weighted average number of ordinary shares
outstanding. In calculating the weighted average number of ordinary shares outstanding:
◾
Own shares held by group companies are deducted from the total number of ordinary shares in issue;
◾
The computation is based on daily averages; and
◾
In case of exercised warrants, the exercise date is taken into consideration.
Diluted earnings per share data are computed as if all convertible instruments outstanding at year-end were
exercised at the beginning of the period. It is also assumed that ING Group uses the assumed proceeds thus
received to buy its own shares against the average market price in the financial year. The net increase in the
number of shares resulting from the exercise is added to the average number of shares used to calculate
diluted earnings per share.
Share options with fixed or determinable terms are treated as options in the calculation of diluted earnings per
share, even though they may be contingent on vesting. They are treated as outstanding on the grant date.
Performance-based employee share options are treated as contingently issuable shares because their issue is
contingent upon satisfying specified conditions in addition to the passage of time.
1.22 Statement of cash flows
The statement of cash flows is prepared in accordance with the indirect method, distinguishing cash flows from
operating, investing and financing activities. In the net cash flow from operating activities, the result before tax
is adjusted for those items in the statement of profit or loss and changes in items per the statement of financial
position, which do not result in actual cash flows during the year.
For the purposes of the statement of cash flows, Cash and cash equivalents comprise balances with less than
three months’ maturity from the date of acquisition, including cash and balances with central banks, treasury
bills and other eligible bills, amounts due from other banks, and deposits from banks. Investments qualify as a
cash equivalent if they are readily convertible to a known amount of cash and are subject to an insignificant
risk of changes in value.
Cash flows arising from foreign currency transactions are translated into the functional currency using the
exchange rates at the date of the cash flows.
The net cash flow shown in respect of Loans and advances to customers relates only to transactions involving
actual payments or receipts. The Addition to loan loss provision which is deducted from the item Loans and
advances to customers in the statement of financial position has been adjusted accordingly from the result
before tax and is shown separately in the statement of cash flows.
The difference between the Net cash flow in accordance with the statement of cash flows and the change
between the opening and closing balance of Cash and cash equivalents in the statement of financial position is
due to exchange rate differences and is presented separately in the cash flow statement.
Liabilities arising from financing activities are debt securities, lease liabilities and subordinated loans.
2 Cash and balances with central banks
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Notes to the Consolidated statement of financial position
2 Cash and balances with central banks
Cash and balances with central banks
in EUR million
2021
2020
Amounts held at central banks
1
Cash and bank balances
1 Amounts held at central banks include an amount of EUR -
The movement in Cash and balances with central banks reflects ING’s active liquidity management.
Amounts held at central banks reflect on demand balances.
Reference is made to Note 43 ‘Transfer of financial assets, assets pledged and received as collateral’ for
restrictions on amounts held at central banks.
3 Loans and advances to banks
Loans and advances to banks
Netherlands
Rest of the world
Total
in EUR million
2021
2020
2021
2020
2021
2020
Loans and advances to banks
Loan loss provisions
-10
-10
-13
-13
-22
-23
Loans include balances (mainly short-term deposits) with central banks amounting to EUR
EUR
As at 31 December 2021, Loans include receivables related to finance lease contracts amounting to EUR
(2020: EUR
lease receivables.
As at 31 December 2021, all loans and advances to banks are non-subordinated.
4 Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
in EUR million
2021
2020
Trading assets
Non-trading derivatives
Designated at fair value through profit or loss
Mandatorily measured at fair value through profit or loss
(Reverse) repurchase transactions
Financial assets at fair value through profit or loss includes securities lending and sales and repurchase
transactions which were not derecognised, because ING Group continues to be exposed to substantially all risks
and rewards of the transferred financial asset. For repurchase agreements the gross amount of assets must be
considered together with the gross amount of related liabilities, which are presented separately on the
statement of financial position since IFRS does not always allow netting of these positions in the statement of
financial position.
ING Group’s exposure to (reverse) repurchase transactions is included in the following lines in the statement of
financial position:
4 Financial assets at fair value through profit or loss
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Exposure to (reverse) repurchase agreements
in EUR million
2021
2020
Reverse repurchase transactions
Loans and advances to banks
Loans and advances to customers
Trading assets, loans and receivables
Loans and receivables mandatorily measured at fair value through profit or loss
Repurchase transactions
Deposits from banks
Trading liabilities, funds on deposit
Funds entrusted designated and measured at fair value through profit or loss
Securities purchased under agreements to resell (reverse repos), securities borrowings and similar agreements
are not recognised in the consolidated statement of financial position. Based on the business model assessment
and counterparty, the consideration paid to purchase securities is recognised as Loans and advances to
customers, Loans and advances to banks, Other financial assets at FVPL or Trading assets.
Securities sold subject to repurchase agreements (repos), securities lending and similar agreements continue to
be recognised in the consolidated statement of financial position. The counterparty liability is measured at FVPL
(designated) and included in Other financial liabilities at FVPL if the asset is measured at FVPL. Otherwise, the
counterparty liability is included in Deposits from banks, Customer deposits, or Trading, as appropriate.
Reference is made to Note 43 ‘Transfer of financial assets, assets pledged and received as collateral’ for
information on transferred assets which were not derecognised.
Trading assets
Trading assets by type
in EUR million
2021
2020
Equity securities
Debt securities
Derivatives
Loans and receivables
Trading assets include assets that are classified under IFRS as Trading, but are closely related to servicing the
needs of the clients of ING Group. ING offers institutional clients, corporate clients, and governments, products
that are traded on the financial markets. A significant part of the derivatives in the trading portfolio is related to
servicing corporate clients in their risk management to hedge for example currency or interest rate exposures. In
addition, ING provides its customers access to equity and debt markets for issuing their own equity or debt
securities (securities underwriting).
Reference is made to Note 14 ‘Financial liabilities at fair value through profit or loss’ for information on trading
liabilities.
Non-trading derivatives
Non-trading derivatives by type
in EUR million
2021
2020
Derivatives used in
- fair value hedges
- cash flow hedges
- hedges of net investments in foreign operations
Other non-trading derivatives
Reference is made to Note 40 ‘Derivatives and hedge accounting’ for information on derivatives designated in
hedge accounting.
Other non-trading derivatives mainly includes interest rate swaps and foreign exchange currency swaps for which
no hedge accounting is applied.
5 Financial assets at fair value through other comprehensive income
ING Group Annual Report 2021 on Form 20-F
F -292
Designated at fair value through profit or loss
Designated at fair value through profit or loss by type
in EUR million
2021
2020
Debt securities
Loans and receivables
‘Financial assets designated at fair value through profit or loss’ is partly economically hedged by credit
derivatives. The hedges do not meet the criteria for hedge accounting and the loans and debt securities are
recorded at fair value to avoid an accounting mismatch. The maximum credit exposure of the loans and
receivables and debt securities included in ‘Financial assets designated at fair value through profit or loss’
approximates its carrying value. The cumulative change in fair value of the loans and debt securities attributable
to changes in credit risk is not significant.
The notional value of the related credit derivatives is EUR
change in fair value of the credit derivatives attributable to changes in credit risk since the financial assets were
first designated, amounts to EUR
-69
-16
to EUR
-53
-45
These have been calculated by determining the changes in credit spread implicit in the fair value of bonds issued
by entities with similar credit characteristics.
Mandatorily at fair value through profit or loss
Mandatorily at fair value through profit or loss by type
in EUR million
2021
2020
Equity securities
Debt securities
Loans and receivables
None of the equity securities are individually significant for ING Group.
Loans and receivables mainly include reverse repurchase agreements.
For details on ING Group’s total exposure to debt securities reference is made to Note 6 ‘Securities at amortised
cost’.
5 Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income by type
in EUR million
2021
2020
Equity securities
Debt securities
1
Loans and advances
1
1 Debt securities include an amount of EUR -
EUR -
Exposure to equity securities
Equity securities designated as at fair value through other comprehensive income
Carrying
value
Carrying
value
Dividend
income
Dividend
income
in EUR million
2021
2020
2021
2020
Investment in Bank of Beijing
Other Investments
For strategic equity securities, ING decided to apply the option to irrevocably designate these investments at fair
value through other comprehensive income, instead of the IFRS 9 default measurement of fair value through
profit or loss.
As at 31 December 2021 ING holds approximately
% (2020:
%) of the shares of Bank of Beijing, a bank listed
on the stock exchange of Shanghai. As per regulatory requirements set by China Banking and Insurance
Regulatory Commission, ING, as a shareholder holding more than
% or more of the shares, is required to supply
additional capital when necessary. No request for additional capital was received in 2021 (2020: nil).
6 Securities at amortised cost
ING Group Annual Report 2021 on Form 20-F
F -293
Changes in fair value through other comprehensive income
The following table presents changes in financial assets at fair value through other comprehensive income.
Changes in fair value through other comprehensive income financial assets
FVOCI equity securities
FVOCI debt
instruments
1
Total
in EUR million
2021
2020
2021
2020
2021
2020
Opening balance
Additions
Amortisation
-46
-9
-46
-9
Transfers and reclassifications
-7
-107
-7
-107
Changes in unrealised revaluations
2
-88
-283
-1,209
-1,296
Impairments
-5
-2
-5
-2
Reversals of impairments
-4
-4
Disposals and redemptions
-19
-13
-17,730
-14,557
-17,750
-14,571
Exchange rate differences
-53
-1,017
-1,070
Changes in the composition of the group and other
changes
-0
Closing balance
1 Fair value through other comprehensive income debt instruments includes both debt securities and loans and advances.
2 Changes in unrealized revaluations of FVOCI debt instruments include changes on hedged items which are recognized in the statement of
profit or loss. Reference is made to Note 19 ‘Equity’ for details on the changes in revaluation reserve.
FVOCI equity securities
In 2021, additions of EUR
is a diversified buy-and-hold portfolio aimed at generating a stable dividend income stream.
In 2021, exchange rate differences of EUR
the appreciation of CNY vs EUR.
In 2021, changes in unrealised revaluations of equity securities decreased mainly related to negative revaluation
of the stake in Bank of Beijing following a decline in share price (EUR
-153
revaluation in several other equity stakes of EUR
In 2020, transfers and reclassifications of EUR
-107
series C shares (EUR
-116
comprehensive income to debt securities at mandatorily fair value through profit or loss' based on variable
conversion rate.
FVOCI debt instruments
In 2021, changes in unrealised revaluations of EUR
-1,209
Reference is made to Note 6 ‘Securities at amortised cost’ for details on ING Group’s total exposure to debt
securities.
6 Securities at amortised cost
Securities at amortised cost fully consist of Debt securities.
ING Group’s exposure to debt securities is included in the following lines in the statement of financial position:
Exposure to debt securities
in EUR million
2021
2020
Debt securities at fair value through other comprehensive income
Debt securities at amortised cost
Debt securities at fair value through other comprehensive income and amortised cost
Trading assets
Debt securities at fair value through profit or loss
1
Total debt securities at fair value through profit or loss
1 The prior period has been updated to improve consistency and comparability of exposure to debt securities.
ING Group’s total exposure to debt securities (excluding debt securities held in the trading portfolio) of EUR
7 Loans and advances to customers
ING Group Annual Report 2021 on Form 20-F
F -294
Debt securities by type of exposure
Debt Securities
at FVPL
Debt Securities
at FVOCI
Debt Securities
at AC
Total
in EUR million
2021
2020
2021
2020
2021
2020
2021
2020
Government bonds
Sub-sovereign, Supranationals
and Agencies
Covered bonds
Corporate bonds
Financial institutions' bonds
1
ABS portfolio
Loan loss provisions
-12
-12
-19
-17
-31
-29
Debt securities portfolio
1 The prior period has been updated to improve consistency and comparability of exposure to debt securities.
7 Loans and advances to customers
Loans and advances to customers by type
Netherlands
Rest of the world
Total
in EUR million
2021
2020
2021
2020
2021
2020
Loans to, or guaranteed by, public authorities
Loans secured by mortgages
Loans guaranteed by credit institutions
Personal lending
Corporate loans
Loan loss provisions
-1,119
-1,286
-4,156
-4,493
-5,274
-5,779
For details on credit quality and loan loss provisioning, refer to ‘Risk management – Credit risk’ paragraph ‘Credit
quality’.
Loans and advances to customers by subordination
in EUR million
2021
2020
Non-subordinated
Subordinated
No individual loan or advance has terms and conditions that significantly affect the amount, timing or certainty of
the consolidated cash flows of ING Group.
Loans and advances to customers and Loans and advances to banks include finance lease receivables and are
detailed as follows:
Finance lease receivables
in EUR million
2021
2020
Maturities of gross investment in finance lease receivables
- within 1 year
- between 1-2 years
- between 2-3 years
- between 3-4 years
- between 4-5 years
- more than 5 years
Unearned future finance income on finance leases
-525
-508
Net investment in finance leases
Included in Loans and advances to banks
Included in Loans and advances to customers
The finance lease receivables mainly relate to the financing of equipment and are part of corporate loans. To a
lesser extent, the finance lease receivables relate to real estate for third parties, where ING is the lessor. These
finance lease receivables are part of loans secured by mortgages. Interest income in 2021 on Finance lease
receivables amounts to EUR
8 Investment in associates and joint ventures
ING Group Annual Report 2021 on Form 20-F
F -295
The total loan loss provision of EUR
into the following loan loss provision stages:
◾
Stage 1: EUR
◾
Stage 2: EUR
◾
Stage 3: EUR
8 Investment in associates and joint ventures
Investments in associates and joint ventures
2021
Interest
held (%)
Fair value
of listed
invest-
ments
Balance
sheet
value
Total
assets
Total
liabilities
Total
income
Total
expenses
TMBThanachart Bank Public Company Limited
Other investments in associates and joint ventures
Investments in associates and joint ventures
2020
Interest
held (%)
Fair value
of listed
invest-
ments
Balance
sheet
value
Total
assets
Total
liabilities
Total
income
Total
expenses
TMBThanachart Bank Public Company Limited
Other investments in associates and joint ventures
The reporting dates of certain associates and joint ventures can differ from the reporting date of the Group, but
by no more than three months.
TMBThanachart Bank Public Company Limited
ING Group has a
% investment in TMBThanachart Bank Public Company Limited (hereafter: TTB), a bank listed
on the Stock Exchange of Thailand. TTB is providing products and services to Wholesale, Small and Medium
Enterprise (SME), and Retail customers. TTB is accounted for as an investment in associate based on the size of
ING shareholding and representation on the Board.
Impairment testing
The fair value has been below the purchase cost of the investment for a prolonged period of time (since 1Q
2020). This is considered to be objective evidence of impairment. As a result ING performed an impairment test
at 31 December 2021 that did not lead to an impairment loss (2020: EUR
of impairment was recognised.
Methodology
The recoverable amount is determined as the higher of the fair value less costs of disposal and Value in Use
(‘VIU’). Fair value less costs of disposal is based on observable share price. The VIU calculation uses discounted
cash flow projections based on management’s best estimates. VIU is derived using a Dividend Discount Model
(DDM) where distributable equity, i.e. future earnings available to ordinary shareholders, is used as a proxy for
future cash flows. The valuation looks at expected cash flows into perpetuity resulting in two main components
to the VIU calculation:
i) the estimation of future earnings over a
ii) the terminal value being the extrapolation of earnings into perpetuity applying a long term growth
rate. The earnings that are used for extrapolation represent the stable long term financial results and
position of TTB, i.e. a steady state. The terminal value comprises the majority of the total VIU.
Key assumptions used in the VIU calculation as at 31 December 2021
The VIU is determined using a valuation model which is subject to multiple management assumptions. The key
assumptions, i.e. those to which the overall result is most sensitive to, are the following:
Expected future earnings of TTB: based on forecasts derived from broker consensus over the short to
medium term and TTB observable targets for steady state earnings into perpetuity. A capital maintenance
charge is applied, which is management’s forecast of the earnings that need to be withheld in order for TTB
to meet target regulatory requirements over the forecast period;
Discount rate (cost of equity):
% (2020:
%), based on the capital asset pricing model (CAPM)
calculated for TTB using current market data.
Terminal growth rate:
% (2020:
%) consistent with current long term government bond yield in
Thailand as a proxy for a risk-free rate;
9 Property and equipment
ING Group Annual Report 2021 on Form 20-F
F -296
To assess the risk of further impairment at 31 December 2021, the model was evaluated for reasonably possible
changes to key assumptions in the model. This reflects the sensitivity of the VIU to each key assumption on its
own and it is possible that more than one favourable and/or unfavourable change may occur at the same time.
Holding the other key assumptions constant, a reduction in all of the forecasted annual cash flows, including
terminal value, of
% or an increase in the discount of
bps would reduce the recoverable amount to the
carrying amount. A reasonably possible change in the terminal growth rate to zero would not cause the VIU to
equal the carrying amount.
Reversal of the impairment loss recognised in 2020 was not considered appropriate as at 31 December 2021
mainly due to the lack of sufficiently positive changes observed in the underlying performance of TTB since the
impairment loss in 2020 as reflected in the broker consensus. Furthermore, the share price remains below the
original cost of the investment for a prolonged period of time.
Other investments in associates and joint ventures
Included in Other investments in associates and joint ventures are mainly financial services and financial
technology funds or vehicles operating predominantly in Europe.
Other investments in associates and joint ventures represents a number of associates and joint ventures that are
individually not significant to ING Group.
Significant influence for associates in which the interest held is below 20%, is based on the combination of ING
Group’s financial interest and other arrangements, such as participation in the Board of Directors.
The associates and joint ventures of ING are subject to legal and regulatory restrictions regarding the amount of
dividends they can pay to ING. These restrictions are for example dependent on the laws in the country of
incorporation for declaring dividends or as a result of minimum capital requirements that are imposed by
industry regulators in the countries in which the associates and joint ventures operate. In addition, the associates
and joint ventures also consider other factors in determining the appropriate levels of equity needed. These
factors and limitations include, but are not limited to, rating agency and regulatory views, which can change over
time.
Changes in Investments in associates and joint ventures
in EUR million
2021
2020
Opening balance
Additions
Revaluations
-24
-3
Share of results
Dividends received
-34
-12
Disposals
-23
-12
Impairments
-3
-235
Exchange rate differences
-31
-144
Other
-5
Closing balance
Share of results from associates and joint ventures of EUR
table above is mainly attributable to results of TTB of EUR
on our stake in Ebusco and other share of results. In 2020 impairments is predominantly attributable to TTB.
9 Property and equipment
Property and equipment by type
in EUR million
2021
2020
Property in own use
Equipment:
- Data processing equipment
- Other equipment
Right- of- use assets:
- ROU property
- ROU cars
- ROU other leases
10 Intangible assets
ING Group Annual Report 2021 on Form 20-F
F -297
Changes in property and equipment
Property in own use
Equipment
Right-of-use assets
Total
in EUR million
2021
2020
2021
2020
2021
2020
2021
2020
Opening balance
Additions
Transfers
-5
-42
-20
-4
-24
Depreciation
-15
-12
-287
-291
-271
-275
-573
-578
Impairments
-10
-8
-8
-9
-15
-35
-33
-52
Reversals of impairments
0
0
0
Remeasurements
Disposals
-24
-63
-15
-12
-10
-14
-49
-89
Exchange rate differences
-21
-24
-7
-22
-35
-25
-81
Closing balance
Costprice
Accumulated depreciation
-373
-378
-2,871
-2,940
-644
-492
-3,888
-3,810
Accumulated impairments
-134
-135
-10
-5
-29
-36
-173
-175
Accumulated revaluation surplus
299
310
299
310
Accumulated remeasurement
Net carrying value
Right-of-use assets relate to leased land and buildings, cars, data-processing equipment and other leases. ING
considers valuations from third party experts in determining the fair values of property in own use.
Property in own use purchase costs amounted to EUR
price less accumulated depreciation and impairments would have been EUR
had property in own use been valued at cost instead of at fair value.
The reported impairment losses of EUR
change in the post-pandemic way of working and phasing out of activities.
10 Intangible assets
Changes in intangible assets
Goodwill
Software
Other
Total
in EUR million
2021
2020
2021
2020
2021
2020
2021
2020
Opening balance
Additions
Capitalised expenses
Amortisation
-260
-249
-1
-2
-261
-251
Impairments
1
-310
-82
-167
-12
-35
-94
-513
Exchange rate differences
-61
-63
-0
-6
-0
-62
-69
Disposals
-0
-9
-0
-9
Changes in the composition of the group and other
changes
-1
-0
Closing balance
Gross carrying amount
Accumulated amortisation
-1,710
-1,621
-9
-9
-1,719
-1,630
Accumulated impairments
-310
-129
-175
-48
-37
-177
-522
Net carrying value
1 Impairments of intangible assets are presented within Other operating expenses in the statement of Profit or Loss.
Goodwill
Goodwill is allocated to groups of cash generating units (CGUs) as follows:
Goodwill allocation to group of CGUs
Method used for
recoverable amount
Discount rate
Terminal growth
rate
Goodwill
Goodwill
Group of CGU’s
2021
2020
Retail Netherlands
8.84%
0.19%
Retail Germany
8.81%
0.67%
Retail Growth Markets
12.87%
3.68%
Impairment testing
Goodwill is tested for impairment annually in the fourth quarter by comparing the recoverable amount of each
goodwill-carrying CGU with its carrying amount. The key assumptions used in the calculation of the recoverable
10 Intangible assets
ING Group Annual Report 2021 on Form 20-F
F -298
amounts are included in the table above. In addition ING Group tests goodwill whenever a triggering event is
identified.
The recoverable amount exceeds the carrying value of the CGUs as at 31 December 2021 and therefore no
impairment is required.
In 2020, Covid-19 has resulted in adverse changes in the market and economic environment. Due to the impact
of the significant deterioration in the economic environment on the cash flow outlook of our businesses, we also
completed a goodwill impairment review across ING Group in 2020. The goodwill impairment test resulted in the
recognition of goodwill impairments on the CGU Retail Belgium of EUR
reported in Retail Belgium segment and EUR
Banking of EUR
resulted from the negative developments in the macro-economic outlook in the context of the Covid-19
pandemic.
Methodology
profits to ING Group. The discount rate calculation includes other inputs such as equity market premium, country
risk premium, and long term inflation which are based on market sources and management’s judgement. The
long term growth rate for EU-countries is based on long term risk-free rate by reference to the yield of a
composite index consisting of Euro generic government bonds, with a maturity of
. For other countries,
the growth rate includes long term inflation rate obtained from market sources.
Sensitivity of key assumptions
Key assumptions in the goodwill impairment test model are the projected locally available cash flows (based on
local capital requirements and projected profits), discount rates (cost of equity), and long term growth rates.
The recoverable amounts of the CGUs are sensitive to the above key assumptions. A decrease in the available cash
flows of
%, an increase in the discount rate of
considered reasonably possible changes in key assumptions. If the aforementioned changes occur to the above key
assumptions holding the other key assumptions constant, goodwill of the remaining CGUs will continue to be
recoverable and no impairment will occur.
Other changes
Other changes in goodwill in 2021 related to changes in currency exchange rates of Retail Growth Markets
goodwill.
Software
Software, includes internally developed software amounting to EUR
In 2021 an impairment of EUR
was recognised. The remaining software impairments in 2021 related to various, individually immaterial items.
In 2020, following the decision to discontinue the Maggie programme an impairment of EUR
recognised, primarily related to capitalised software development costs. In addition, an impairment of EUR
million with regard to software in the payments and cash management business was recogni sed. The remaining
software impairments in 2020 related to various, individually immaterial items.
Other intangible assets
In 2021 an impairment of an indefinite useful life asset related to brand names of EUR
was recognised. Additionally EUR
a previous acquisition (customer relationships), following a re-evaluation of the business plan.
11 Other assets
ING Group Annual Report 2021 on Form 20-F
F -299
11 Other assets
Other assets by type
in EUR million
2021
2020
Net defined benefit assets
Investment properties
Property development and obtained from foreclosures
Accrued assets
Amounts to be settled
Other
Disclosures in respect of Net defined benefit assets are provided in Note 37 ‘Pension and other post-employment
benefits’.
Amounts to be settled include primarily transactions not settled at the balance sheet date. The nature of these
transaction is short term and they are expected to settle shortly after the closing date of the balance sheet.
Other relates to various receivables in the normal course of business, amongst others, short term receivables
relating to mortgage issuance and other amounts receivable from customers.
12 Deposits from banks
Deposits from banks includes non-subordinated deposits and repurchase agreements from banks.
Deposits from banks by type
Netherlands
Rest of the world
Total
in EUR million
2021
2020
2021
2020
2021
2020
Non-interest bearing
Interest bearing
Deposits from banks includes ING’s participation in the Targeted Longer-Term Refinancing Operations of EUR
Operations (TLTRO III) for EUR
For the details of the applicable rates and impact on net interest income reference is made to note 20 ‘Net
interest income’.
13 Customer deposits
Customer deposits
in EUR million
2021
2020
Savings accounts
Credit balances on customer accounts
Corporate deposits
Other
Customer deposits by type
Netherlands
Rest of the world
Total
in EUR million
2021
2020
2021
2020
2021
2020
1
Non-interest bearing
Interest bearing
1 The prior period has been updated to improve consistency and comparability of customer deposits by type.
Savings accounts relate to the balances on savings accounts, savings books, savings deposits, and time deposits of
private individuals.
14 Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
in EUR million
2021
2020
Trading liabilities
Non-trading derivatives
Designated at fair value through profit or loss
Trading liabilities
ING Group Annual Report 2021 on Form 20-F
F -300
Trading liabilities
Trading liabilities by type
in EUR million
2021
2020
Equity securities
Debt securities
Funds on deposit
Derivatives
Non-trading derivatives
Non-trading derivatives by type
in EUR million
2021
2020
Derivatives used in:
- fair value hedges
- cash flow hedges
- hedges of net investments in foreign operations
Other non-trading derivatives
Reference is made to Note 40 ‘Derivatives and hedge accounting’ for information on derivatives used for hedge
accounting.
Other non-trading derivatives mainly includes interest rate swaps and foreign currency swaps for hedging
purposes, but for which no hedge accounting is applied.
Designated at fair value through profit or loss
Designated at fair value through profit or loss by type
in EUR million
2021
2020
Debt securities
Funds entrusted
Subordinated liabilities
As at 31 December 2021, the change in the fair value of financial liabilities designated at fair value through profit
or loss attributable to changes in credit risk is EUR
change has been determined as the amount of change in fair value of the financial liability that is not attributable
to changes in market conditions that gave rise to market risk (i.e. mainly interest rate risk based on yield curves).
The amount that ING Group is contractually required to pay at maturity to the holders of financial liabilities
designated at fair value through profit or loss excluding repurchase agreements (part of funds entrusted) is EUR
15 Provisions
Provisions by type
in EUR million
2021
2020
Reorganisation provisions
Litigation provisions
Other provisions
Changes in provisions
Reorganisation
Litigation
Other
Total
in EUR million
2021
2020
2021
2020
2021
2020
1
2021
2020
Opening balance
Additions
Interest
-2
-1
-2
-1
Releases
-96
-16
-11
-25
-79
-47
-186
-88
Utilised
-172
-152
-18
-16
-25
-13
-215
-180
Exchange rate differences
-1
-3
-3
-2
-5
-4
-9
Other changes
-3
-0
-11
-5
Closing balance
1 The prior period additions and releases have been updated to improve consistency and comparability of Other Provisions.
In 2021, the additions to the reorganisation provision mainly relate to the discontinuation of retail banking
activities in France and the restructuring of the branch network and retail advice organisation in the Netherlands.
16 Other liabilities
ING Group Annual Report 2021 on Form 20-F
F -301
The additions to the reorganisation provision in 2020 are mainly attributable to refocusing of our activities in
Wholesale Banking and decision on the Maggie project, as well as additional restructuring costs in Retail Benelux
and Other Challengers Growth Markets.
These initiatives are implemented over a period of several years and the estimate of the reorganisation
provisions is inherently uncertain.
Reference is made to Note 46 ‘Legal proceedings’ for developments in litigation provisions.
The additions to the Other provisions in 2021 include an EUR
retail customers for past interest charges that did not sufficiently track market rates.
In 2021, Other provisions includes provisions of EUR
replacement facilities and EUR
balance facilities.
As at 31 December 2021, amounts expected to be settled within twelve months in Other provisions amount to
EUR
amounts and timing of cash flows required to settle the obligation.
Additions to provisions and unused amounts released are presented in Note 28 ‘Other operating expenses’.
16 Other liabilities
Other liabilities by type
In EUR million
2021
2020
Net defined benefit liability
Other post-employment benefits
Other staff-related liabilities
Share-based payment plan liabilities
Other taxation and social security contributions
Rents received in advance
Costs payable
Amounts to be settled
Lease liabilities
Other
Disclosures in respect of Net defined benefit liabilities are provided in Note 37 ‘Pension and other post-
employment benefits’.
Other staff-related liabilities includes vacation leave provisions, variable compensation provisions, jubilee
provisions, and disability/illness provisions.
Amounts to be settled includes primarily transactions not settled at the balance sheet date. The nature of these
transactions is short term and these are expected to settle shortly after the closing date of the balance sheet.
Lease liabilities relate to right-of-use assets. Disclosures in respect to right-of-use assets are provided in Note 9
‘Property and Equipment’.
The total cash outflow for leases in 2021 was EUR
The line other relates mainly to balances on margin accounts or amounts payable to customers and includes the
remaining EUR
17 Debt securities in issue
ING Group Annual Report 2021 on Form 20-F
F -302
17 Debt securities in issue
Debt securities in issue relates to debentures and other issued debt securities with either fixed interest rates or
interest rates based on floating interest rate levels, such as certificates of deposit and accepted bills issued by
ING Group, except for subordinated items. Debt securities in issue does not include debt securities presented as
Financial liabilities at fair value through profit or loss. ING Group does not have debt securities that are issued on
terms other than those available in the normal course of business.
Debt securities in issue – maturities
In EUR million
2021
2020
Fixed rate debt securities
Within 1 year
More than 1 year but less than 2 years
More than 2 years but less than 3 years
More than 3 years but less than 4 years
More than 4 years but less than 5 years
More than 5 years
Total fixed rate debt securities
Floating rate debt securities
Within 1 year
More than 1 year but less than 2 years
More than 2 years but less than 3 years
More than 3 years but less than 4 years
More than 4 years but less than 5 years
More than 5 years
Total floating rate debt securities
Total debt securities
In 2021 Debt securities in issue increased by EUR
Reference is made to Note 33 ‘Changes in liabilities arising from financing activities’ for further information on
issuances and redemptions.
18 Subordinated loans
Subordinated loans by group companies
In EUR million
2021
2020
ING Groep N.V.
ING Group companies
Subordinated loans issued by ING Groep N.V. include bonds issued to raise Tier 1 and Tier 2 (CRD IV eligible)
capital for ING Bank N.V. Under IFRS these bonds are classified as liabilities and for regulatory purposes, they are
considered capital. Subordinated loans issued by ING Group companies comprise, for the most part,
subordinated loans which are subordinated to all current and future liabilities of ING Bank N.V.
In 2021 ING Groep N.V. issued in June EUR
September USD
% and USD
% Perpetual Additional Tier 1 Contingent Convertible
Capital Securities and in November EUR
% Fixed Rate Subordinated Tier 2 Notes.
In 2021 ING Bank N.V. redeemed in February EUR
% Fixed Rate Subordinated Tier 2 notes on the
first call date. ING Groep N.V. redeemed EUR
Securities in September.
Reference is made to Note 33 ‘Changes in liabilities arising from financing activities’ for further information on
issuances and redemptions.
The average interest rate on subordinated loans is
% (2020:
%). The interest expense during the year
2021 was EUR
19 Equity
ING Group Annual Report 2021 on Form 20-F
F -303
19 Equity
Total equity
In EUR million
2021
2020
2019
Share capital and share premium
Other reserves
-153
-80
-117
-114
-212
-307
-336
-3,483
-3,636
-2,079
-1,612
-4
-10
-540
Retained earnings
Shareholders’ equity (parent)
Non-controlling interests
Total equity
Share capital and share premium
Share capital
Share capital
Ordinary shares (par value EUR 0.01)
Number x 1,000
Amount
2021
2020
2019
2021
2020
2019
Authorised share capital
Unissued share capital
Issued share capital
Changes in issued share capital
Ordinary shares
(par value EUR 0.01)
Number x
1,000
Amount
Issued share capital as at 1 January 2019
Issue of shares
Issued share capital as at 31 December 2019
Issue of shares
Issued share capital as at 31 December 2020
Issue of shares
Issued share capital as at 31 December 2021
In 2021, ING Groep N.V. issued
These issues were made in order to fund obligations arising from share-based employee incentive programmes.
As at 31 December 2021 ING Groep N.V. has issued USD
Convertible Capital Securities which can, in accordance with their terms and conditions, convert by operation of
law into ordinary shares if the conditions to such a conversion are fulfilled. As a result of this conversion, the
issued share capital can increase by up to
‘Subordinated loans’.
19 Equity
ING Group Annual Report 2021 on Form 20-F
F -304
Ordinary shares
All ordinary shares are registered. No share certificates have been issued. The par value of ordinary shares is EUR
. The authorised ordinary share capital of ING Groep N.V. currently consists of
As at 31 December 2021,
Ordinary shares held by ING Group (Treasury shares)
As at 31 December 2021,
with a par value of EUR
share plans will be funded either by cash or by newly issued shares at the discretion of ING Group.
Share premium
Share premium
In EUR million
2021
2020
2019
Opening balance
Issue of shares
Closing balance
The increase in share premium, is a result of the issuance of ordinary shares related to share-based employee
incentive programmes.
19 Equity
ING Group Annual Report 2021 on Form 20-F
F -305
Other reserves
Revaluation reserves
Changes in revaluation reserve
Equity securities at FVOCI
Debt instruments at FVOCI
Cash flow hedge
Credit liability
Property in own use
In EUR million
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
Opening balance
-117
-114
Changes in credit liability reserve
-19
-116
Unrealised revaluations
-337
-173
-43
-1,603
-2
-7
Realised gains/losses transferred to the statement of profit or loss
-40
-33
-33
Realised revaluations transferred to retained earnings
-1
-472
-6
-11
-26
-9
Other changes
-62
Closing balance
-153
-80
-117
-114
Equity securities at FVOCI
In 2021, the unrealised revaluation of EUR
million.
In 2020, the unrealised revaluations of EUR -
reclassified to Financial assets at fair value through profit or loss and for which the unrealised revaluation up until
2019 is transferred to retained earnings. Reference is made to note 5 ‘Financial assets at fair value through other
comprehensive income’.
In 2019, the unrealised revaluations of EUR
EUR
-472
reserve to retained earnings is mainly related to the sale of shares in Kotak Mahindra Bank EUR
-320
EquensWorldLine EUR
-149
Cash flow hedge
ING mainly hedges floating rate lending with interest rate swaps. Due to an increase in yield curves in 2021 the
interest rate swaps had a negative revaluation of EUR
-1,603
reserve.
Net defined benefit asset/liability remeasurement reserve
Reference is made to Note 37 ‘Pension and other post-employment benefits’.
19 Equity
ING Group Annual Report 2021 on Form 20-F
F -306
Currency translation reserve
Changes in currency translation reserve
In EUR million
2021
2020
2019
Opening balance
-3,636
-2,079
-2,043
Unrealised revaluations
-61
-134
Realised gains/losses transferred to the statement of profit or loss
-1
-138
Exchange rate differences
-1,662
Closing balance
-3,483
-3,636
-2,079
Unrealised revaluations relates to changes in the value of hedging instruments that are designated as net
investment hedges. The hedging strategy is to hedge the CET1 ratio of ING Group. The net increase of unrealised
revaluations and Exchange rate differences of EUR
-466
currencies (EUR
In 2019 realised gains/losses transferred to the statement of profit or loss is related to the sale of shares in Kotak
Mahindra Bank (EUR
-119
-18
Share of associates and joint ventures and other reserves
Changes in share of associates, joint ventures and other reserves
In EUR million
2021
2020
2019
Opening balance
Result for the year
Transfer to/from retained earnings
-21
-37
Closing balance
The Share of associates, joint ventures and other reserves includes non-distributable profits from associates and
joint ventures of EUR
Vakbondsspaarbank SPN and a legal reserve of EUR
software.
Treasury shares
Changes in treasury shares
Amount
Number x 1,000
2021
2020
2019
2021
2020
2019
Opening balance
-4
-10
-11
Purchased/sold for trading purposes
-4
-348
-218
Purchases Share buyback programme
-1,604
Closing balance
-1,612
-4
-10
On 1 October 2021, ING announced a share buyback programme for EUR
October 2021 and which was completed by February 2022. As per 31 December 2021 a total of
have been repurchased at an average price of EUR
As the programme was initiated for capital reduction purposes, ING Groep N.V. intends to cancel all the shares
acquired under the programme.
Retained earnings
Changes in retained earnings
In EUR million
2021
2020
2019
Opening balance
Transfer to/from other reserves
Result for the year
Dividend and other distributions
-2,342
-2,650
Employee stock options and share plans
Changes in composition of the group and other changes
-143
Closing balance
Dividend and other distributions
In 2021, a cash dividend of EUR
nil
of EUR
information, reference is made to Note 31 ‘Dividend per ordinary share’.
19 Equity
ING Group Annual Report 2021 on Form 20-F
F -307
Other changes
Other changes' includes an amount of EUR
broker regarding the share buyback programme. As ING Group has a contractual obligation to purchase its own
shares when the agreement with the broker was signed a liability was formed with a corresponding reduction in
equity.
Ordinary shares - Restrictions with respect to dividend and repayment of capital
The following equity components cannot be freely distributed: Revaluation reserves, Net defined benefit
asset/liability remeasurement reserve, Currency translation reserve, Share of associates and joint ventures
reserve and Other reserves including the part related to the former Stichting Regio Bank and the former Stichting
Vakbondsspaarbank SPN.
As at 31 December 2021, an amount of EUR
related to the former Stichting Regio Bank and the former Stichting Vakbondsspaarbank SPN is included.
ING Groep N.V. is subject to legal restrictions regarding the amount of dividends it can pay to the holders of its
ordinary shares. Pursuant to the Dutch Civil Code, dividends can only be paid up to an amount equal to the
excess of the company’s own funds over the sum of the paid-up capital and reserves required by law.
Moreover, ING Groep N.V.’s ability to pay dividends is dependent on the dividend payment ability of its
subsidiaries, associates and joint ventures. ING Groep N.V. is legally required to create a non-distributable
reserve insofar as profits of its subsidiaries, associates and joint ventures are subject to dividend payment
restrictions which apply to those subsidiaries, associates and joint ventures themselves.
Non distributable reserves, determined in accordance with the financial reporting requirements included in Part
9 of Book 2 of the Dutch Civil Code, from ING Group’s subsidiaries, associates and joint ventures are as follows:
Non-distributable reserves
In EUR million
2021
2020
2019
ING Bank
Other
Non-distributable reserves
In addition to the legal and regulatory restrictions on distributing dividends from subsidiaries, associates and joint
ventures to ING Groep N.V. there are various other considerations and limitations that are taken into account in
determining the appropriate levels of equity in the Group’s subsidiaries, associates and joint ventures. These
considerations and limitations include, but are not restricted to, minimum capital requirements that are imposed
by industry regulators in the countries in which the subsidiaries, associates and joint ventures operate, or other
limitations which may exist in certain countries and may or may not be temporary in nature. It is not possible to
disclose a reliable quantification of these limitations. For an overview of the minimal capital requirements of ING
Group refer to the ‘Capital Management’ section.
Without prejudice to the authority of the Executive Board to allocate profits to reserves and to the fact that the
ordinary shares are the most junior securities issued by ING Groep N.V., no specific dividend payment restrictions
with respect to ordinary shares exist. Refer to Note 51 ‘Capital Management’ for further details.
Furthermore, ING Groep N.V. is subject to legal restrictions with respect to repayment of capital to holders of
ordinary shares. Pursuant to the Dutch Civil Code, capital may only be repaid if none of ING Groep N.V.’s
creditors opposes such a repayment within two months following the announcement of a resolution to that
effect.
Cumulative preference shares (not issued)
Pursuant to the Articles of Association of ING Groep N.V. the authorised cumulative preference share capital
consists of
cumulative preference shares is EUR
. A right to acquire cumulative preference shares has been granted to
Stichting Continuïteit ING (ING Continuity Foundation).
The cumulative preference shares rank before the ordinary shares in entitlement to dividend and to distributions
upon liquidation of ING Groep N.V.
19 Equity
ING Group Annual Report 2021 on Form 20-F
F -308
The dividend on the cumulative preference shares will be equal to a percentage, calculated on the amount
compulsorily paid up or yet to be paid up. This percentage shall be equal to the average of the Euro short-term
rate (€STR) as calculated by the European Central Bank during the financial year for which the distribution is
made; this percentage being weighted on the basis of the number of days for which it applies, and increased by
If, and to the extent that the profit available for distribution is not sufficient to pay the dividend referred to
above in full, the shortfall will be made up from the reserves insofar as possible. If, and to the extent that, the
dividend distribution cannot be made from the reserves, the profits earned in subsequent years shall first be
used to make up the shortfall before any distribution may be made on shares of any other category.
ING Groep N.V.’s Articles of Association make provision for the cancellation of cumulative preference shares.
Upon cancellation of cumulative preference shares and upon liquidation of ING Groep N.V., the amount paid up
on the cumulative preference shares will be repaid together with the accrued dividend as well as any dividend
shortfall in preceding years, insofar as this shortfall has not yet been made up.
No specific dividend payment restrictions with respect to the cumulative preference shares exist.
20 Net interest income
ING Group Annual Report 2021 on Form 20-F
F -309
Notes to the Consolidated statement of profit or loss
20 Net interest income
Net interest income
in EUR million
2021
2020
2019
2021
2020
2019
Interest income on loans
Interest expense on deposits from banks
Interest income on financial assets at fair value through OCI
Interest expense on customer deposits
Interest income on debt securities at amortised cost
Interest expense on debt securities in issue
Interest income on non-trading derivatives (hedge accounting)
Interest expense on subordinated loans
Negative interest on liabilities
Negative interest on assets
Total interest income using effective interest rate method
Interest expense on non-trading derivatives (hedge accounting)
Total interest expense using effective interest rate method
Interest income on financial assets at fair value through profit or loss
Interest income on non-trading derivatives (no hedge accounting)
Interest expense on financial liabilities at fair value through profit or loss
Interest income other
Interest expense on non-trading derivatives (no hedge accounting)
Total other interest income
Interest expense on lease liabilities
Total interest income
Interest expense other
Total other interest expense
Total interest expense
Net interest income
Total net interest income amounts to EUR
affected by reversing the hedge accounting impacts that are applied under EU ‘IAS 39 carve-out’ with an impact
of EUR +
-52
million. Higher interest results were recorded on lending products (driven by a higher total lending margin).
These increases were offset by lower revenues on current accounts and savings, reflecting continued liability
margin pressure.
Negative interest on liabilities in 2021, amounting to EUR
funding rate benefit from the TLTRO III programme of EUR
includes EUR
which depends on meeting the lending growth targets (2020: the full amount of EUR
unconditional interest benefit).
As at 31 December 2020, ING Group did not have a reasonable expectation of meeting the lending growth
targets for the first special reference period (1 March 2020 to 31 March 2021), hence ING Group did not accrue
for the conditional benefit and recognised unconditional interest benefit at
-50
2021, ING Group met the lending growth targets for the first special reference period (1 March 2020 to 31 March
2021) and therefore the interest rate applicable under TLTRO III during the period 24 June 2020 to 23 June 2021
changed from
-50
bps to
-100
bps. The effect of the revised interest rate has been recognised in the statement of
profit or loss (net interest income) in 2021 including EUR
developments in the eligible asset base, ING met the lending growth targets for the second special reference
period (1 October 2020 to 31 December 2021), therefore the funding rate remains at
-100
June 2021 – 23 June 2022.
21 Net fee and commission income
ING Group Annual Report 2021 on Form 20-F
F -310
21 Net fee and commission income
Net fee and commission income
in EUR million
2021
2020
2019
Fee and commission income
Payment Services
Securities business
Insurance and other broking
Portfolio management
Lending business
Financial guarantees and other commitments
Other
Total fee and commission income
Fee and commission expenses
Payment Services
Securities business
Distribution of products (Externally)
Other
Total fee and commission expenses
Net fee and commission income
ING Group changed the presentation of net fee and commission income as of 2021 to better align with internal
management and monitoring. Comparative figures for 2020 and 2019 have been updated accordingly. The
reclassifications do not affect the total amount of Net Fee and Commission Income.
Payment services fees are earned for providing services for deposit accounts and cards, cash management and
transaction processing including interchange. Securities fees and commissions are fees for securities brokerage
and securities underwriting. Portfolio management fees include fees earned for asset management activities,
fiduciary and related activities in which ING holds or invests assets on behalf of its customers. Fees and
commissions from Lending business include income earned for lending advisory, origination, underwriting and
loan commitments which are not part of the effective interest rate. Financial guarantees and other commitments
fees and commissions are earned from bank guarantees, letters of credit and other trade finance related
products, factoring and leasing. Fees paid for distribution of products are all fees paid for the distribution of ING’s
products and services through external providers.
All of ING’s net fee and commission income are in scope of IFRS 15 ‘Revenue from Contracts with Customers’.
Reference is made to Note 35 ‘Segments’ which includes net fee and commission income, as reported to the
Executive Board and the Management Board Banking, disaggregated by line of business and by geographical
segment.
22 Valuation results and net trading income
Valuation results and net trading income
in EUR million
2021
2020
2019
Securities trading results
-500
Derivatives trading results
-554
-998
Other trading results
Change in fair value of derivatives relating to
– fair value hedges
-1,317
– cash flow hedges (ineffective portion)
-5
– other non-trading derivatives
-90
-732
Change in fair value of assets and liabilities (hedged items)
-541
-518
Valuation results on assets and liabilities designated at FVPL (excluding trading)
-13
-123
-358
Foreign exchange transactions results
-159
Changes in Valuation results and net trading income in 2021 compared to 2020 are the result of increased yield
curves in 2021 versus decreased yield curves in 2020.
Securities trading results includes the results of market making in instruments such as government securities,
equity securities, corporate debt securities, money-market instruments. Derivatives trading results includes the
results of derivatives such as interest rate swaps, options, futures, and forward contracts.
Trading gains and losses relating to trading securities still held as at 31 December 2021 amount to EUR
-268
million (2020: EUR
-690
-82
23 Investment income
ING Group Annual Report 2021 on Form 20-F
F -311
The majority of the risks involved in security and currency trading is economically hedged with derivatives. The
securities trading results are partly offset by results on these derivatives. The result of these derivatives is
included in Derivatives trading results.
Other trading results include the results of trading loans and funds entrusted.
Foreign exchange transactions results include gains and losses from spot and forward contracts, options, futures,
and translated foreign currency assets and liabilities. The result on currency trading is included in foreign
exchange transactions results.
Net trading income relates to trading assets and trading liabilities which include assets and liabilities that are
classified under IFRS as Trading but are closely related to servicing the needs of the clients of ING. ING offers
products that are traded on the financial markets to institutional clients, corporate clients, and governments. ING
Group’s trading books are managed based on internal limits and comprise a mix of products with results which
could be offset. A significant part of the derivatives in the trading portfolio are related to servicing corporate
clients in their risk management to hedge for example currency or interest rate exposures. From a risk
perspective, the gross amount of trading assets must be considered together with the gross amount of trading
liabilities, which are presented separately on the statement of financial position. However, IFRS does not always
allow netting of these positions in the statement of financial position. Reference is made to Note 4 ‘Financial
assets at fair value through profit or loss’ and Note 14 ‘Financial liabilities at fair value through profit or loss’ for
information on trading assets and trading liabilities respectively.
‘Valuation results and net trading income’ include the fair value movements on derivatives (used for both hedge
accounting and economically hedging exposures) as well as the changes in the fair value of assets and liabilities
included in hedging relationships as hedged items. Reference is made to Note 40 ‘Derivatives and hedge
accounting’ for information on derivatives used for hedge accounting.
In general, the fair value movements are influenced by changes in the market conditions, such as stock prices,
credit spreads, interest rates and currency exchange rates. The Covid-19 pandemic is still ongoing, but markets
have recovered and stabilised further during 2021 and volatility has largely returned to pre-pandemic levels.
Furthermore, derivatives trading results is also impacted by fair value movements arising from changes in credit
spreads (CVA and DVA), bid offer spreads, model risk and incremental cost of funding on derivatives (FVA and
CollVA). Spreads tightened in 2021 compared to 2020 and the fair value changes decreased.
In 2021, Derivatives trading results include EUR
EUR
‘Valuation results on assets and liabilities designated at fair value through profit or loss (excluding trading)’
include fair value changes on financial assets and financial liabilities driven by changed market conditions. Refer
to Note 4 'Financial assets at fair value through profit or loss' and to Note 14 ‘Financial liabilities at fair value
through profit or loss’.
In addition, ‘Valuation results on assets and liabilities designated at fair value through profit or loss (excluding
trading)’ include fair value adjustments on own issued notes amounting to EUR
-1
2019: EUR
-424
Interest income from trading assets in 2021 amounted to EUR
23 Investment income
Investment income
in EUR million
2021
2020
2019
Dividend income
Realised gains/losses on disposal of debt instruments measured at FVOCI
Income from and fair value gains/losses on investment properties
-0
Investment income
In 2021, 2020 and 2019 dividend income mainly consists of dividend received from ING’s equity stake in Bank of
Beijing.
24 Result on disposal of group companies
ING Group Annual Report 2021 on Form 20-F
F -312
24 Result on disposal of group companies
Result on disposal of group companies
in EUR million
2021
2020
2019
ING Austria (Retail Banking activities)
-26
Makelaarsland
-3
Cel Data Services
-3
ING Lease Italy
-2
ING Mauritius
-29
-3
At 12 July 2021, ING announced that it has reached an agreement to transfer ING’s Retail Banking operations in Austria
to bank99. Per 1 December 2021 ING completed the transaction and realized a loss on settlement of
EUR
ING and the board of Makelaarsland agreed during 2021 to continue Makelaarsland independently. The negative
result on disposal of group companies from this management buyout amounted to a loss of approximately EUR
million.
In 2020 ING realized a EUR
million. Cel Data Services N.V. is active in ATM services including cash loading and ICT managed services for ING’s
Belgian retail branches, other Belgian financial institutions and retail shops.
In 2019 the Result on disposal of group companies is mainly impacted by the sale of ING’s stake in Kotak
Mahindra Bank by ING Mauritius during 1Q 2019. ING Mauritius is in the process of being liquidated and
consequently, the release of the currency translation reserve (CTA) and the release of the Net Investment
Foreign Entities reserve resulted in a one-off gain of EUR
25 Net result on derecognition of financial assets measured at amortised cost
Net result on derecognition of financial assets measured at amortised cost
in EUR million
2021
2020
2019
Loans at amortised cost
Securities at amortised cost
-1
Net result on derecognition of financial assets measured at amortised cost
-0
In 2020, driven by exceptional market circumstances in the first quarter, ING realised a profit on the sale of debt
securities at amortised cost of EUR
26 Other income
In 2021, Other income of EUR
of EUR
Netherlands and EUR
retail banking market in the Czech Republic. Furthermore, it includes the positive recovery of defaulted
receivables of EUR
In 2020, Other income is impacted by positive and negative non-recurring results, including a loss of EUR
million following a settlement with the Australian Tax Authorities related to former insurance activities, that
were fully indemnified by NN Group. This was offset by a tax profit for the same amount resulting from the
release of the provision for uncertain tax positions in current tax liabilities.
In 2019, Other income also included the recognition of EUR
financial institution.
27 Staff Expenses
ING Group Annual Report 2021 on Form 20-F
F -313
27 Staff Expenses
Staff expenses
in EUR million
2021
2020
2019
Salaries
Pension costs and other staff-related benefit costs
Social security costs
Share-based compensation arrangements
External employees
Education
Other staff costs
Share-based compensation arrangements include EUR
relating to equity-settled share-based payment arrangements and EUR
Number of employees
Netherlands
Rest of the world
Total
2021
2020
2019
2021
2020
2019
2021
2020
2019
Total average number
of internal employees at full time
equivalent basis
Remuneration of senior management, Executive Board and Supervisory Board
Reference is made to Note 50 ‘Related parties’.
Share plans and Stock Options
ING grants various types of share awards, namely deferred shares, performance shares and upfront shares, which
form part of the variable remuneration offering via the Long-term Sustainable Performance Plan (LSPP). The
entitlement to the LSPP share awards is granted conditionally. If the participant remains in employment for an
uninterrupted period between the grant date and the vesting date, the entitlement becomes unconditional, with
the exception of the upfront shares which are immediately vested upon grant. Upfront and deferred shares
awarded to the Management Board members of ING Group as well as identified staff, have a retention obligation
that must be adhered to upon vesting, typically a minimum retention of 12 months applies. ING has the authority
to apply a holdback to awarded but unvested shares and a clawback to vested shares.
In addition to the LSPP share awards, ING paid a number of senior employees fixed shares. The number of shares
were determined each month from a cash value that forms part of the employee fixed remuneration. The shares
were immediately vested to the employee, but had a minimum holding requirement of
employee can dispose of the shares. The fixed shares are not subject to holdback or clawback.
The share awards granted in 2021 relate to the performance year 2020. In 2021,
;
2019:
) were granted to the members of the Executive Board of ING Groep N.V., and
(2020:
; 2019:
) were granted to the Management Board Banking. To senior management and other
employees
; 2019:
) were granted.
The obligations with regard to share plans are funded by newly issued shares at the discretion of ING Group.
In 2010, the Group Executive Board has decided not to continue the option scheme as from 2011. These option
schemes have run off during the financial year 2020.
On 31 December 2019 there were
The weighted average share price at the date of exercise for options exercised during 2020 was EUR
).
Changes in share awards
Share awards (in numbers)
Weighted average grant date fair
values (in euros)
2021
2020
2019
2021
2020
2019
Opening balance
Granted
Performance effect
Vested
-3,459,163
-3,690,340
-3,945,020
Forfeited
-135,506
-153,440
-223,585
Closing balance
28 Other operating expenses
ING Group Annual Report 2021 on Form 20-F
F -314
As at 31 December 2021 the share awards consists of
; 2019:
)
relating to equity-settled share-based payment arrangements and
; 2019:
) relating to cash-settled share-based payment arrangements.
The fair value of share awards granted is recognised as an expense under Staff expenses and is allocated over the
vesting period of the share awards. The fair value calculation takes into account the current stock prices,
expected volatilities and the dividend yield of ING shares.
As at 31 December 2021, total unrecognised compensation costs related to share awards amount to EUR
million (2020: EUR
average period of
28 Other operating expenses
Other operating expenses
in EUR million
2021
2020
2019
Regulatory costs
Audit and non-audit services
IT related expenses
Advertising and public relations
External advisory fees
Office expenses
Travel and accommodation expenses
Contributions and subscriptions
Postal charges
Depreciation of property and equipment
Amortisation of intangible assets
(Reversals of) impairments of tangible assets
-3
(Reversals of) impairments of intangible assets
Addition to / (unused amounts reversed of) provision for reorganisations
Addition to / (unused amounts reversed of) other provisions
Other
Reference is made to Note 9 for (reversals of) impairments of property and equipment and Note 10 for (reversals
of) impairments of intangible assets.
Regulatory costs
Regulatory costs represent contributions to the Deposit Guarantee Schemes (DGS), The Single Resolution Fund
(SRF), local bank taxes and local resolution funds. Included in Regulatory costs for 2021, are contributions to DGS
of EUR
Belgium, and Poland and contributions to the SRF and local resolution funds of EUR
million; 2019: EUR
2020 to EUR
Addition to / (unused amounts reversed of) provision for reorganisations
For further information reference is made to Note 15 ‘Provisions’.
Addition to / (unused amounts reversed of) other provisions
For further information reference is made to Note 15 ‘Provisions’ and Note 46 ‘Legal proceedings’.
29 Audit fees
Total audit and non-audit services include the following fees for services provided by the Group’s auditor.
Fees of Group’s auditors
2021
2020
2019
Audit fees
Audit related fees
0
Total
1 The Group’s auditors did not provide any non-audit services.
Fees as disclosed in the table above relate to the network of the Group’s auditors and are the total expected
audit fees for the period excluding VAT.
30 Earnings per ordinary share
ING Group Annual Report 2021 on Form 20-F
F -315
30 Earnings per ordinary share
Earnings per ordinary share
Weighted average number
of ordinary shares outstanding
Amount
during the period
Per ordinary share
(in EUR million)
(in millions)
(in EUR)
2021
2020
2019
2021
2020
2019
2021
2020
2019
Basic earnings
Basic earnings from continuing
operations
Effect of dilutive instruments:
Stock option and share plans
Diluted earnings
Diluted earnings from
continuing operations
Earnings per ordinary share is calculated on the basis of the weighted average number of ordinary shares
outstanding. In calculating the weighted average number of ordinary shares outstanding, own shares held by
group companies (including share buyback programme) are deducted from the total number of ordinary shares
in issue.
Dilutive instruments
Diluted earnings per share is calculated as if the stock options and share plans outstanding at the end of the
period had been exercised at the beginning of the period and assuming that the cash received from dilutive
instruments (if any) is used to buy own shares against the average market price during the period. The net
increase in the number of shares resulting from exercising stock options and share plans is added to the average
number of shares used for the calculation of diluted earnings per share. In 2021, the effect of dilutive
instruments no longer includes stock options. The stock option scheme was terminated in 2020.
31 Dividend per ordinary share
Dividends to shareholders of the parent
Per
ordinary
share
Total
(in EUR
million)
Dividends on ordinary shares:
In respect of 2019
Total dividend in respect of 2019
In respect of 2020
1
Total dividend in respect of 2020
In respect of 2021
2
Total dividend in respect of 2021
1 AGM declared the interim dividend of EUR
2 Compared to the reserved amount of EUR
rounding of cents per share.
ING Groep N.V. is required to withhold tax of
% on dividends paid.
The final dividend declared for 2021 is based on the proposed dividend of EUR
number of outstanding shares. This excludes the shares repurchased under the share buyback programme (
million shares at 31 December 2021). On 28 February 2022 ING announced it has fully completed the programme
under which
In 2021, other cash distributions related to prior year profits of EUR
to the shareholders of ING Group. Reference is made to Note 19 ‘Equity’ for further information.
32 Net cash flow from operating activities
ING Group Annual Report 2021 on Form 20-F
F -316
32 Net cash flow from operating activities
The table below shows a detailed overview of the net cash flow from operating activities.
Cash flows from operating activities
in EUR million
2021
2020
2019
Cash flows from operating activities
Result before tax
Adjusted for:
- Depreciation and amortisation
- Addition to loan loss provisions
- Other non-cash items included in result before tax
-1,190
Taxation paid
-1,873
-1,734
-2,345
Changes in:
– Loans and advances to banks, not available on demand
-1,338
– Deposits from banks, not payable on demand
-2,574
Net change in loans and advances to/ from banks, not available/ payable on
demand
-3,911
– Trading assets
-25
-2,101
– Trading liabilities
-5,596
-3,173
Net change in Trading assets and Trading liabilities
-5,620
-2,568
Loans and advances to customers
-27,860
-16,687
Customer deposits
– Non–trading derivatives
-1,440
– Assets designated at fair value through profit or loss
-1,907
-1,369
-7
– Assets mandatorily at fair value through profit or loss
-1,963
– Other assets
-113
– Other financial liabilities at fair value through profit or loss
-6,791
-12,235
– Provisions and other liabilities
-304
-1,355
-1,784
Other
-7,175
-3,856
11,752
Net cash flow from/(used in) operating activities
-14,943
33 Changes in liabilities arising from financing activities
Changes in liabilities arising from financing activities
Debt securities in issue
Subordinated Loans
Lease liabilities
Total Liabilities from
financing activities
in EUR million
2021
2020
2021
2020
2021
2020
2021
2020
Opening balance
Cashflows:
Additions
Redemptions / Disposals
-76,150
-99,212
-2,449
-2,786
-301
-273
-78,900
-102,270
Non cash changes:
Amortisation
Other
-92
-105
-26
-20
-6
Changes in unrealised
revaluations
-1,923
-414
-2,336
Foreign exchange movement
-3,403
-545
-31
-3,980
Closing balance
34 Cash and cash equivalents
Cash and cash equivalents
in EUR million
2021
2020
2019
Treasury bills and other eligible bills
0
Deposits from banks/Loans and advances to banks
Cash and balances with central banks
Cash and cash equivalents at end of year
Treasury bills and other eligible bills included in cash and cash equivalents
in EUR million
2021
2020
2019
Treasury bills and other eligible bills included in securities at AC
0
35 Segments
ING Group Annual Report 2021 on Form 20-F
F -317
Deposits from banks/Loans and advances to banks
in EUR million
2021
2020
2019
Included in cash and cash equivalents:
– Deposits from banks
-7,059
-8,788
-8,519
– Loans and advances to banks
Not included in cash and cash equivalents:
– Deposits from banks
-78,033
-69,310
-26,307
– Loans and advances to banks
-62,621
-53,212
-476
Total as included in the statement of financial position:
– Deposits from banks
-85,092
-78,098
-34,826
– Loans and advances to banks
-61,500
-52,733
Cash and cash equivalents includes deposits from banks and loans and advances to banks that are on demand.
Included in Cash and cash equivalents, are minimum mandatory reserve deposits to be held with various central
banks. Reference is made to Note 43 ‘Transfer of financial assets, assets pledged and received as collateral’ for
restrictions on Cash and balances with central banks.
Segment reporting
35 Segments
ING Group’s segments are based on the internal reporting structure by lines of business.
The Executive Board of ING Group and the Management Board Banking (together the Chief Operating Decision
Maker (CODM)) set the performance targets, approve and monitor the budgets prepared by the business lines.
Business lines formulate strategic, commercial, and financial plans in conformity with the strategy and
performance targets set by the CODM.
Recognition and measurement of segment results are in line with the accounting policies as described in Note 1
‘Basis of preparation and significant accounting policies’. The results for the period for each reportable segment
are after intercompany and intersegment eliminations and are those reviewed by the CODM to assess
performance of the segments. Corporate expenses are allocated to business lines based on time spent by head
office personnel, the relative number of staff, or on the basis of income, expenses and/or assets of the segment.
The following table specifies the segments by line of business and main sources of income of each of the
segments:
35 Segments
ING Group Annual Report 2021 on Form 20-F
F -318
Specification of the main sources of income of each of the segments by line of business
Segments by line of business
Main source of income
Retail Netherlands
(Market Leaders)
Income from retail and private banking activities in the Netherlands, including the
SME and mid-corporate segments, and the Real Estate Finance portfolio related to
Dutch domestic mid-corporates. The main products offered are current and savings
accounts, business lending, mortgages and other consumer lending in the
Netherlands.
Retail Belgium
(Market Leaders)
Income from retail and private banking activities in Belgium (including
Luxembourg), including the SME and mid-corporate segments. The main products
offered are similar to those in the Netherlands.
Retail Germany
(Challengers and Growth Markets)
Income from retail and private banking activities in Germany (including Austria). The
main products offered are current and savings accounts, mortgages and other
customer lending.
Retail Other
(Challengers and Growth Markets)
Income from retail banking activities in the rest of the world, including the SME and
mid-corporate segments in specific countries. The main products offered are similar
to those in the Netherlands.
Wholesale Banking
Income from wholesale banking activities. The main products are: lending, debt
capital markets, working capital solutions, export finance, daily banking solutions,
treasury and risk solutions, and corporate finance.
Specification of geographical split of the segments
Geographical split of the segments
Main countries
The Netherlands
Belgium
Including Luxembourg
Germany
Including Austria
Other Challengers
Australia, Czech Republic, France, Italy, Spain, Portugal, Other
Growth Markets
Poland, Romania, Turkey, Philippines and Asian stakes
Wholesale Banking Rest of World
UK, Americas, Asia and other countries in Central and Eastern Europe
Other
Corporate Line
ING Group monitors and evaluates the performance of ING Group at a consolidated level and by segment using
results based on figures according to IFRS as adopted by the European Union (IFRS-EU). The Executive Board and
the Management Board Banking consider this measure to be relevant to an understanding of the Group’s
financial performance, because it allows investors to understand the primary method used by management to
evaluate the Group’s operating performance and make decisions about allocating resources.
In addition, ING Group believes that the presentation of results in accordance with IFRS-EU helps investors
compare its segment performance on a meaningful basis by highlighting result before tax attributable to ongoing
operations and the profitability of the segment businesses. IFRS-EU result is derived by including the impact of
the IFRS-EU ‘IAS 39 carve out’ adjustment.
The IFRS-EU ‘IAS 39 carve-out’ adjustment relates to fair value portfolio hedge accounting strategies for the
mortgage and savings portfolios in the Benelux, Germany and Other Challengers that are not eligible under IFRS-
IASB. As no hedge accounting is applied to these mortgage and savings portfolios under IFRS-IASB, the fair value
changes of the derivatives are not offset by fair value changes of the hedge items (mortgages and savings).
The segment reporting in the annual report on Form 20-F has been prepared in accordance with International
Financial Reporting Standards as issued by the EU (IFRS-EU) and reconciled to International Financial Reporting
Standards as issued by the International Accounting Standards Board (IFRS-IASB) for consistency with the other
financial information contained in this report. The difference between the accounting standards is reflected in
the Wholesale Banking segment, and in the geographical split of the segments in the Netherlands, Belgium,
Germany and Other Challengers.
Reference is made to Note 1 ‘Basis of preparation and significant accounting policies’ for a reconciliation
between IFRS-EU and IFRS-IASB. Corporate expenses are allocated to business lines based on time spent by head
office personnel, the relative number of staff, or on the basis of income, expenses and/or assets of the segment.
35 Segments
ING Group Annual Report 2021 on Form 20-F
F -319
ING Group reconciles the total segment results to the total result using Corporate Line. The Corporate Line is a
reflection of capital management activities and certain income and expenses that are not allocated to the
banking businesses, including the recognition of value-added tax (VAT) refunds in the Netherlands (recorded
under expenses). In 2021, income was supported by a EUR
recognition of a EUR
included EUR
% increase in the Dutch bank tax as well as a
significantly lower VAT refund compared with the previous year. In 2020, net interest income on the Corporate
Line sharply declined, mainly due to lower interest results from foreign currency hedging due to lower interest
rate differentials. In 2019, a EUR
sale of ING’s stake in Kotak Mahindra Bank was included, and the recognition of a EUR
related to the insolvency of a financial institution (both recorded under income). Furthermore, the Corporate
Line includes the isolated legacy costs (mainly negative interest results) caused by the replacement of short-term
funding with long-term funding during 2013 and 2014. ING Group applies a system of capital charging for its
banking operations in order to create a comparable basis for the results of business units globally, irrespective of
the business units’ book equity and the currency they operate in.
The information presented in this note is in line with the information presented to the Executive Board of ING
Group and Management Board Banking.
This note does not provide information on the revenue specified to each product or service as this is not reported
internally and is therefore not readily available.
35 Segments
ING Group Annual Report 2021 on Form 20-F
F -320
Reconciliation between IFRS-IASB and IFRS-EU income, expense and net result
12 month period
2021
2020
2019
in EUR million
Income
Expenses
Taxation
Non-
controlling
interests
Net result
1
Income
Expenses
Taxation
Non-
controlling
interests
Net result
1
Income
Expenses
Taxation
Non-
controlling
interests
Net result
1
Net result IFRS-IASB attributable to equity holder of the
parent
Remove impact of:
Adjustment of the EU 'IAS 39 carve out'
2
-1,603
-429
-1,174
Result IFRS-EU
3
1. Net result, after tax and non-controlling interests.
2. ING prepares the Form 20-F in accordance with IFRS-IASB. This information is prepared by reversing the hedge accounting impacts that
applied under the EU 'carve-out' version of IAS 39. For the IFRS-EU result, the impact of the carve-out is re-instated as this is the measure at
which management monitors the business.
3. IFRS-EU figures are derived from figures according to IFRS-IASB by excluding the impact of adjustment of the EU 'IAS 39 carve-out'.
35 Segments
ING Group Annual Report 2021 on Form 20-F
F -321
ING Group Total
12 month period
2021
2020
2019
in EUR million
ING
Bank
Other
Total ING
Group
ING
Bank
Other
Total ING
Group
ING
Bank
Other
Total ING
Group
Income
– Net interest income
-0
– Net fee and commission income
-0
-0
-0
– Total investment and other income
-12
Total income
-9
Expenditure
– Operating expenses
-3
-8
– Addition to loan loss provisions
0
-0
0
Total expenses
-3
-8
Result before taxation
-1
Taxation
-71
Non-controlling interests
0
Net result IFRS-EU
-63
Adjustment of the EU 'IAS 39 carve out'
-234
-234
-878
-878
Net result IFRS-IASB attributable to equity holder of the parent
-63
35 Segments
ING Group Annual Report 2021 on Form 20-F
F -322
Segments by line of business
12 month period
2021
2020
2019
in EUR million
Retail
Nether-
lands
Retail
Belgium
Retail
Ger-
many
1
Retail
Other
1
Wholesale
Banking
Corporate
Line
Total
Retail
Nether-
lands
Retail
Belgium
Retail
Ger-
many
Retail
Other
Wholesale
Banking
Corporate
Line
Total
Retail
Nether-
lands
Retail
Belgium
Retail
Ger-
many
Retail
Other
Wholesale
Banking
Corporate
Line
Total
Income
– Net interest income
– Net fee and commission income
-1
-6
– Total investment and other income
-45
-192
Total income
Expenditure
– Operating expenses
– Additions to loan loss provision
-76
0
-53
-0
Total expenses
Result before taxation
-345
-367
Taxation
-58
Non-controlling interests
0
-0
-1
0
-0
-0
0
-0
Net result IFRS-EU
-410
-308
Adjustment of the EU 'IAS 39 carve out'
-234
-234
-878
-878
Net result IFRS-IASB
-410
-308
1 In the fourth quarter of 2021, ING exited from the retail banking markets in Austria and the Czech Republic.
35 Segments
ING Group Annual Report 2021 on Form 20-F
F -323
Geographical split of the segments
12 month period
2021
2020
2019
in EUR million
Nether-
lands
Belgium
Ger-
many
1
Other
Challen
gers
1
Growth
Markets
Wholesale
Banking
Rest of
World
Other
Total
Nether-
lands
Belgium
Ger-
many
Other
Challen
gers
Growth
Markets
Wholesale
Banking
Rest of
World
Other
Total
Nether-
lands
Belgium
Ger-
many
Other
Challen
gers
Growth
Markets
Wholesale
Banking
Rest of
World
Other
Total
– Net interest income
– Net fee and
commission income
-1
-7
– Total investment and
other income
-46
-184
Total income
Expenditure
– Operating expenses
– Additions to loan loss
provision
-21
0
-40
-0
Total expenses
Result before taxation
-345
-367
Retail Banking
-27
Wholesale Banking
-0
-290
-0
-19
-3
Corporate Line
-345
-345
-367
-367
Result before taxation
-345
-367
Taxation
-59
Non-controlling
interests
0
-0
-1
0
-0
-0
0
-0
Net result IFRS-EU
-409
-308
Adjustment of the EU
'IAS 39 carve out'
-177
-115
-234
-273
-372
-232
-0
-878
Net result IFRS
-409
-308
1 In the fourth quarter of 2021, ING exited from the retail banking markets in Austria and the Czech Republic.
36 Information on geographical areas
ING Group Annual Report 2021 on Form 20-F
F -324
36 Information on geographical areas
ING Group’s business lines operate in
Poland, Rest of Europe, North America, Latin America, Asia and Australia. A geographical area is a distinguishable
component of the Group engaged in providing products or services within a particular economic environment
that is subject to risks and returns that are different from those of geographical areas operating in other
economic environments. The geographical analyses are based on the location of the office from which the
transactions are originated and do not include countries where ING only has representation offices. The
Netherlands is ING Group’s country of domicile.
In order to increase ING Group’s tax transparency, additional financial information on a per country basis has
been included in this disclosure: Tax paid represents all income tax paid to and/or received from tax authorities
in the current year, irrespective of the fiscal year to which these payments or refunds relate. Total assets by
country does not include intercompany balances and reconciles to the total assets in the consolidated statement
of financial position of ING Group.
The table below provide additional information, for the years 2021, 2020 and 2019 respectively, on names of
principal subsidiaries and branches, nature of main activities and average number of employees on a full time
equivalent basis by country/tax jurisdiction.
Additional information by country
Geographical
area
Country/Tax
jurisdiction
Name of principal
subsidiary
Main (banking)
activity
Average number of employees at
full time equivalent basis
Total Income
Total assets
Result before tax
Taxation
Tax paid
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
Netherlands
Netherlands
Belgium
Belgium
Luxemburg
Rest of Europe
Poland
1
Germany
Romania
1
Spain
Italy
-39
UK
France
2
-65
-71
-16
-17
-7
Russia
0
0
-7
-3
Czech Republic
3
-2
Hungary
-7
Slovakia
1
0
0
-1
Ukraine
Austria
3
0
0
-5
-14
Bulgaria
0
0
0
0
0
0
Ireland
Portugal
Switzerland
-36
1 Includes significant amount of FTEs in relation to global services provided.
2 Public subsidies received, as defined in article 89 of the CRD IV, amounts to EUR 0.0 million (2020: EUR
3 In the fourth quarter of 2021, ING exited from the retail banking markets in Austria and the Czech Republic.
36 Information on geographical areas
ING Group Annual Report 2021 on Form 20-F
F -325
Additional information by country (continued)
Geographical
area
Country/Tax
jurisdiction
Name of principal subsidiary
Main (banking)
activity
Average number of employees at
full time equivalent basis
Total Income
Total assets
Result before tax
Taxation
Tax paid
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
2021
2020
2019
North America
Canada
0
0
0
0
0
0
0
0
0
0
0
0
0
USA
Latin America
Brazil
Colombia
0
0
0
0
0
0
0
0
0
0
0
0
Mexico
-1
-1
-2
0
0
0
0
0
0
Asia
China
0
-2
-1
-1
-5
0
Japan
-1
-1
Singapore
Macau
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Hong Kong
-9
-1
-7
Philippines
1
-33
-26
-11
-5
-5
South Korea
-2
Taiwan
-3
-1
0
0
Indonesia
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Malaysia
0
-1
-1
0
0
0
0
0
0
0
Sri Lanka
0
0
0
0
0
0
Turkey
United Arab
Emirates
0
0
-1
0
-1
-2
-2
0
0
0
0
0
0
Australia
Australia
Other
Mauritius
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Total
1 Includes significant amount of FTEs in relation to global services provided.
2021
The higher tax charge of
% in the Netherlands (compared to the statutory rate of
%) is mainly caused by
the non-deductible Dutch bank tax (EUR
Payvision and Yolt (EUR
The lower tax charge in Austria is caused by previously not recognised tax losses (EUR
-10
The higher tax charge in Poland is mainly caused by non-deductible regulatory- and other costs.
37 Pensions and other post-employment benefits
ING Group Annual Report 2021 on Form 20-F
F -326
2020
The higher tax charge of
% in the Netherlands (compared to the statutory rate of
%) is mainly caused by
the non-deductible Dutch bank tax (EUR
(EUR
The lower tax charge in Australia is caused by a release of a tax provision after concluding a settlement with
the Australian Tax Authorities on an issue related to former Insurance activities, which issue was fully
indemnified by NN Group.
The higher tax charges in Brazil and the Philippines are mainly caused by the de-recognition of tax benefits for
incurred tax losses due to expected insufficient future taxable profits.
The higher tax charges in Poland and Belgium are mainly caused by non-deductible regulatory- and other costs.
2019
The relatively high tax charge of
% in the Netherlands (compared to statutory rate of
%) is mainly caused
by the non-deductible Dutch bank tax (EUR
The relatively low tax charge in Switzerland is caused by a deferred tax benefit following a tax rate reduction in
2019.
Additional notes to the Consolidated financial statements
37 Pensions and other post-employment benefits
Most group companies sponsor defined contribution pension plans. The assets of all ING Group’s defined
contribution plans are held in independently administered funds. Contributions are generally determined as a
percentage of remuneration. Contributions, including the defined contribution plan in the Netherlands, are
principally determined as a percentage of renumeration. These plans do not give rise to provisions in the
statement of financial position, other than relating to short-term timing differences included in other
assets/liabilities.
ING Group maintains defined benefit retirement plans in some countries. These plans provide benefits that are
related to the remuneration and service of employees upon retirement. The benefits in some of these plans
are subject to various forms of indexation. The indexation is, in some cases, at the discretion of management;
in other cases it is dependent upon the sufficiency of plan assets.
Annual contributions are paid to the funds at a rate necessary to adequately finance the accrued liabilities of
the plans calculated in accordance with local legal requirements. Plans in all countries are designed to comply
with applicable local regulations governing investments and funding levels.
ING Group provides other post-employment benefits to certain former employees. These are primarily
discounts on ING products.
Defined Contribution Plans
ING, as part of employee’s labour agreement, sponsors a number of defined contribution plans. ING’s
obligation is limited to contributions which are agreed in advance and also includes employee contributions.
The most significant plans are in The Netherlands and Belgium. The Employer contribution are recognized as an
expense which amounted for 2021 EUR
37 Pensions and other post-employment benefits
ING Group Annual Report 2021 on Form 20-F
F -327
Defined benefit retirement plans
Statement of financial position - Net defined benefit asset/liability
Plan assets and defined benefit obligation per country
Plan assets
Defined benefit
obligation
Funded Status
in EUR million
2021
2020
2021
2020
2021
2020
The Netherlands
-152
-174
United States
United Kingdom
Belgium
-10
-90
Other countries
-34
-77
Funded status (Net defined benefit asset/liability)
Presented as:
- Other assets
- Other liabilities
-227
-350
The most recent (actuarial) valuations of the plan assets and the present value of the defined benefit obligation
were carried out as at 31 December 2021. The present value of the defined benefit obligation, and the related
current service cost and past service cost, were determined using the projected unit credit method.
Changes in the fair value of plan assets for the period were as follows:
Changes in fair value of plan assets
in EUR million
2021
2020
Opening balance
Interest income
Remeasurements: Return on plan assets excluding amounts included in interest income
Employer's contribution
Participants contributions
Benefits paid
-136
-128
Exchange rate differences
-134
Closing balance
Actual return on the plan assets
ING does not manage the pension funds and thus receives no compensation for fund management. The
pension funds have not engaged ING in any swap or derivative transactions to manage the risk of the pension
funds.
The overall funded status improved during the year because of increased interest rates, leading to lower
benefit obligations, and positive performance of plan assets. Covid-19 still has an impact on most investment
markets in 2021, the effect on the fair value of ING Group’s plan assets is limited as a large majority of our plan
assets is invested in liquid asset categories which mark to market frequently.
Changes in the present value of the defined benefit obligation and other post-employment benefits for the
period were as follows:
37 Pensions and other post-employment benefits
ING Group Annual Report 2021 on Form 20-F
F -328
Changes in defined benefit obligation and other post-employment benefits
Defined benefit
obligation
Other post-
employment benefits
in EUR million
2021
2020
2021
2020
Opening balance
Current service cost
-2
Interest cost
Remeasurements: Actuarial gains and losses arising from changes in demographic
assumptions
-5
Remeasurements: Actuarial gains and losses arising from changes in financial
assumptions
-122
-16
Participants’ contributions
0
Benefits paid
-141
-132
-1
-1
Past service cost
0
0
Effect of curtailment or settlement
-0
0
-2
Exchange rate differences
-85
-8
Closing balance
Amounts recognised directly in Other comprehensive income were as follows:
Changes in the net defined benefit assets/liability remeasurement reserve
in EUR million
2021
2020
Opening balance
-307
-336
Remeasurement of plan assets
Actuarial gains and losses arising from changes in demographic assumptions
-4
Actuarial gains and losses arising from changes in financial assumptions
-190
Taxation and Exchange rate differences
-34
-24
Total Other comprehensive income movement for the year
Closing balance
-212
-307
In 2021, EUR
income is driven by slightly higher yields on investments.
The EUR
defined benefit obligation are mainly due to an increase in discount rates.
The accumulated amount of remeasurements recognised directly in Other comprehensive income is EUR
-262
million (EUR
-212
-343
-307
Amounts recognised in the statement of profit or loss related to pension and other staff related benefits are as
follows:
Pension and other staff-related benefit costs
Net defined benefit
asset/liability
Other post-employment
benefits
Total
in EUR million
2021
2020
2019
2021
2020
2019
2021
2020
2019
Current service cost
-2
-1
Past service cost
0
-0
0
0
-0
Net Interest cost
-6
-6
-5
-4
-4
-3
Effect of curtailment or settlement
-0
0
0
-2
-2
0
0
Defined benefit plans
0
Defined contribution plans
Pension and other post employment
benefits
Other staff related benefits
Pension and other staff-related benefits
Determination of the net defined benefit asset/liability
The net defined benefit asset/liability is reviewed and adjusted annually. The assumptions used in the
determination of the net defined benefit asset/liability and the Other post-employment benefits include
discount rates, mortality rates, expected rates of salary increases (excluding promotion increases), and
indexation. The rates used for salary developments, interest discount factors, and other adjustments reflect
country-specific conditions.
The key assumption in the determination of the net defined benefit asset/liability is the discount rate. The
discount rate is the weighted average of the discount rates that are applied in different regions where ING
Group has defined benefit pension plans (weighted by the defined benefit obligation). The discount rate is
based on a methodology that uses market yields on high quality corporate bonds of the specific regions with
durations matching the pension liabilities as key input. Market yields of high quality corporate bonds reflect
38 Taxation
ING Group Annual Report 2021 on Form 20-F
F -329
the yield on corporate bonds with an AA rating for durations where such yields are available. An extrapolation
is applied in order to determine the yield to the longer durations for which no AA-rated corporate bonds are
available. As a result of the limited availability of long-duration AA-rated corporate bonds, extrapolation is an
important element of the determination of the discount rate. The weighted average discount rate applied for
net defined benefit asset/liability for 2021 was
% (2020:
%) based on the pension plan in the
Netherlands, Germany, Belgium, The United States of America, and the United Kingdom. The average discount
rate applied for Other post-employment benefits was
% (2020:
%).
Sensitivity analysis of key assumptions
ING performs sensitivity analysis on the most significant assumptions: discount rates, mortality, expected rate
of salary increase, and indexation. The sensitivity analysis has been carried out under the assumption that the
changes occurred at the end of the reporting period.
The sensitivity analysis calculates the financial impact on the defined benefit obligation of an increase or
decrease of the weighted averages of each significant actuarial assumption, all other assumptions held
constant. In practice, this is unlikely to occur, and some changes of the assumptions may be correlated.
Changes to mortality, expected rate of salary increase, and indexation would have no material impact on the
defined benefit obligation. The most significant impact would be from a change in the discount rate. An
increase or decrease in the discount rate of
% creates an impact on the defined benefit obligation of EUR
-443
million (decrease) and EUR
Expected cash flows
Annual contributions are paid to the funds at a rate necessary to adequately finance the accrued liabilities of
the plans calculated in accordance with local supervisory requirements. Plans in all countries are designed to
comply with applicable local regulations governing investments and funding levels. ING Group’s subsidiaries
should fund the cost of the entitlements expected to be earned on a yearly basis.
For 2022 the expected contributions to defined benefit pension plans are EUR
The benefit payments for defined benefit and other post-employment benefits expected to be made by the
plan between 2022-2026 are estimated to be between EUR
2027 to 2031 the total payments made by the plan are expected to be EUR
38 Taxation
Statement of financial position – Deferred tax
Deferred taxes are recognised on all temporary differences under the liability method using tax rates applicable
in the jurisdictions in which ING Group is subject to taxation.
Changes in deferred tax
2021
Net liability (-)
Net asset (+)
opening
balance
Change
through
equity
Change
through
net result
Exchange
rate
differences
Changes
in the composi-
tion of the
group and
other changes
Net liability (-)
Net asset (+)
ending balance
Financial assets at FVOCI
-108
-1
-72
Investment properties
-3
-1
Financial assets and liabilities at FVPL
-469
-7
Depreciation
-10
-2
-7
Cash flow hedges
-360
-126
Pension and post-employment benefits
-54
-23
-8
-49
Other provisions
-5
-4
-0
Loans and advances
-2
-83
-1
-0
Unused tax losses carried forward
Other
-83
-83
-0
-147
-399
-1
Presented in the statement of financial
position as:
– Deferred tax liabilities
-343
-311
– Deferred tax assets
The above table shows netted deferred tax amounts related to right-of-use assets and lease liabilities included
in the row ‘Other’ a deferred tax amount for right-of-use assets of EUR
a deferred tax amount for lease liabilities of EUR
Financial assets and liabilities FVPL changes through net result in 2021 relates to the decrease in fair value of
derivatives due to increased interest yield curves.
38 Taxation
ING Group Annual Report 2021 on Form 20-F
F -330
The deferred tax on cash flow hedges relate to floating rate lending with interest rate swaps. Due to an
increase in the interest rate yield curve in 2021 there was a negative revaluation through other comprehensive
income and an increase of the deferred tax asset of EUR
Changes in deferred tax
2020
Net liability (-)
Net asset (+)
opening
balance
Change
through
equity
Change
through
net result
Exchange
rate
differences
Changes in
the composi-
tion of the
group and
other changes
Net liability (-)
Net asset (+)
ending balance
Financial assets at FVOCI
-107
-10
0
-108
Investment properties
-7
0
Financial assets and liabilities at FVPL
Depreciation
-19
-10
Cash flow hedges
-337
-23
0
-360
Pension and post-employment benefits
-8
-5
-0
Other provisions
-4
-7
0
-5
Loans and advances
-1
-15
0
Unused tax losses carried forward
-5
Other
-156
-1
-5
-83
Total
-9
0
Presented in the statement of financial
position as:
– deferred tax liabilities
-322
-343
– deferred tax assets
The above table shows netted deferred tax amounts related to right-of-use assets and lease liabilities included
in the row ‘Other’ a deferred tax amount for right-of-use assets of EUR
a deferred tax amount for lease liabilities of EUR
Financial assets and liabilities FVPL changes through net result in 2020 relates to the increase in fair value of
derivatives due to decreased interest yield curves.
Deferred tax in connection with unused tax losses carried forward
2021
2020
Total unused tax losses carried forward
Unused tax losses carried forward not recognised as a deferred tax asset
Unused tax losses carried forward recognised as a deferred tax asset
Average tax rate
22.3%
22.0%
Deferred tax asset
Total unused tax losses carried forward analysed by expiry terms
No deferred tax
asset recognised
Deferred tax
asset recognised
2021
2020
2021
2020
Within 1 year
More than 1 year but less than 5 years
More than 5 years but less than 10 years
More than 10 years but less than 20 years
Unlimited
The above mentioned deferred tax asset of EUR
losses carried forward exclude the deferred tax liability recognised in the Netherlands with respect to the
recapture of tax losses originated in the United Kingdom but previously deducted in the Netherlands for the
amount of EUR
Deferred tax assets are recognised for temporary deductible differences, for tax losses carried forward and
unused tax credits only to the extent that realisation of the related tax benefit is probable.
38 Taxation
ING Group Annual Report 2021 on Form 20-F
F -331
Breakdown of certain net deferred tax asset positions by jurisdiction
2021
2020
The table above includes a breakdown of certain net deferred tax asset positions by jurisdiction for which the
utilisation of the deferred tax asset is dependent on future taxable profits in excess of the profits arising from
the reversal of existing taxable temporary differences whilst the related entities have incurred losses in either
the current or the preceding year.
In 2021 ING Bank Slaski (Poland) incurred a tax loss following the large value changes of the cash flow hedge
derivatives which are settled net via a central counter party. This tax loss can be carried forward for 5 years.
Based on a taxable profit forecast, ING considers it probable that the future taxable profits will compensate for
this tax loss carry forward position within 2 years. Based on this a deferred tax asset on unused tax losses
carried forward (EUR
of EUR
through profit and loss.
Recognition is based on the fact that it is probable that the entity will have taxable profits and/or can utilise tax
planning opportunities before expiration of the deferred tax assets. Changes in circumstances in future periods
may adversely impact the assessment of the recoverability. The uncertainty of the recoverability is taken into
account in establishing the deferred tax assets.
At 31 December 2021 and at 31 December 2020, ING Groep N.V. had no significant temporary differences
associated with the parent company’s investments in subsidiaries as any economic benefit from those
investments will not be taxable at parent company level.
Statement of profit or loss – Taxation
Taxation by type
Netherlands
Rest of the world
Total
in EUR million
2021
2020
2019
2021
2020
2019
2021
2020
2019
Current taxation
Deferred taxation
-72
-51
-230
-267
-301
-318
Reconciliation of the weighted average statutory income tax rate to ING Group’s effective income tax rate
in EUR million
2021
2020
2019
Result before tax from continuing operations
Weighted average statutory tax rate
24.7
%
25.2
%
25.8
%
Weighted average statutory tax amount
Permanent differences affecting current tax
Participation exemption
-68
-46
-49
Other income not subject to tax
-32
-6
-76
Expenses not deductible for tax purposes
Current tax from previously unrecognised amounts
State and local taxes
Adjustments to prior periods
-12
-85
Differences affecting deferred tax
Impact on deferred tax from change in tax rates
-47
-57
Deferred tax benefit from previously unrecognised amounts
-18
-6
Write-off/reversal of deferred tax assets
Effective tax amount
Effective tax rate
27.5
%
31.5
%
29.2
%
The weighted average statutory tax rate in 2021 (
%) is slightly lower compared to that of 2020 (
%).
The effective tax rate of
% in 2021 is higher than the weighted average statutory tax rate. This is mainly
caused by expenses non-deductible for tax purposes like the non-deductible bank tax and a tax charge caused
by the recapture of tax losses originated in the United Kingdom but previously deducted in the Netherlands.
The weighted average statutory tax rate in 2020 (
%) was slightly lower compared to the
% of 2019.
39 Fair value of assets and liabilities
ING Group Annual Report 2021 on Form 20-F
F -332
The effective tax rate of
% in 2020 was significantly higher than the weighted average statutory tax rate.
This is mainly caused by a high amount of expenses non-deductible for tax purposes like the non-deductible
bank tax and non-deductible losses with respect to goodwill impairments and impairments on associates in the
Netherlands and in some other European countries.
Adjustments to prior periods in 2020 relates to a release of a tax provision of EUR
on a settlement with the Australian tax authorities with respect to an issue related to former insurance
activities, which issue was fully indemnified by NN Group.
The effective tax rate of
% in 2019 was higher than the weighted average statutory tax rate. This was
mainly caused by a high amount of expenses non-deductible for tax purposes with respect to interest on
additional Tier 1 securities and non-deductible bank tax in the Netherlands and regulatory expenses non-
deductible for tax purposes in some other European countries.
Equity – Other comprehensive income
Income tax related to components of other comprehensive income
in EUR million
2021
2020
2019
Unrealised revaluations financial assets at fair value through other comprehensive income and
other revaluations
-1
Realised gains/losses transferred to the statement of profit or loss
(reclassifications from equity to profit or loss)
Changes in cash flow hedge reserve
-23
-199
Remeasurement of the net defined benefit asset/liability
-54
-8
-14
Changes in fair value of own credit risk of financial liabilities at fair value through
profit or loss
-8
-1
Exchange rate differences and other
-77
Total income tax related to components of other comprehensive income
-176
Tax Contingency
The contingent liability (also disclosed in note 45 ‘Contingent liabilities’) in connection with taxation in the
Netherlands refers to a possible obligation arising from the deduction from Dutch taxable profit of losses
incurred by ING Bank in the United Kingdom in previous years. The existence of this obligation will be
confirmed only by the occurrence of future profits in the United Kingdom.
39 Fair value of assets and liabilities
a) Valuation Methods
b) Valuation Control framework
The valuation control framework covers the product approval process (PARP), pricing, independent price
verification (IPV), valuation adjustments, and model use. Valuation processes are governed by various
governance bodies, including Local Parameter Committees, Global Price Testing and Impairment Committee,
Market Data Committee and Valuation Model Committee. All relevant committees meet on a regular basis
(monthly/quarterly), where agenda covers the aforementioned valuation controls.
The Global Price Testing and Impairment Committee is responsible for the oversight and the approval of the
outcome of impairments (other than loan loss provisions) and valuation processes. It oversees the quality and
coherence of valuation methodologies and performance. The Valuation Model Committee is responsible for
the approval of fair value pricing models and fair and prudent valuation adjustment models and the Local
Parameter Committee monitors the appropriateness of (quoted) pricing, any other relevant market info, as
well as the appropriateness of pricing models themselves related to the fair valued positions to which they are
applied. The Local Parameter Committee executes valuation methodology and processes at a local level. The
Market Data Committee approves and reviews all pricing inputs for the calculation of market parameters.
39 Fair value of assets and liabilities
ING Group Annual Report 2021 on Form 20-F
F -333
c) Valuation Adjustments
Valuation adjustments are an integral part of the fair value. They are included as part of the fair value to
provide better estimation of market exit value on measurement date. ING considers various valuation
adjustments to arrive at the fair value including Bid-Offer adjustments, Model Risk adjustments, Credit
Valuation Adjustments (CVA), Debit valuation Adjustments (DVA), including DVA on derivatives and own issued
liabilities, Collateral Valuation Adjustment (CollVA) and Funding Valuation Adjustment (FVA)'.
For financial instruments measured by internal models where one or more unobservable market inputs are
significant for valuation, a difference between the transaction price and the theoretical price resulting from the
internal model can occur. ING defers material Day One profit or loss relating to financial instruments classified
as Level 3 and financial instruments with material unobservable inputs into CVA which are not necessarily
classified as Level 3. The Day One profit or loss is amortised over the life of the instrument or until the
observability improves. Both the impact on the profit and loss per year end 2021 and the Day One profit or loss
reserve in the balance sheet as per 31 December 2021 are deemed to be immaterial.
The following table presents the models reserves for financial assets and liabilities:
Valuation adjustment on financial assets and liabilities
as at 31 December
2021
2020
Bid/Offer
-143
-121
Model Risk
-11
-25
CVA
-159
-238
DVA
-66
-124
CollVA
-8
-16
FVA
-95
-111
Total Valuation Adjustments
-482
-634
Bid-Offer Adjustment
Bid-Offer adjustments are required to adjust mid-market values to appropriate bid or offer value in order to
best represent the exit value, and therefore fair value. It is applicable to financial assets and liabilities that are
valued at mid-price initially. In practice this adjustment accounts for the difference in valuation from mid to bid
and mid to offer for long and short exposures respectively. In principle assets are valued at the bid prices and
liabilities are valued at the offer price. For certain assets or liabilities, where a market quoted price is not
available, the price used is the fair value that is most representative within the bid-offer spread.
Model Risk Adjustment
Model risk adjustments addresses the risk of possible financial losses resulting from the use of a mis-specified,
misapplied, or incorrect implementation of a model.
Credit Valuation Adjustment (CVA)
Credit Valuation Adjustment (CVA) is the adjustment on the fair value of a derivative trade to account for the
possibility that a counterparty can go into default. In other words, it is the market value of counterparty credit
risk. On the contrary, Debit Valuation Adjustment (DVA) reflects the credit risk of ING for its counterparty. CVA
and DVA combinedly are regarded as the Bilateral Valuation Adjustment (BVA). The calculation of CVA is based
on the estimation of the expected exposure, the counterparties’ risk of default, and taking into account the
collateral agreements as well as netting agreements. The counterparties’ risk of default is measured by
probability of default and expected loss given default, which is based on market information including credit
default swap (CDS) spread. Where counterparty CDS spreads are not available, relevant proxy spreads are
used. Additionally, wrong-way risk (when exposure to a counterparty is increasing and the credit quality of that
counterparty deteriorates) and right-way risk (when exposure to a counterparty is increasing and the credit
quality of that counterparty improves) are included in the adjustment.
Debit Valuation Adjustment (DVA)
ING recognises two types of Debit Valuation Adjustments, namely DVA on derivatives, as aforementioned and
DVA on own issued financial liabilities. The application of DVA on own issued financial liabilities is for those
financial liabilities measured at fair value through profit or loss, if the credit risk component has not been
included in the prices. In this DVA calculation, the default probability of the institution are estimated based on
the ING Credit spread.
Collateral Valuation Adjustment (CollVA )
Collateral Valuation Adjustment is a derivative valuation adjustment capturing specific features of CSA (Credit
Support Annex) with a counterparty that the regular valuation framework does not capture. Non-standard CSA
features may include deviations in relation to the currency in which ING posts or receives collateral, deviations
in remuneration rate on collateral which may pay lower or higher rate than overnight rate or even no interest
at all. Other deviations can be posting securities rather than cash as collateral.
39 Fair value of assets and liabilities
ING Group Annual Report 2021 on Form 20-F
F -334
Funding Valuation Adjustment (FVA)
ING applies an additional ‘Funding Valuation Adjustment’ (FVA) to address the funding costs associated with
the
collateral funding asymmetry on uncollateralized or partially collateralized derivatives in the portfolio. This
adjustment is based on the expected exposure profiles of the uncollateralized or partially collateralized OTC
derivatives and market-based funding spreads.
d) Fair value hierarchy
ING Group has categorised its financial instruments that are either measured in the statement of financial
position at fair value or of which the fair value is disclosed, into a three level hierarchy based on the
observability of the valuation inputs from (unadjusted) quoted prices. Highest priority is retained to
(unadjusted) quoted prices in active markets for identical assets or liabilities and the lowest priority to
valuation techniques supported by unobservable inputs.
Transfers into and transfers out of fair value hierarchy levels are made on a quarterly basis at the end of the
reporting period.
Level 1 – (Unadjusted) quoted prices in active markets
This category includes financial instruments whose fair value is determined directly by reference to
(unadjusted) quoted prices in an active market. A financial instrument is regarded as quoted in an active
market if quoted prices are readily and regularly available from an exchange, dealer markets, brokered
markets, or principal to principal markets. Those prices represent actual and regularly occurring market
transactions with sufficient frequency and volume to provide pricing information on an ongoing basis.
Transfers out of Level 1 into Level 2 or Level 3 occur when ING Group establishes that markets are no longer
active and therefore (unadjusted) quoted prices no longer provide reliable pricing information.
Level 2 – Valuation technique supported by observable inputs
This category includes financial instruments whose fair value is based on market observables other than
(unadjusted) quoted prices. The fair value for financial instruments in this category can be determined by
reference to quoted prices for similar instruments in active markets, but for which the prices are modified
based on other market observable external data or reference to quoted prices for identical or similar
instruments in markets that are not active. These prices can be obtained from a third party pricing service. ING
analyses how the prices are derived and determines whether the prices are liquid tradable prices or model
based consensus prices taking various data as inputs.
For financial instruments that do not have a reference price available, fair value is determined using a valuation
technique (e.g. a model), where inputs in the model are taken from an active market or are observable, such as
interest rates and yield curves observable at commonly quoted intervals, implied volatilities, and credit
spreads.
Level 3 – Valuation technique supported by unobservable inputs
This category includes financial instruments whose fair value is determined using a valuation technique (e.g. a
model), for a significant part of the overall valuation the valuation input is unobservable, or is determined by
reference to price quotes where the market is considered inactive. Unobservable inputs are inputs which are
based on the Group’s own assumptions about the factors that market participants would use in pricing an asset
or liability, developed based on the best information available in the market. Unobservable inputs may include
volatility, correlation, spreads to discount rates, default rates and recovery rates, prepayment rates, and
certain credit spreads.
Financial instruments at fair value
The fair values of the financial instruments were determined as follows:
39 Fair value of assets and liabilities
ING Group Annual Report 2021 on Form 20-F
F -335
Methods applied in determining fair values of financial assets and liabilities (carried at fair value)
Level 1
Level 2
Level 3
Total
2021
2020
2021
2020
2021
2020
2021
2020
Financial Assets
Financial assets at fair value
through profit or loss
Financial assets at fair value
through other comprehensive
income
Financial liabilities
Financial liabilities at fair value
through profit or loss
– Debt securities
– Deposits
– Trading securities
0
0
– Derivatives
The following methods and assumptions were used by ING Group to estimate the fair value of the financial
instruments:
Equity securities
Instrument description:
investments.
Valuation:
based on quoted market prices. In absence of active markets, fair values are estimated by analysing the
investee’s financial position, result, risk profile, prospect, price, earnings comparisons and revenue multiples.
Additionally, reference is made to valuations of peer entities where quoted prices in active markets are
available. For equity securities best market practice will be applied using the most relevant valuation method.
All non-listed equity investments, including investments in private equity funds, are subject to a standard
review framework which ensures that valuations reflect the fair values.
Fair value hierarchy:
regularly available. Hence, these securities are classified as Level 1. Equity securities which are not traded in
active markets mainly include corporate investments, fund investments and other equity securities and are
classified as Level 3.
Debt securities
Instrument description:
backed securities (ABS).
Valuation:
Quoted market prices are obtained from an exchange market, dealer, broker, industry group, pricing service, or
regulatory service. The quoted prices from non-exchange sources are reviewed on their tradability of market
prices. If quoted prices in an active market are not available, fair value is based on an analysis of available
market inputs, which includes consensus prices obtained from one or more pricing services. Furthermore, fair
values are determined by valuation techniques discounting expected future cash flows using a market interest
rate curves, referenced credit spreads, maturity of the investment, and estimated prepayment rates where
applicable.
Fair value hierarchy:
markets, where quoted prices are readily and regularly available and are hence, classified as Level 1. The
remaining positions are classified as Level 2 or Level 3. Asset backed securities for which no active market is
available and a wide discrepancy in quoted prices exists, are classified as Level 3.
39 Fair value of assets and liabilities
ING Group Annual Report 2021 on Form 20-F
F -336
Derivatives
Instrument description:
Derivatives include interest rate derivatives, FX derivatives, Credit derivatives, Equity derivatives and
commodity derivatives.
Valuation:
market and are classified as Level 1 of the fair value hierarchy. For instruments that are not actively traded, fair
values are estimated based on valuation techniques. OTC derivatives and derivatives trading in an inactive
market are valued using valuation techniques. The valuation techniques and inputs depend on the type of
derivatives and the nature of the underlying instruments. The principal techniques used to value these
instruments are based on (amongst others) discounted cash flows option pricing models and Monte Carlo
simulations. These valuation models calculate the present value of expected future cash flows, based on ‘no-
arbitrage’ principles. The models are commonly used in the financial industry and inputs to the validation
models are determined from observable market data where possible. Certain inputs may not be observable in
the market, but can be determined from observable prices via valuation model calibration procedures. These
inputs include prices available from exchanges, dealers, brokers or providers of pricing, yield curves, credit
spreads, default rates, recovery rates, dividend rates, volatility of underlying interest rates, equity prices, and
foreign currency exchange rates and reference is made to quoted prices, recently executed trades,
independent market quotes and consensus data, where available.
For uncollateralised OTC derivatives, ING applies Credit Valuation Adjustment to correctly reflect the
counterparty credit risk in the valuation and Debit Valuation Adjustments to reflect the credit risk of ING for its
counterparty. See sections CVA/DVA in section c) Valuation Adjustments for more details regarding the
calculation.
Fair value hierarchy:
Level 2. Derivatives for which the input cannot be implied from observable market data are classified as Level
3.
Loans and receivables
Instrument description:
payments that are not quoted in an active market. Loans and receivables carried at fair value includes trading
loans, being securities lending and similar agreement comparable to collateralised lending, syndicated loans,
loans expected to be sold and receivables with regards to reverse repurchase transactions.
Valuation:
of other loans is estimated by discounting expected future cash flows using a discount rate that reflects credit
risk, liquidity, and other current market conditions. The fair value of mortgage loans is estimated by taking into
account prepayment behaviour.
Fair value hierarchy:
which current market information about similar assets to use as observable, corroborated data for all
significant inputs into a valuation model is not available are classified as Level 3.
Financial liabilities at fair value through profit and loss
Instrument description:
instruments, primarily comprised of structured notes, which are held at fair value under the fair value option.
Besides that, it includes derivative contracts and repurchase agreements.
Valuation:
loss are based on quoted market prices, where available. For those securities not actively traded, fair values
are estimated based on internal discounted cash flow valuation techniques using interest rates and credit
spreads that apply to similar instruments.
Fair value hierarchy:
cannot be derived from observable market data are classified as Level 3.
e) Transfers between Level 1 and 2
As a consequence of a change in the levelling methodology of INGs bond portfolio in 2021, ING recorded an
EUR
fair value through other comprehensive income and debt securities measured at fair value through profit or
loss. No significant transfers from Level 2 to Level 1 were recorded in the reporting period 2021.
39 Fair value of assets and liabilities
ING Group Annual Report 2021 on Form 20-F
F -337
f) Level 3: Valuation techniques and inputs used
Financial assets and liabilities in Level 3 include both assets and liabilities for which the fair value was
determined using (i) valuation techniques that incorporate unobservable inputs as well as (ii) quoted prices
which have been adjusted to reflect that the market was not actively trading at or around the balance sheet
date. Unobservable inputs are inputs which are based on ING’s own assumptions about the factors that market
participants would use in pricing an asset or liability, developed based on the best information available in the
circumstances. Unobservable inputs may include volatility, correlation, spreads to discount rates, default rates
and recovery rates, prepayment rates, and certain credit spreads. Valuation techniques that incorporate
unobservable inputs are sensitive to the inputs used.
Of the total amount of financial assets classified as Level 3 as at 31 December 2021 of EUR
December 2020: EUR
%) (31 December 2020: EUR
being
%) is based on unadjusted quoted prices in inactive markets. As ING does not generally adjust
quoted prices using its own inputs, there is no significant sensitivity to ING’s own unobservable inputs.
Furthermore, Level 3 financial assets includes approximately EUR
billion) which relates to financial assets that are part of structures that are designed to be fully neutral in terms
of market risk. Such structures include various financial assets and liabilities for which the overall sensitivity to
market risk is insignificant. Whereas the fair value of individual components of these structures may be
determined using different techniques and the fair value of each of the components of these structures may be
sensitive to unobservable inputs, the overall sensitivity is by design not significant.
The remaining EUR
assets is established using valuation techniques that incorporates certain inputs that are unobservable.
Of the total amount of financial liabilities classified as Level 3 as at 31 December 2021 of EUR
December 2020: EUR
%) (31 December 2020: EUR
being
%) is based on unadjusted quoted prices in inactive markets. As ING does not generally adjust
quoted prices using its own inputs, there is no significant sensitivity to ING’s own unobservable inputs.
Furthermore, Level 3 financial liabilities includes approximately EUR
billion) which relates to financial liabilities that are part of structures that are designed to be fully neutral in
terms of market risk. As explained above, the fair value of each of the components of these structures may be
sensitive to unobservable inputs, but the overall sensitivity is by design not significant.
The remaining EUR
liabilities is established using valuation techniques that incorporates certain inputs that are unobservable.
The table below provides a summary of the valuation techniques, key unobservable inputs and the lower and
upper range of such unobservable inputs, by type of Level 3 asset/liability. The lower and upper range
mentioned in the overview represent the lowest and highest variance of the respective valuation input as
actually used in the valuation of the different financial instruments. Amounts and percentages stated are
unweighted. The range can vary from period to period subject to market movements and change in Level 3
position. Lower and upper bounds reflect the variability of Level 3 positions and their underlying valuation
inputs in the portfolio, but do not adequately reflect their level of valuation uncertainty. For valuation
uncertainty assessment, reference is made to section Sensitivity analysis of unobservable inputs (Level 3).
39 Fair value of assets and liabilities
ING Group Annual Report 2021 on Form 20-F
F -338
Valuation techniques and range of unobservable inputs (Level 3)
Assets
Liabilities
Valuation techniques
Significant unobservable inputs
Lower range
Upper range
In EUR million
2021
2020
2021
2020
2021
2020
2021
2020
At fair value through profit or loss
Debt securities
Price based
Price (%)
121%
107%
Equity securities
Price based
Price (price per share)
Loans and advances
Price based
Price (%)
0%
100%
101%
Present value techniques
Credit spread (bps)
(Reverse) repo's
Present value techniques
Interest rate (%)
3%
1%
4%
Structured notes
Price based
Price (%)
84%
74%
125%
109%
Option pricing model
Equity volatility (%)
13%
14%
30%
25%
Equity/Equity correlation
n.a.
n.a.
Equity/FX correlation
-0.7
Dividend yield (%)
3%
4%
5%
Derivatives
– Rates
Option pricing model
Interest rate volatility (bps)
Present value techniques
Reset spread (%)
2%
2%
2%
2%
– FX
Present value techniques
FX volatility (%)
1%
n.a.
16%
n.a.
Option pricing model
FX volatility (bps)
n.a.
n.a.
Implied volatility (%)
1%
n.a.
22%
n.a.
– Credit
Present value techniques
Credit spread (bps)
Jump rate (%)
n.a.
n.a.
n.a.
n.a.
Price based
Price (%)
99%
100%
107%
– Equity
Option pricing model
Equity volatility (%)
11%
5%
119%
64%
Equity/Equity correlation
Equity/FX correlation
-0.7
-0.6
Dividend yield (%)
18%
34%
Price based
Price (%)
3%
3%
– Other
Option pricing model
Commodity volatility (%)
20%
18%
89%
55%
Com/Com correlation
n.a.
n.a.
n.a.
n.a.
Com/FX correlation
n.a.
-0.5
n.a.
-0.3
At fair value through other comprehensive income
– Loans and advances
Present value techniques
Prepayment rate (%)
9%
9%
9%
9%
Price based
Price (%)
99%
99%
100%
99%
– Equity
Present value techniques
Credit spread (bps)
Interest rate (%)
3%
3%
3%
3%
Price based
Price (%)
1%
n/a
1%
n/a
Price based
Other (EUR)
Total
39 Fair value of assets and liabilities
ING Group Annual Report 2021 on Form 20-F
F -339
Price
For securities where market prices are not available fair value is measured by comparison with observable pricing
data from similar instruments. Prices of
% are distressed to the point that no recovery is expected, while prices
significantly in excess of
% or par are expected to pay a yield above current market rates.
Credit spreads
Credit spread is the premium above a benchmark interest rate required by the market participant to accept a
lower credit quality. Higher credit spreads indicate lower credit quality and a lower value of an asset.
Volatility
Volatility is a measure for variation of the price of a financial instrument or other valuation input over time.
Volatility is one of the key inputs in option pricing models. Typically, the higher the volatility, the higher value of
the option. Volatility varies by the underlying reference (equity, commodity, foreign currency and interest rates),
by strike, and maturity of the option. The minimum level of volatility is
% and there is no theoretical maximum.
Correlation
Correlation is a measure of dependence between two underlying references which is relevant for valuing
derivatives and other instruments having more than one underlying reference. High positive correlation (close to
1) indicates strong positive (statistical) relationship, where underliers move, everything else equal, into the same
direction. The same holds for a high negative correlation.
Reset spread
Inflation rate
Inflation rate is a key input to inflation linked instruments. Inflation linked instruments protect against price
inflation and are denominated and indexed to investment units. Interest payments would be based on the
inflation index and nominal rate in order to receive/pay the real rate of return. A rise in nominal coupon
payments is a result of an increase in inflation expectations, real rates, or both.
Dividend yield
Dividend yield is an important input for equity option pricing models showing how much dividends a company is
expected to pay out each year relative to its share price. Dividend yields are generally expressed as an annualised
percentage of share price.
Jump rate
Jump rates simulate abrupt changes in valuation models. The rate is an added component to the discount rate in
the model to include default risks.
Prepayment rate
Prepayment rate is a key input to mortgage and loan valuation. Prepayment rate is the estimated rate at which
mortgage borrowers will repay their mortgages early, e.g.
% per year. Prepayment rate and reset spread are key
inputs to mortgage linked prepayment swaps valuation
39 Fair value of assets and liabilities
ING Group Annual Report 2021 on Form 20-F
F -340
Level 3: Changes during the period
Changes in Level 3 Financial assets
Trading assets
Non-trading
derivatives
Financial assets
mandatorily at FVPL
Financial assets
designated at FVPL
Financial assets
at FVOCI
Total
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Opening balance
Realised gain/loss recognised in the statement of profit or loss during the period
–61
0
–1
–104
–80
–198
–12
–19
–37
–383
Revaluation recognised in other comprehensive income during the period
–46
–46
Purchase of assets
Sale of assets
–
48
–
73
–
3
–
8
–
612
–
973
–
141
–
270
–
234
–
419
–
1,037
–
1,743
Maturity/settlement
–
14
–
39
–
1
–
163
–
83
–
13
–
57
–
109
–
175
–
299
–
354
Reclassifications
–5
–6
–105
–11
Transfers into Level 3
–1
–1
–1
Transfers out of Level 3
–
517
–
90
–
1
0
–
98
–
528
–
138
–
615
–
755
Exchange rate differences
0
–24
–4
–27
Changes in the composition of the group and other changes
0
–2
–2
Closing balance
1 Net gains/losses were recorded as ‘Valuation results and net trading income’ in the statement of profit or loss. The total amounts
includes EUR
2 Revaluation recognised in other comprehensive income is included on the line ‘Net change in fair value of debt instruments at fair value
through other comprehensive income’.
In 2020, the transfer into Level 3 assets is mainly driven by debt securities that are part of a structure transferred
into level 3 due to market illiquidity which decreased observability for an input. In 2021, these instruments
transferred out of Level 3 due to the valuation not being significantly impacted by unobservable inputs.
In 2021, transfers out of Level 3 of financial assets designated at fair value mainly relate to (long term) reverse
repurchase transactions that were transferred out of Level 3 due to the valuation not being significantly impacted
by unobservable inputs.
In 2020, transfers out of Level 3 is mainly related to debt obligations due to the valuation no longer being
significantly impacted by unobservable inputs.
In 2020, reclassification relate to a re-review of the general terms of a portfolio of securitization loans, the
underlying pools of assets are exposed to residual value risk. Consequently, the portfolio of EUR
is classified at Level 3, was incorrectly measured at amortised cost and therefore reclassified to mandatorily fair
value through profit or loss. Furthermore, it relates to ING’s investment in Visa preference series C shares,
reference is made to Note 5 ‘Financial assets at fair value through other comprehensive income’.
39 Fair value of assets and liabilities
ING Group Annual Report 2021 on Form 20-F
F -341
Changes in Level 3 Financial liabilities
Financial liabilities
designated as at fair
value through profit or
loss
Trading liabilities
Non-trading derivatives
Total
2021
2020
2021
2020
2021
2020
2021
2020
Opening balance
Realised gain/loss recognised in
the statement of profit or loss
during the period
1
-2
-0
-22
-4
Additions
Redemptions
-10
-116
-3
-45
-140
-90
-153
-250
Maturity/settlement
-44
-11
-52
-1
-83
-45
-146
Transfers into Level 3
Transfers out of Level 3
-173
-111
-3
-23
-203
-738
-378
-873
Closing balance
1 Net gains/losses were recorded as ‘Valuation results and net trading income’ in the statement of profit or loss. The total amount includes
EUR
-4
In 2020 and 2021, financial liabilities transfers into and out of Level 3 mainly consist of structures notes,
measured as designated at fair value through profit or loss. The structured notes are transferred out of Level 3 as
the valuation is no longer impacted by significantly unobservable inputs.
In 2020, financial liabilities mainly (long term) repurchase transactions were transferred out of Level 3 mainly due
to the valuation not being significantly impacted by unobservable inputs.
g) Recognition of unrealised gains and losses in Level 3
Amounts recognised in the statement of profit or loss relating to unrealised gains and losses during the year that
relates to Level 3 assets and liabilities are included in the line item ‘Valuation results and net trading income’ in
the statement of profit or loss.
In 2020 and 2021, unrealised gains and losses that relate to ‘Financial assets at fair value through other
comprehensive income’ are included in the Revaluation reserve – Equity securities at fair value through other
comprehensive income or Debt Instruments at fair value through other comprehensive income.
h) Level 3: Sensitivity analysis of unobservable inputs
Where the fair value of a financial instrument is determined using inputs which are unobservable and which have
a more than insignificant impact on the fair value of the instrument, the actual value of those inputs at the
balance date may be drawn from a range of reasonably possible alternatives. In line with market practice the
upper and lower bounds of the range of alternative input values reflect a
% level of valuation certainty. The
actual levels chosen for the unobservable inputs in preparing the financial statements are consistent with the
valuation methodology used for fair valued financial instruments.
In practice valuation uncertainty is measured and managed per exposure to individual valuation inputs (i.e. risk
factors) at portfolio level across different product categories. Where the disclosure looks at individual Level 3
inputs the actual valuation adjustments may also reflect the benefits of portfolio offsets.
This disclosure does not attempt to indicate or predict future fair value movement. The numbers in isolation give
limited information as in most cases these Level 3 assets and liabilities should be seen in combination with other
instruments (for example as a hedge) that are classified as Level 2.
The valuation uncertainty in the table below is broken down by related risk class rather than by product. The
possible impact of a change of unobservable inputs in the fair value o of financial instruments where
unobservable inputs are significant to the valuation is as follows:
Sensitivity analysis of Level 3 instruments
Positive fair value
movements from
using reasonable
possible alternatives
Negative fair value
movements from
using reasonable
possible alternatives
2021
2020
2021
2020
Equity (equity derivatives, structured notes)
-27
-14
Interest rates (Rates derivatives, FX derivatives)
-1
-1
Credit (Debt securities, Loans, structured notes, credit derivatives)
-2
-27
-30
–42
39 Fair value of assets and liabilities
ING Group Annual Report 2021 on Form 20-F
F -342
i) Financial instruments not measured at fair value
The following table presents the estimated fair values of the financial instruments not measured at fair value in
the statement of financial position. The aggregation of the fair values presented below does not represent, and
should not be construed as representing, the underlying value of ING Group.
Methods applied in determining fair values of financial assets and liabilities (carried at amortised cost)
Carrying Amount
Carrying amount
approximates fair value
Level 1
Level 2
Level 3
Total fair value
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Financial Assets
Loans and advances to banks
0
Loans and advances to customers
1, 2
0
0
Securities at amortised cost
1
–0
0
Financial liabilities
Deposits from banks
0
Customer deposits
–0
Debt securities in issue
1
–0
Subordinated loans
1
–0
1 As a consequence of a change in the levelling methodology of INGs bond portfolio ING recorded transfers from Level 1 to Level 2 in 2021.
2 The prior period has been updated to improve consistency and comparability of the fair values of loans and advances to customers.
The following methods and assumptions were used by ING Group to estimate the fair value of the financial
instruments not measured at fair value .
Loans and advances to banks
For short term receivables from banks carrying amounts represent a reasonable estimate of the fair value. The
fair value of long term receivables from banks is estimated by discounting expected future cash flows using a
discount rate based on available market interest rates and appropriate spreads that reflects current credit risk.
Loans and advances to customers
For short term loans carrying amounts represent a reasonable estimate of the fair value. The fair value of long
term loans is estimated by discounting expected future cash flows using a discount rate that reflects current
credit risk, current interest rates, and other current market conditions where applicable. The fair value of
mortgage loans is estimated by taking into account prepayment behaviour. Loans with similar characteristics are
aggregated for calculation purposes.
Deposits from banks
For short term payables to banks carrying amounts represent a reasonable estimate of the fair value. The fair
value of long term payables to banks is estimated by discounting expected future cash flows using a discount rate
based on available market interest rates and appropriate spreads that reflects ING’s own credit risk.
40 Derivatives and hedge accounting
ING Group Annual Report 2021 on Form 20-F
F -343
Customer deposits
The carrying values of customer deposits with an immediate on demand features approximate their fair values.
The fair values of deposits with fixed contractual terms have been estimated based on discounting future cash
flows using the interest rates currently applicable to deposits of similar maturities.
Debt securities in issue
The fair value of debt securities in issue is generally based on quoted market prices, or if not available, on
estimated prices by discounting expected future cash flows using a current market interest rate and credit
spreads applicable to the yield, credit quality and maturity.
Subordinated loans
The fair value of publicly traded subordinated loans are based on quoted market prices when available. Where
no quoted market prices are available, fair value of the subordinated loans is estimated using discounted cash
flows based on interest rates and credit spreads that apply to similar instruments.
40 Derivatives and hedge accounting
Use of derivatives
ING Group uses derivatives for economic hedging purposes to manage its asset and liability portfolios and
structural risk positions. The primary objective of ING Group’s hedging activities is to manage the risks which
arises from structural imbalances in the duration and other profiles of its assets and liabilities. The objective of
economic hedging is to enter into positions with an opposite risk profile to an identified risk exposure to reduce
that exposure. The main risks which are being hedged are interest rate risk and foreign currency exchange rate
risk. These risks are primarily hedged with interest rate swaps, cross currency swaps and foreign exchange
forwards/swaps.
ING Group uses credit derivatives to manage its economic exposure to credit risk, including total return swaps
and credit default swaps, to sell or buy protection for credit risk exposures in the loan, investment, and trading
portfolios. Hedge accounting is not applied in relation to these credit derivatives.
Hedge accounting
Derivatives that qualify for hedge accounting under IFRS are classified and accounted for in accordance with the
nature of the instrument hedged and the type of IFRS hedge accounting model that is applicable. The three
models applicable under IFRS are: fair value hedge accounting, cash flow hedge accounting, and hedge
accounting of a net investment in a foreign operation. How and to what extent these models are applied are
described under the relevant headings below. The company’s detailed accounting policies for these three hedge
models are set out in paragraph 1.6 ‘Financial instruments’ of Note 1 ‘Basis of preparation and accounting
policies’.
Impact of Covid-19
The impact of Covid-19 on timing or amount of cash flows of our products that are designated as hedged items in
hedge accounting programs did not result in significant hedge ineffectiveness during the reporting period.
IBOR transition
Reference is made to the note Risk management/ IBOR Transition for information on how ING is managing the
transition to alternative benchmark rates and INGs progress in completing the transition.
At the reporting date, ING Group assessed the extent to which hedge relationships are subject to uncertainties
driven by IBOR reform.
40 Derivatives and hedge accounting
ING Group Annual Report 2021 on Form 20-F
F -344
Except for EONIA and EUR LIBOR all IBOR’s in scope of ING’s IBOR Transition program are a component of either
the hedging instrument and/or the hedged item where the interest rate and/or foreign currency risk are the
designated hedged risk. The hedged exposures are mainly loan portfolios, issued debt securities and purchased
debt instruments.
ING Group early adopted the amendments to IAS 39 issued in September 2019 to these hedging relationships
directly affected by IBOR reform (Phase 1). This excludes EURIBOR hedges as EURIBOR is Benchmarks Regulation
compliant. Refer to section 1.6.4 of Note 1 ‘Basis of preparation and significant accounting policies’ for more
information on the Phase 1 amendments.
In 2021 the amendments to IAS 39 issued in August 2020 became effective for ING Group (Phase 2). Refer to
sections 1.4.1 and 1.6.4 of Note 1 ‘Basis of preparation and significant accounting policies’ for more information
on the Phase 2 amendments.
Phase 1 amendments to IFRS allow ING Group to apply a set of temporary exceptions to continue hedge
accounting even when there is uncertainty about contractual cash flows arising from IBOR reform. Phase 1 reliefs
cease to apply when uncertainty arising from IBOR Reform is no longer present with respect to the timing and
amount of the IBOR-based cash flows of the relevant instruments.
ING Group hedges are being amended, where necessary, to incorporate the new benchmark rates. During 2021
ING transitioned significant portions of its financial instruments (designated in hedge accounting relationships)
linked to benchmarks ceasing in 2021. As a result, for these hedge accounting relationships the applicable Phase
1 reliefs ceased to apply and Phase 2 became applicable. In the coming year, ING will shift the focus to USD LIBOR
contracts (USD LIBOR tenors will continue to be published until the end of June 2023).
As at 31 December 2021, USD LIBOR indexed fair value and cash flow hedges are still directly affected by the
uncertainties arising from the IBOR reform. In particular, uncertainties over the timing and amount of the
replacement rate may impact the effectiveness and highly probable assessment.
For these affected fair value and cash flow hedge relationships ING Group assumes that the USD LIBOR based
cash flows from the hedging instrument and hedged item will remain unaffected.
The same assumption is used to assess the likelihood of occurrence of the forecast transactions that are subject
to cash flow hedges. The hedged cash flows in cash flow hedges directly impacted by the IBOR reform still meet
the highly probable requirement, assuming the USD LIBOR benchmark on which the hedged cash flows are based
is not altered as a result of the reform.
The following table contains details of the gross notional amounts of hedging instruments as at 31 December that
are used in the ING Group's hedge accounting relationships for which the Phase 1 amendments to IAS39 were
applied:
Notional amounts of Hedging instruments in EUR mln as at 31 December
Benchmark
2021
2020
USD LIBOR
GBP LIBOR
JPY LIBOR
CHF LIBOR
Approximately
% (31 December 2020:
%) of the above notional amounts for USD LIBOR have a maturity date
beyond June 2023.
The notional amounts of the derivative hedging instruments (in above table) provide a close approximation of
the extent of the risk exposure ING manages through these hedging relationships.
40 Derivatives and hedge accounting
ING Group Annual Report 2021 on Form 20-F
F -345
Fair value hedge accounting
ING Group’s fair value hedges principally consist of interest rate swaps that are used to protect against changes
in the fair value of fixed-rate instruments due to movements in market interest rates. ING Group’s approach to
manage market risk, including interest rate risk, is discussed in ‘Risk management –Market risk’. ING Group’s
exposure to interest rate risk is disclosed in paragraph ‘Interest rate risk in banking book’.
ING Group designates specific non-contractual risk components of hedged items. This is usually determined by
designating benchmark interest rates such as EURIBOR. As a result of the IBOR reform ING designated new
benchmark rates in 2021 such as SOFR, SONIA and TONAR. Note that ING applies the IBOR phase 2 amendments
(refer to section 1.6.4 of Note 1 ‘Basis of preparation and significant accounting policies’ for more information on
the Phase 2 amendments) for new benchmarks for which the separately identifiable requirement cannot (yet) be
met.
By using derivative financial instruments to hedge exposures to changes in interest rates, ING Group also exposes
itself to credit risk of the derivative counterparty, which is not offset by the hedged item. ING Group minimises
counterparty credit risk in derivative instruments by clearing most of the derivatives through Central Clearing
Counterparties. In addition ING Group only enters into transactions with high-quality counterparties and requires
posting collateral.
ING Group applies fair value hedge accounting on micro level in which one hedged item is hedged with one or
multiple hedging instruments. Micro fair value hedge accounting is mainly applied on issued debt securities and
purchased debt instruments for hedging interest rate risk.
Before fair value hedge accounting is applied by ING Group, ING Group determines whether an economic
relationship between the hedged item and the hedging instrument exists based on an evaluation of the
quantitative characteristics of these items and the hedged risk that is supported by quantitative analysis. ING
Group considers whether the critical terms of the hedged item and hedging instrument closely align when
assessing the presence of an economic relationship. ING Group evaluates whether the fair value of the hedged
item and the hedging instrument respond similarly to similar risks. In addition ING is mainly using regression
analysis to assess whether the hedging instrument is expected to be and has been highly effective in offsetting
changes in the fair value of the hedged item.
ING Group uses the following derivative financial instruments in a fair value hedge accounting relationship:
Gross carrying value of derivatives designated under fair value hedge accounting
Assets
2021
Liabilities
2021
Assets
2020
Liabilities
2020
As at 31 December
Hedging instrument on interest rate risk
– Interest rate swaps
– Other interest derivatives
The derivatives used for fair value hedge accounting are included in the statement of financial position line-item
‘Financial assets at fair value through profit or loss – Non-trading derivatives’ for EUR
million) respectively ‘Financial liabilities at fair value through profit or loss – Non-trading derivatives’ EUR
million (2020: EUR
the net carrying value as presented in the statement of financial position is due to offsetting with other
derivatives and collaterals paid or received.
For our main currencies the average fixed rate for interest rate swaps used in fair value hedge accounting are
% (2020:
%) for EUR and
% (2020:
%) for USD.
The following table shows the net notional amount of derivatives designated in fair value hedging, split into the
maturity of the instruments. The net notional amounts presented in the table are a combination of payer (-) and
receiver (+) swaps.
40 Derivatives and hedge accounting
ING Group Annual Report 2021 on Form 20-F
F -346
Maturity derivatives designated in fair value hedging
As at 31 December 2021
Less than
1 month
1 to 3
months
3 to 12
months
1 to 2
year
2 to 3
years
3 to 4
years
4 to 5
years
5 years
Total
Hedging instrument on
interest rate risk
– Interest rate swaps
-83
– Other interest derivatives
-0
-102
-307
-286
-287
-357
-224
-1,490
As at 31 December 2020
Hedging instrument on
interest rate risk
- Interest rate swaps
– Other interest derivatives
-1
-68
-283
-434
-370
-302
-315
-1,378
Gains and losses on derivatives designated under fair value hedge accounting are recognised in the statement of
profit or loss. The effective portion of the fair value change on the hedged item is also recognised in the
statement of profit or loss. As a result, only the net accounting ineffectiveness has an impact on the net result.
40 Derivatives and hedge accounting
ING Group Annual Report 2021 on Form 20-F
F -347
Hedged items included in a fair value hedging relationship
Carrying amount of the hedged items
Accumulated amount of fair value hedge
adjustment on the hedged item included in
the carrying amount of the hedged item
Change in fair value
used for measuring
ineffectiveness for the
period
Change in fair value
hedge instruments
Hedge ineffectiveness
recognised in the
statement of profit or
loss gain (+) / loss (-)
Assets
Liabilities
Assets
Liabilities
As at 31 December 2021
Interest rate risk
– Amounts due from banks
-0
– Debt securities at fair value through other comprehensive income
n/a
-798
– Loans at FVOCI
n/a
-0
– Loans and advances to customers
-42
– Debt instruments at amortised cost
-165
– Debt securities in issue
– Subordinated loans
– Amounts due to banks
-0
– Customer deposits and other funds on deposit
-2
– Discontinued hedges
Total
-1,317
As at 31 December 2020
Interest rate risk
– Amounts due from banks
– Debt securities at fair value through other comprehensive income
n/a
– Loans at FVOCI
n/a
-0
– Loans and advances to customers
– Debt instruments at amortised cost
– Debt securities in issue
-878
– Subordinated loans
-397
– Amounts due to banks
-5
– Customer deposits and other funds on deposit
-9
– Discontinued hedges
Total
-541
-4
The main sources of ineffectiveness are:
◾
differences in maturities of the hedged item(s) and hedging instrument(s);
◾
different interest rate curves applied to discount the hedged item(s) and hedging instrument(s);
◾
differences in timing of cash flows of the hedged item(s) and hedging instrument(s).
There were no other sources of significant ineffectiveness in these hedging relationships.
40 Derivatives and hedge accounting
ING Group Annual Report 2021 on Form 20-F
F -348
Cash flow hedge accounting
ING Group’s cash flow hedges mainly consist of interest rate swaps and cross-currency swaps that are used to
protect against the exposure to variability in future cash flows on non-trading assets and liabilities that bear
interest at variable rates or are expected to be refunded or reinvested in the future. The amounts and timing of
future cash flows, representing both principal and interest flows, are projected for each portfolio of financial
assets and liabilities, based on contractual terms and other variables including estimates of prepayments. These
projected cash flows form the basis for identifying the notional amount subject to interest rate risk or foreign
currency exchange rate risk that is designated under cash flow hedge accounting.
ING Group’s approach to manage market risk, including interest rate risk and foreign currency exchange rate risk,
is discussed in ‘Risk management – Credit risk and Market risk’. ING Group determines the amount of the
exposures to which it applies hedge accounting by assessing the potential impact of changes in interest rates and
foreign currency exchange rates on the future cash flows from its floating-rate assets and liabilities. This
assessment is performed using analytical techniques.
As noted above for fair value hedges, by using derivative financial instruments to hedge exposures to changes in
interest rates and foreign currency exchange rates, ING Group exposes itself to credit risk of the derivative
counterparty, which is not offset by the hedged items. This exposure is managed similarly to that for fair value
hedges.
Gains and losses on the effective portions of derivatives designated under cash flow hedge accounting are
recognised in Other Comprehensive Income. Interest cash flows on these derivatives are recognised in the
statement of profit or loss in ‘Net interest income’ consistent with the manner in which the forecasted cash flows
affect net result. The gains and losses on ineffective portions of such derivatives are recognised immediately in
the statement of profit or loss in ‘Valuation results and net trading income’.
ING Group determines an economic relationship between the cash flows of the hedged item and the hedging
instrument based on an evaluation of the quantitative characteristics of these items and the hedged risk that is
supported by quantitative analysis. ING Group considers whether the critical terms of the hedged item and
hedging instrument closely align when assessing the presence of an economic relationship. ING Group evaluates
whether the cash flows of the hedged item and the hedging instrument respond similarly to the hedged risk, such
as the benchmark interest rate of foreign currency. In addition (for macro FX hedging relationships) a regression
analysis is performed to assess whether the hedging instrument is expected to be and has been highly effective in
offsetting changes in the fair value of the hedged item.
ING Group uses the following derivative financial instruments in a cash flow hedge accounting relationship:
Gross carrying value of derivatives used for cash flow hedge accounting
Assets
Liabilities
Assets
Liabilities
2021
2021
2020
2020
As at 31 December
Hedging instrument on interest rate risk
– Interest rate swaps
-437
Hedging instrument on combined interest and FX rate risk
– Cross currency interest rate derivatives
The derivatives used for cash flow hedge accounting are included in the statement of financial position line-item
‘Financial assets at fair value through profit or loss – Non-trading derivatives’ EUR
million) respectively ‘Financial liabilities at fair value through profit or loss – Non-trading derivatives’ EUR
million (2020: EUR
the net carrying value as presented in the statement of financial position is due to offsetting with other
derivatives and collaterals paid or received.
For the main currencies the average fixed rate for interest rate swaps used in cash flow hedge accounting are
% (2020:
-0.15
%) for EUR,
% (2020:
%) for PLN,
% (2020:
%) for USD and
% (2020:
%) for AUD. The average currency exchange rates for cross currency swaps used in cash flow hedge
accounting is for EUR/USD
) and for EUR/AUD
).
The following table shows the net notional amount of derivatives designated in cash flow hedging split into the
maturity of the instruments. The net notional amounts presented in the table are a combination of payer (+) and
receiver (-) swaps.
40 Derivatives and hedge accounting
ING Group Annual Report 2021 on Form 20-F
F -349
Maturity derivatives designated in cash flow hedging
As at 31 December
2021
Less than 1
month
1 to 3
months
3 to 12
months
1 to 2 year
2 to 3 years
3 to 4
years
4 to 5 years
5 years
Total
Hedging instrument
on interest rate risk
– Interest rate swaps
-1,075
-6,939
-5,470
-6,711
-5,825
-5,272
-18,107
-48,982
Hedging instrument
on combined interest
and FX rate risk
– Cross currency
interest rate
derivatives
-256
-1,048
-1,760
-3,831
-2,528
-2,580
-56
-11,878
As at 31 December
2020
Hedging instrument
on interest rate risk
– Interest rate swaps
-248
-92
-2,061
-4,896
-1,832
-5,772
-3,466
-19,537
-37,904
Hedging instrument
on combined interest
and FX rate risk
– Cross currency
interest rate
derivatives
-160
-1,666
-2,828
-2,446
-3,493
-1,324
-210
-11,934
The following table shows the cash flow hedge accounting impact on profit or loss and comprehensive income:
40 Derivatives and hedge accounting
ING Group Annual Report 2021 on Form 20-F
F -350
Cash flow hedging – impact of hedging instruments on the statement of profit or loss and other comprehensive income
Change in value used for
calculating hedge
ineffectiveness for the
period
Carrying amount
cash flow hedge
reserve at the end of
the reporting period
1
Amount reclassified from
CFH reserve to profit or
loss
Cash flow is no
longer expected
to occur
Change in value of
hedging instrument
recognised in OCI
Hedge ineffectiveness
recognised in the
statement of profit or
loss, gain (+) / loss (-)
As at 31 December 2021
Interest rate risk on;
– Floating rate lending
-1,132
-454
– Floating rate borrowing
-915
– Other
-122
– Discontinued hedges
-306
Total interest rate risk
-214
-603
-1,825
-2
Combined interest and FX rate risk on;
– Floating rate lending
-90
-19
-153
– Floating rate borrowing
-2
-16
– Other
-0
-1
-1
– Discontinued hedges
-13
-90
Total combined interest and Fx
-92
-49
-235
Total cash flow hedge
-262
-838
-1,574
As at 31 December 2020
Interest rate risk on;
– Floating rate lending
-784
-97
– Floating rate borrowing
-306
– Other
-107
– Discontinued hedges
-236
Total interest rate risk
-755
-281
-6
Combined interest and FX rate risk on;
– Floating rate lending
-26
-35
-256
– Floating rate borrowing
-42
-10
– Other
-0
-0
-3
– Discontinued hedges
-26
Total combined interest and Fx
-78
-295
Total cash flow hedge
-753
-576
-5
1 The carrying amount is the gross amount, excluding tax adjustments.
The decrease in the carrying amount of the cash flow hedge reserve is driven by increased interest rates.
The main sources of ineffectiveness for cash flow hedges are:
differences in timing of cash flows of the hedged item(s) and hedging instrument(s);
40 Derivatives and hedge accounting
ING Group Annual Report 2021 on Form 20-F
F -351
mismatches in reset frequency between hedged item and hedging instrument.
Hedges of net investments in foreign operations
A foreign currency exposure arises from a net investment in subsidiaries that have a different functional currency
from the presentation currency of ING Group. The risk arises from the fluctuation in spot exchange rates
between the functional currency of the subsidiaries and ING Group’s presentation currency, which causes the
amount of the net investment to vary in the consolidated financial statements of ING Group. This risk may have a
significant impact on ING Group’s financial statements. ING Group’s policy is to hedge these exposures only when
not doing so it is expected to have a significant impact on the regulatory capital ratios of ING Group and its
subsidiaries.
ING Group’s net investment hedges principally consist of derivatives (including currency forwards and swaps) and
non-derivative financial instruments such as foreign currency denominated funding. When the hedging
instrument is foreign currency denominated debt, ING Group assesses effectiveness by comparing past changes
in the carrying amount of the debt that are attributable to a change in the spot rate with past changes in the
investment in the foreign operation due to movement in the spot rate (the offset method).
Gains and losses on the effective portions of derivatives designated under net investment hedge accounting are
recognised in Other Comprehensive Income. The balance in equity is recognised in the statement of profit or loss
when the related foreign subsidiary is disposed. The gains and losses on ineffective portions are recognised
immediately in the statement of profit or loss.
ING Group has the following derivative financial instruments used for net investment hedging;
Gross carrying value of derivatives used for net investment hedging
Assets
Liabilities
Assets
Liabilities
2021
2021
2020
2020
As at 31 December
– FX forwards and Cross currency swaps
The derivatives used for net investment hedge accounting are included in the statement of financial position line-
item ‘Financial assets at fair value through profit or loss – Non-trading derivatives’ EUR
million) respectively ‘Financial liabilities at fair value through profit or loss – Non trading derivatives’ EUR
million (2020: EUR
For ING Group’s main currencies the average exchange rates used in net investment hedge accounting for 2021
are EUR/USD
), EUR/PLN
), EUR/AUD
) and EUR/THB
(2020:
).
The following table shows the notional amount of derivatives designated in net investment hedging split into the
maturity of the instruments:
Maturity derivatives designated in net investment hedging
As at 31 December
2021
Less than
1 month
1 to 3
months
3 to 12
months
1 to 2 year
2 to 3
years
3 to 4
years
4 to 5
years
5 years
Total
– FX forwards and
cross currency
swaps
-4,462
-461
-590
-5,514
– Other FX
derivatives
As at 31 December
2020
– FX forwards and
Cross currency
swaps
-3,825
-375
-580
-4,780
– Other FX
derivatives
-8
-8
41 Assets by contractual maturity
ING Group Annual Report 2021 on Form 20-F
F -352
The effect of the net investment hedge accounting in the statement of profit or loss and other comprehensive
income is as follows:
Net investment hedge accounting – Impact on statement of profit or loss and other comprehensive income
As at 31 December 2021
Change in value
used for
calculating
hedge
ineffectiveness
for the period
Carrying amount
net investment
hedge reserve at
the end of the
reporting period
1
Hedged item
affected
statement of
profit or loss
Change in value
of hedging
instrument
recognised in
OCI
Hedge
ineffectiveness
recognised in the
statement of
profit or loss,
gain(+) / Loss(-)
Investment in foreign operations
-72
-1
Discontinued hedges
-59
As at 31 December 2020
Investment in foreign operations
-122
-11
Discontinued hedges
-210
1 The carrying amount is the gross amount, excluding tax adjustments.
41 Assets by contractual maturity
Amounts presented in these tables by contractual maturity are the amounts as presented in the statement of
financial position and are discounted cash flows. Reference is made to ‘Risk Management – Funding and liquidity
risk’.
41 Assets by contractual maturity
ING Group Annual Report 2021 on Form 20-F
F -353
Assets by contractual maturity
2021
Less than 1 month
1-3 months
3-12 months
1-5 years
Over 5 years
Maturity not applicable
Total
Cash and balances with central banks
Loans and advances to banks
Financial assets at fair value through profit or loss
– Trading assets
– Non-trading derivatives
– Mandatorily at fair value through profit or loss
– Designated as at fair value through profit or loss
Financial assets at fair value through other comprehensive income
– Equity securities
– Debt securities
– Loans and advances
Securities at amortised cost
Loans and advances to customers
Other assets
2
Total assets
2020
Cash and balances with central banks
Loans and advances to banks
Financial assets at fair value through profit or loss
– Trading assets
– Non-trading derivatives
– Mandatorily at fair value through profit or loss
– Designated as at fair value through profit or loss
Financial assets at fair value through other comprehensive income
– Equity securities
– Debt securities
– Loans and advances
Securities at amortised cost
Loans and advances to customers
Other assets
2
Total assets
1 Includes assets on demand.
2 Includes other financial assets such as assets held for sale, current and deferred tax assets as presented in the consolidated statement of the financial position. Additionally, non-financial assets are included in that position where maturities are not applicable as property and equipment
and investments in associates and joint ventures. Due to their nature non-financial assets consist mainly of assets expected to be recovered after more than 12 months.
42 Liabilities and off-balance sheet commitments by maturity
ING Group Annual Report 2021 on Form 20-F
F -354
42 Liabilities and off-balance sheet commitments by maturity
The tables below include all liabilities and off-balance sheet commitments by maturity based on contractual,
undiscounted cash flows. These balances are included in the maturity analysis as follows:
Perpetual liabilities are included in the column ‘Maturity not applicable’.
Derivative liabilities are included on a net basis if cash flows are settled net. For other derivative
liabilities the contractual gross cash flow payable is included.
Undiscounted future coupon interest on financial liabilities payable is included in a separate line and in
the relevant maturity bucket.
Non-financial liabilities are included based on a breakdown of the amounts per statement of financial
position, per expected maturity.
Loans and other credit-related commitments are classified on the basis of the earliest date they can be
drawn down.
ING Group’s expected cash flows on some financial liabilities vary significantly from contractual cash flows.
Principal differences are in demand deposits from customers that are expected to remain stable or increase and
in unrecognised loan commitments that are not all expected to be drawn down immediately. Reference is made
to the liquidity risk paragraph in ‘Risk Management – Funding and liquidity risk’ for a description on how liquidity
risk is managed.
42 Liabilities and off-balance sheet commitments by maturity
ING Group Annual Report 2021 on Form 20-F
F -355
Liabilities and off-balance sheet commitments by maturity
2021
Less than 1 month
1–3 months
3–12 months
1–5 years
Over 5 years
Maturity not
applicable
Adjustment
Total
Deposits from banks
-967
Customer deposits
-19
Financial liabilities at fair value through profit or loss
– Other trading liabilities
– Trading derivatives
-2,472
– Non-trading derivatives
-564
– Designated at fair value through profit or loss
Debt securities in issue
Subordinated loans
Lease liabilities
-23
Financial liabilities
-1,602
Other liabilities
Total liabilities
-1,602
Coupon interest due on financial liabilities
Contingent liabilities in respect of
– Discounted bills
– Guarantees
– Irrevocable letters of credit
– other
Guarantees issued by ING Groep N.V.
Irrevocable facilities
1 Includes liabilities on demand.
2 This column reconciles the contractual undiscounted cash flows on financial liabilities to the statement of financial position values. The adjustments mainly relate to the impact of discounting and fair value hedge adjustments, and for derivatives, to the fact that the contractual cash flows
are presented on a gross basis (unless the cash flows are actually settled net).
3 Includes Other liabilities, Current and deferred tax liabilities, and Provisions as presented in the Consolidated statement of financial position.
42 Liabilities and off-balance sheet commitments by maturity
ING Group Annual Report 2021 on Form 20-F
F -356
Liabilities and off-balance sheet commitments by maturity
2020
Less than 1 month
1–3 month
3–12 months
1–5 years
Over 5 years
Maturity not applicable
Adjustment
Total
Deposits from banks
-161
Customer deposits
Financial liabilities at fair value through profit or loss
– Other trading liabilities
– Trading derivatives
-373
– Non-trading derivatives
– Designated at fair value through profit or loss
Debt securities in issue
Subordinated loans
Lease liabilities
-18
Financial liabilities
Other liabilities
Total liabilities
Coupon interest due on financial liabilities
Contingent liabilities in respect of
– Discounted bills
– Guarantees
– Irrevocable letters of credit
– other
Guarantees issued by ING Groep N.V.
Irrevocable facilities
4
1 Includes liabilities on demand.
2 This column reconciles the contractual undiscounted cash flows on financial liabilities to the statement of financial position values. The adjustments mainly relate to the impact of discounting and fair value hedge adjustments, and for derivatives, to the fact that the contractual cash flows
are presented on a gross basis (unless the cash flows are actually settled net).
3 Includes Other liabilities, Current and deferred tax liabilities, and Provisions as presented in the Consolidated statement of financial position.
4 The prior period has been updated to improve consistency and comparability of the amounts per maturity of irrevocable facilities.
43 Transfer of financial assets, assets pledged and received as collateral
ING Group Annual Report 2021 on Form 20-F
F -357
43 Transfer of financial assets, assets pledged and received as collateral
Financial assets pledged as collateral
The financial assets pledged as collateral consist primarily of Loans and advances to customers pledged to secure
Debt securities in issue, deposits from the Dutch Central Bank and other banks, as well as debt securities used in
securities lending or sale and repurchase transactions. They serve to secure margin accounts and are used for
other purposes required by law. Pledges are generally conducted under terms that are usual and customary for
collateralised transactions including standard sale and repurchase agreements, securities lending and borrowing
and derivatives margining. The financial assets pledged are as follows:
Financial assets pledged as collateral
2021
2020
Banks
– Cash and balances with central banks
– Loans and advances to banks
Financial assets at fair value through profit or loss
Financial assets at fair value through OCI
Securities at amortised cost
Loans and advances to customers
Other assets
In addition, in some jurisdictions ING Bank N.V. has an obligation to maintain a reserve with central banks. As at
31 December 2021, the minimum mandatory reserve deposits with various central banks amount to EUR
million (2020: EUR
Loans and advances to customers that have been pledged as collateral for debt securities in issue and for liquidity
purposes amount to EUR
Financial assets received as collateral
Financial assets received as collateral
2021
2020
Total received collateral available for sale or repledge at fair value
– equity securities
– debt securities
of which sold or repledged at fair value
– equity securities
– debt securities
Transfer of financial assets
The majority of ING's financial assets that have been transferred, but do not qualify for derecognition are debt
instruments used in securities lending or sale and repurchase transactions.
44 Offsetting financial assets and liabilities
ING Group Annual Report 2021 on Form 20-F
F -358
Transfer of financial assets not qualifying for derecognition
Securities lending
Sale and repurchase
Equity
Debt
Equity
Debt
2021
2020
2021
2020
2021
2020
2021
2020
Transferred assets at carrying amount
Financial assets at fair value through profit or loss
Financial assets at fair value through other
comprehensive income
Loans and advances to customers
4,386
2,381
2
Securities at amortised cost
Associated liabilities at carrying amount
1
Deposits from banks
n/a
n/a
n/a
n/a
Customer deposits
n/a
n/a
n/a
n/a
Financial liabilities at fair value through profit or
loss
n/a
n/a
n/a
n/a
2
1 The table includes the associated liabilities which are reported after offsetting, compared to the gross positions of the encumbered assets.
2 The prior period has been updated to improve consistency and comparability.
The table above does not include assets transferred to consolidated securitisation entities as the related assets
remain recognised in the consolidated statement of financial position.
Transferred financial assets that are derecognised in their entirety are mentioned in note 49 ‘Structured Entities’.
44 Offsetting financial assets and liabilities
The following tables include information about rights to offset and the related arrangements. The amounts
included consist of all recognised financial instruments that are presented net in the statement of financial
position under the IFRS netting criteria (legal right to offset and intention to net settle or to realise the asset and
settle the liability simultaneously) and amounts presented gross in the statement of financial position but subject
to enforceable master netting arrangements or similar arrangements.
At ING Group amounts that are offset mainly relate to derivatives transactions, sale and repurchase agreements,
securities lending agreements and cash pooling arrangements. A significant portion of offsetting is applied to OTC
derivatives which are cleared through central clearing parties.
Related amounts not set off in the statement of financial position include transactions where:
◾
The counterparty has an offsetting exposure and a master netting or similar arrangement is in place with
a right to set off only in the event of default, insolvency or bankruptcy, or the offsetting criteria are
otherwise not satisfied, and
◾
In the case of derivatives and securities lending or sale and repurchase agreements, cash and non-cash
collateral has been received or pledged to cover net exposure in the event of a default or other
predetermined events. The effect of over-collateralisation is excluded.
The net amounts resulting after setoff are not intended to represent ING’s actual exposure to counterparty risk,
as risk management employs a number of credit risk mitigation strategies in addition to netting and collateral
arrangements. Reference is made to the Risk Management section on Credit risk.
44 Offsetting financial assets and liabilities
ING Group Annual Report 2021 on Form 20-F
F -359
Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements
2021
Gross amounts of
recognised financial
assets
Gross amounts of
recognised financial
liabilities offset in the
statement of financial
position
Net amounts of
financial assets
presented in the
statement of financial
position
Related amounts not offset
in the statement of financial position
Net amount
Amounts not
subject to
enforceable netting
arrangements
Statement of
financial position
total ¹
Financial instruments
Cash and financial
instruments received
as collateral
Statement of financial position
line item
Financial instrument
Loans and advances to banks
2
Reverse repurchase, securities
borrowing and similar agreements
Cash pools
–
1
0
0
0
–0
–
1
0
Financial assets at fair value through profit or loss
Trading and Non-trading
Reverse repurchase, securities
borrowing and similar agreements
–
11,564
Derivatives
–
38,431
–
49,995
Loans and advances to customers
3
Reverse repurchase, securities
borrowing and similar agreements
–0
Cash pools
–
194,522
–
194,522
Other items where offsetting is applied in the
statement of financial position
4
–
3,470
–0
Total financial assets
–
247,987
1 ‘The statement of financial position total’ is the sum of ‘Net amounts of financial assets presented in the statement of financial position’ and ’Amounts not subject to enforceable master netting arrangements’.
2 At 31 December 2021, the total amount of ‘Loans and advances to banks’ excluding repurchase agreements is EUR
3 At 31 December 2021, the total amount of ‘Loans and advances to customers’ excluding repurchase agreements is EUR
4 Other items mainly include amounts to be settled with Central Clearing Counterparties regarding securities and derivatives transactions and is included in ‘Other Assets – Amounts to be settled’ for EUR
subject to offsetting as at 31 December 2021.
44 Offsetting financial assets and liabilities
ING Group Annual Report 2021 on Form 20-F
F -360
Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements
2020
Gross amounts of
recognised financial
assets
Gross amounts of
recognised financial
liabilities offset in the
statement of financial
position
Net amounts of
financial assets
presented in the
statement of financial
position
Related amounts not offset
in the statement of financial position
Net amount
Amounts not
subject to
enforceable netting
arrangements
Statement of
financial position
total ¹
Financial instruments
Cash and financial
instruments received
as collateral
Statement of financial position line item
Financial instrument
Loans and advances to banks
2
Reverse repurchase, securities
borrowing and similar agreements
0
0
Cash pools
–
2
0
0
0
–0
0
–
2
0
Financial assets at fair value through profit or loss
Trading and non-trading
Reverse repurchase, securities
borrowing and similar agreements
–
14,823
Derivatives
–
52,561
–
67,384
Loans and advances to customers
3
Reverse repurchase, securities
borrowing and similar agreements
–2,359
Cash pools
–
165,815
–
168,174
Other items where offsetting is applied in the
statement of financial position
4
–
7,752
Total financial assets
–
243,312
1 ‘The statement of financial position total’ is the sum of ‘Net amounts of financial assets presented in the statement of financial position’ and ’Amounts not subject to enforceable master netting arrangements’.
2 At 31 December 2020, the total amount of ‘Loans and advances to banks’ excluding repurchase agreements is EUR
3 At 31 December 2020, the total amount of ‘Loans and advances to customers’ excluding repurchase agreements is EUR
4 Other items mainly include amounts to be settled with Central Clearing Counterparties regarding securities and derivatives transactions and is included in ‘Other Assets – Amounts to be settled’ for EUR
subject to offsetting as at 31 December 2020.
44 Offsetting financial assets and liabilities
ING Group Annual Report 2021 on Form 20-F
F -361
Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements
Related amounts not offset in the statement
of financial position
Amounts not
subject to
enforceable
netting
arrangements
Statement of
financial position
total
¹
2021
Gross amounts of
recognised financial
liabilities
Gross amounts of
recognised financial
assets offset in the
statement of financial
position
Net amounts of
financial liabilities
presented in the
statement of financial
position
Financial instruments
Cash and financial
instruments pledged
as collateral
Net amount
Statement of financial position line item
Financial instrument
Deposits from banks
2
Repurchase, securities lending and
similar agreements
Cash pools
-1
-1
Customer deposits
3
Repurchase, securities lending and
similar agreements
Cash pools
-194,522
-194,522
Financial liabilities at fair value through profit or loss
Trading and Non-trading
Repurchase, securities lending and
similar agreements
-11,564
Derivatives
-39,053
-50,617
Other items where offsetting is applied in the statement of
financial position
4
-2,848
-1
Total financial liabilities
-247,987
1 ‘The statement of financial position total’ is the sum of ‘Net amounts of financial liabilities presented in the statement of financial position’ and ’Amounts not subject to enforceable master netting arrangements’.
2 At 31 December 2021, the total amount of ‘Deposits from banks’ excluding repurchase agreements is EUR
3 At 31 December 2021, the total amount of ‘Customers deposits’ excluding repurchase agreements is EUR
4 Other items mainly include amounts to be settled with Central Clearing Counterparties regarding securities and derivatives transactions and is included in ‘Other Liabilities – Amounts to be settled’ for EUR
subject to offsetting as at 31 December 2021.
44 Offsetting financial assets and liabilities
ING Group Annual Report 2021 on Form 20-F
F -362
Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements
Related amounts not offset in the
statement of financial position
Amounts not
subject to
enforceable
netting
arrangements
Statement of
financial position
total
¹
2020
Gross amounts of
recognised
financial liabilities
Gross amounts of
recognised financial
assets offset in the
statement of financial
position
Net amounts of
financial
in the statement of
financial position
Financial instruments
Cash and financial
instruments pledged
as collateral
1
Net amount
Statement of financial position line item
Financial instrument
Deposits from banks
2
Repurchase, securities lending and
similar agreements
Cash pools
-2
-2
Customer deposits
3
Repurchase, securities lending and
similar agreements
-2,354
Cash pools
-165,815
-168,169
Financial liabilities at fair value through profit or loss
Trading and Non-trading
Repurchase, securities lending and
similar agreements
-14,827
Derivatives
-52,626
-67,453
Other items where offsetting is applied in the statement
of financial position
4
-7,687
Total financial liabilities
-243,312
1 ‘The statement of financial position total’ is the sum of ‘Net amounts of financial liabilities presented in the statement of financial position’ and ’Amounts not subject to enforceable master netting arrangements’.
2 At 31 December 2020, the total amount of ‘Deposits from banks’ excluding repurchase agreements is EUR
3 At 31 December 2020, the total amount of ‘Customers deposits’ excluding repurchase agreements is EUR
4 Other items mainly include amounts to be settled with Central Clearing Counterparties regarding securities and derivatives transactions and is included in ‘Other Liabilities – Amounts to be settled’ for EUR
subject to offsetting as at 31 December 2020.
45 Contingent liabilities and commitments
ING Group Annual Report 2021 on Form 20-F
F -363
45 Contingent liabilities and commitments
In the normal course of business, ING Group is party to activities where risks are not reflected in whole or in part
in the consolidated financial statements. In response to the needs of its customers, the Group offers financial
products related to loans. These products include traditional off-balance sheet credit-related financial
instruments.
Contingent liabilities and commitments
2021
2020
Contingent liabilities in respect of
– Guarantees
– Irrevocable letters of credit
– other
Guarantees issued by ING Groep N.V.
Irrevocable facilities
Guarantees relate both to credit and non-credit substitute guarantees. Credit substitute guarantees are
guarantees given by ING Group in respect of credit granted to customers by a third party. Many of them are
expected to expire without being drawn on and therefore do not necessarily represent future cash outflows.
Irrevocable letters of credit mainly secure payments to third parties for a customer’s foreign and domestic trade
transactions in order to finance a shipment of goods. ING Group’s credit risk in these transactions is limited since
these transactions are collateralised by the commodity shipped and are of a short duration.
Other contingent liabilities include acceptances of bills and are of a short-term nature. Other contingent liabilities
also include contingent liabilities resulting from the operations of the Real Estate business including obligations
under development and construction contracts. Furthermore other contingent liabilities include a contingent
liability in connection with a possible Dutch tax obligation that relates to the deduction from Dutch taxable profit
for losses incurred by ING Bank in the United Kingdom in previous years. The existence of this obligation will be
confirmed only by the occurrence of future profits in the United Kingdom.
Irrevocable facilities mainly constitute unused portions of irrevocable credit facilities granted to corporate clients.
Many of these facilities are for a fixed duration and bear interest at a floating rate. ING Group’s credit risk and
interest rate risk in these transactions is limited. The unused portion of irrevocable credit facilities is partly
secured by customers’ assets or counter-guarantees by the central governments and other public sector entities
under the regulatory requirements. Irrevocable facilities also include commitments made to purchase securities
to be issued by governments and private issuers.
As at 31 December 2021, ING Groep N.V. guarantees various US dollar debentures (that mature between 2023
and 2036) which were issued by a subsidiary of Voya Financial Inc. In accordance with the Shareholder’s
agreement, the net exposure of ING Groep N.V. as at 31 December 2021 was
nil
, as the outstanding principal
amount of the US dollar debentures was fully covered with collateral of EUR
pledged by Voya Financial Inc.
In addition to the items included in contingent liabilities, ING Group has issued certain guarantees as participant
in collective arrangements of national banking funds and as a participant in required collective guarantee
schemes which apply in different countries. For example, ING Bank N.V. provided a guarantee to the German
Deposit Guarantee Fund (‘Einlagensicherungsfonds’ or ESF) under section 5 (10) of the by-laws of this fund,
where ING Bank N.V. indemnifies the Association of German Banks Berlin against any losses it might incur as
result of actions taken with respect to ING Germany. The ESF is a voluntary collective guarantee scheme for retail
savings and deposits in excess of EUR 100,000.
Furthermore we refer to Note 46 for any contingent liabilities in respect of legal proceedings.
46 Legal proceedings
ING Group Annual Report 2021 on Form 20-F
F -364
46 Legal proceedings
ING Group and its consolidated subsidiaries are involved in governmental, regulatory, arbitration and legal
proceedings and investigations in the Netherlands and in a number of foreign jurisdictions, including the U.S.,
involving claims by and against them which arise in the ordinary course of their businesses, including in
connection with their activities as lenders, broker-dealers, underwriters, issuers of securities and investors and
their position as employers and taxpayers. In certain of such proceedings, very large or indeterminate amounts
are sought, including punitive and other damages. While it is not feasible to predict or determine the ultimate
outcome of all pending or threatened governmental, regulatory, arbitration and legal proceedings and
investigations, ING is of the opinion that some of the proceedings and investigations set out below may have or
have in the recent past had a significant effect on the financial position, profitability or reputation of ING and/or
ING and its consolidated subsidiaries.
Settlement agreement:
with the Dutch Public Prosecution Service relating to previously disclosed investigations regarding various
requirements for client on-boarding and the prevention of money laundering and corrupt practices. Following
the entry into the settlement agreement, ING has experienced heightened scrutiny from authorities in various
countries. ING is also aware, including as a result of media reports, that other parties may, among other things,
seek to commence legal proceedings against ING in connection with the subject matter of the settlement. Certain
parties filed requests with the Court of Appeal in The Netherlands to reconsider the prosecutor’s decision to
enter into the settlement agreement with ING and not to prosecute ING or (former) ING employees. In December
2020, the Court of Appeal issued its final ruling. In this ruling the prosecutors' decision to enter into the
settlement agreement with ING was upheld, making the settlement final. However, in a separate ruling, the
Court ordered the prosecution of ING’s former CEO.
Findings regarding AML processes:
authorities concerning anti-money laundering matters, and in the context of significantly increased attention on
the prevention of financial economic crime, ING has experienced heightened scrutiny by authorities in various
countries. The interactions with such regulatory and judicial authorities have included, and can be expected to
continue to include, onsite visits, information requests, investigations and other enquiries. Such interactions, as
well as ING’s internal assessments in connection with its global enhancement programme, have in some cases
resulted in satisfactory outcomes, and also have resulted in, and may continue to result in, findings, or other
conclusions which may require appropriate remedial actions by ING, or may have other consequences. ING
intends to continue to work in close cooperation with authorities as it seeks to improve its management of non-
financial risks in terms of policies, tooling, monitoring, governance, knowledge and behaviour.
In January 2022, a Luxembourg investigating judge informed ING Luxembourg that he intends to instruct the
relevant prosecutor to prepare a criminal indictment regarding alleged shortcomings in AML process at ING
Luxembourg. Although this matter remains at an early procedural stage and it is currently not possible to
determine how this matter will be resolved or the timing of any such resolution, ING does not expect a financial
outcome of this matter to have a material effect.
ING continues to take steps to enhance its management of compliance risks and embed stronger awareness
across the whole organisation. These steps are part of the global KYC programme and set of initiatives, which
includes enhancing KYC files and working on various structural improvements in compliance policies, tooling,
monitoring, governance, knowledge and behaviour.
Tax cases
: Because of the geographic spread of its business, ING may be subject to tax audits, investigations and
procedures in numerous jurisdictions at any point in time. Although the Issuer believes that it has adequately
provided for all its tax positions, the ultimate resolution of these audits, investigations and procedures is
uncertain and may result in liabilities which are materially different from the amounts recognised.
Litigation regarding products of a former subsidiary in Mexico
: Proceedings in which ING is involved include
complaints and lawsuits concerning the performance of certain interest sensitive products that were sold by a
former subsidiary of ING in Mexico. A provision has been taken in the past.
46 Legal proceedings
ING Group Annual Report 2021 on Form 20-F
F -365
SIBOR – SOR litigation
: In July 2016, investors in derivatives tied to the Singapore Interbank Offer Rate (“SIBOR”)
filed a U.S. class action complaint in the New York District Court alleging that several banks, including ING,
conspired to rig the prices of derivatives tied to SIBOR and the Singapore Swap Offer Rate (“SOR”). The lawsuit
refers to investigations by the Monetary Authority of Singapore (“MAS”) and other regulators, including the U.S.
Commodity Futures Trading Commission (“CFTC”), in relation to rigging prices of SIBOR- and SOR based
derivatives. In October 2018, the New York District Court issued a decision dismissing all claims against ING
Group and ING Capital Markets LLC, but leaving ING Bank, together with several other banks, in the case, and
directing plaintiffs to file an amended complaint consistent with the Court's rulings. In October 2018, plaintiffs
filed such amended complaint, which asserts claims against a number of defendants but none against ING Bank
(or any other ING entity), effectively dismissing ING Bank from the case. In December 2018, plaintiffs sought
permission from the Court to file a further amended complaint that names ING Bank as a defendant. In July 2019,
the New York District Court granted the defendants’ motion to dismiss and denied leave to further amend the
complaint, effectively dismissing all remaining claims against ING Bank. In March 2021, the Second Circuit court
vacated the District Court’s ruling. The case was remanded to the District Court to reconsider the amended
complaint that would add ING Bank N.V. back to the case. In April 2021, the defendants filed a petition for
rehearing with the Second Circuit court. In May 2021, the Second Circuit court denied the defendants’ petition. In
August 2021, plaintiffs and ING executed a binding settlement term sheet. Accordingly, plaintiffs and ING jointly
asked the Court to stay all litigation proceedings and deadlines applicable to plaintiffs and ING pending drafting,
execution and presentment for approval of a formal class settlement agreement. ING has taken a provision for
the settlement amount.
Claims regarding accounts with predecessors of ING Bank Turkey:
claims from (former) customers of legal predecessors of ING Bank Turkey. The claims are based on offshore
accounts held with these banks, which banks were seized by the Savings Deposit Insurance Fund (“SDIF”) prior to
the acquisition of ING Bank Turkey in 2007 from OYAK. SDIF has also filed various lawsuits against ING Bank
Turkey to claim compensation from ING Bank Turkey, with respect to amounts paid out to offshore account
holders so far. At this moment it is not possible to assess the outcome of these procedures nor to provide an
estimate of the (potential) financial effect of these claims.
Interest rate derivatives claims:
interest rate derivatives that were sold to clients in connection with floating interest rate loans in order to hedge
the interest rate risk of the loans. These proceedings are based on several legal grounds, depending on the facts
and circumstances of each specific case, inter alia alleged breach of duty of care, insufficient information
provided to the clients on the product and its risks and other elements related to the interest rate derivatives
that were sold to clients. In some cases, the court has ruled in favour of the claimants and awarded damages,
annulled the interest rate derivative or ordered repayment of certain amounts to the claimants. The total
amounts that need to be repaid or compensated in some cases still need to be determined. ING may decide to
appeal against adverse rulings. Although the outcome of the pending litigation and similar cases that may be
brought in the future is uncertain, it is possible that the courts may ultimately rule in favour of the claimants in
some or all of such cases. Where appropriate a provision has been taken. The aggregate financial impact of the
current and future litigation could become material.
Interest surcharges claims:
Netherlands regarding increases in interest surcharges with respect to several credit products, including but not
limited to commercial property. ING has reviewed the relevant product portfolio. The provision previously taken
has been reversed for certain of these complaints. All claims are dealt with individually. Thus far, the courts have
ruled in favour of ING in each case, ruling that ING was allowed to increase the interest surcharge based upon the
essential obligations in the contract. In a relevant case the Dutch Supreme Court ruled in favor of another Dutch
bank, addressing the question whether or not a bank is allowed to increase interest surcharges unilaterally. The
Supreme Court ruled affirmative. ING will continue to deal with all claims individually.
46 Legal proceedings
ING Group Annual Report 2021 on Form 20-F
F -366
Mortgage expenses claims:
regarding reimbursement of expenses associated with the formalisation of mortgages. In most court proceedings
in first instance the expense clause of the relevant mortgage contract has been declared null and ING Spain has
been ordered to reimburse all or part of the applicable expenses. Since 2018, the Spanish Supreme Court and the
European Court of Justice have issued rulings setting out which party should bear notary, registration, agency,
and stamp duty costs. In January 2021, the Spanish Supreme Court ruled that valuation costs of mortgages,
signed prior to 16 June 2019, the date the new mortgage law entered into force, should be borne by the bank.
Media attention for the statute of limitations applicable to the right to claim reimbursement of costs resulted in
an increased number of claims at the beginning of 2021. In June 2021, the Supreme Court published a press
release informing of its decision to ask the European Court of Justice for a preliminary ruling regarding the
criteria that should be applied to determine the date from which the action for claiming the reimbursement of
mortgage expenses is considered to be expired. ING Spain has also been included, together with other Spanish
banks, in three class actions filed by customer associations. In one of the class actions an agreement was reached
with the association. In another class action ING filed an appeal asking the Spanish Court of Appeal to determine
that the ruling of the court of first instance is only applicable to the consumers that were part of the case. A
provision has been established in the past and has been adjusted where appropriate.
Imtech claim:
Action Group B.V. on behalf of certain (former) shareholders of Imtech N.V. (“Imtech”). Furthermore, on 28
March 2018, ING Bank received another claim on the same subject matter from the Dutch Association of
Stockholders (Vereniging van Effectenbezitters, “VEB”). Each of the claimants allege inter alia that shareholders
were misled by the prospectus of the rights issues of Imtech in July 2013 and October 2014. ING Bank, being one
of the underwriters of the rights issues, is held liable by the claimants for the damages that investors in Imtech
would have suffered. ING Bank responded to the claimants denying any and all responsibility in relation to the
allegations made in the relevant letters. In September 2018, the trustees in the bankruptcy of Imtech claimed
from various financing parties, including ING, payment of what the security agent has collected following
bankruptcy or intends to collect, repayment of all that was repaid to the financing parties, as well as
compensation for the repayment of the bridge financing. At this moment it is not possible to assess the outcome
of these claims nor to provide an estimate of the (potential) effect of these claims.
Mexican Government Bond litigation:
ING Bank Mexico S.A. and ING Financial Markets LLC (“ING”) as defendants to a complaint that had previously
been filed against multiple other financial institutions. The complaint alleges that the defendants conspired to fix
the prices of Mexican Government Bonds. On 30 September 2019, the relevant court dismissed the antitrust
complaint, finding that the plaintiffs had failed to identify any facts that links each defendant to the alleged
conspiracy. In December 2019, the plaintiffs filed an amended complaint removing all ING entities as defendants
on the condition that the ING entities enter into a tolling agreement for the duration of two years. ING
subsequently entered into a tolling agreement, which expired in December 2021. The defendants named in the
amended complaint have now settled that litigation.
Claims regarding mortgage loans in Swiss franc in Poland:
retail customers who took out mortgage loans indexed to the Swiss franc. Such customers have alleged that the
mortgage loan contract contains abusive clauses. One element that the court is expected to consider in
determining whether such contracts contain abusive clauses is whether the rules to determine the exchange rate
used for the conversion of the loan from Polish zloty to Swiss franc are unambiguous and verifiable. In December
2020, the Polish Financial Supervision Authority (PFSA) proposed that lenders offer borrowers voluntary out-of-
court settlements on foreign-currency mortgage disputes, with mortgages indexed to Swiss franc serving as a
reference point. In February 2021, ING Poland announced its support for this initiative and in October 2021
began offering the settlements to the borrowers following the PFSA’s proposal. ING has recorded a portfolio
provision with respect to the claims and the PFSA proposal. The Polish Supreme Court was expected to provide
further clarity on this topic in a ruling scheduled for November 2021, however the court’s session on this matter
was postponed and the date of the next session has not yet been announced.
Certain Consumer Credit Products
: In October 2021, ING announced that it would offer compensation to certain
of its Dutch retail customers in connection with certain revolving consumer loans with variable interest rates that
allegedly did not sufficiently follow market rates. This announcement was made in response to a number of
rulings by the Dutch Institute for Financial Disputes (Kifid) regarding similar products at other banks. ING
currently expects that any such compensation will be paid before the end of 2022. ING has recognized a provision
of €
announced that it has reached an agreement with the Dutch Consumers’ Association (Consumentenbond) on the
compensation methodology for revolving credits.
47 Consolidated companies and businesses acquired and divested
ING Group Annual Report 2021 on Form 20-F
F -367
47 Consolidated companies and businesses acquired and divested
Acquisitions
There were no significant acquisitions in 2021 or 2020.
In May 2019 ING acquired
% of the shares of Intersoftware Group B.V., Findata Access B.V. and Unitrust B.V.
(ISW Group) for a total consideration of EUR
of goodwill of EUR
Divestments
On 18 February 2021 ING announced the intention to withdraw from the retail banking market in the Czech
Republic. The decision to discontinue Czech Retail Banking entails the closure of retail customer accounts
/mutual funds and the sale of assets comprising the related government bond portfolio. ING’s retail customers in
the Czech Republic have received a welcome offer from Raiffeisenbank Czech Republic. ING’s departure from the
Czech Retail banking market resulted in EUR
the government bond portfolio with a carrying amount of EUR
2021.
At 12 July 2021, ING announced that it has reached an agreement to transfer ING’s Retail Banking operations in
Austria to bank99. Under the terms of the agreement, approximately EUR
approximately EUR
approximately EUR
2021 completed the transaction and realized a loss on disposal of EUR
segment Retail Challengers Growth Markets.
In 2021, ING and the board of Makelaarsland agreed to continue Makelaarsland independently. The new board
will take over all clients and employees, and services to clients will continue unchanged. The negative result on
disposal of group companies from this management buyout amounted to approximately EUR
On 28 October 2021 ING announced that its subsidiary Payvision will start phasing out its services as a payment
service provider and acquirer. After a thorough evaluation of all options in the context of the rapidly evolving and
increasingly competitive and capital intensive e-commerce merchant market, ING has concluded that it is not
feasible to achieve its ambitions with Payvision. The aim is to complete the phase-out process by the second
quarter of 2022.
In 2021, Payvision recognised an impairment loss of intangible assets of EUR
Brand, IT and Customer relationships and an impairment loss of the deferred tax asset of EUR
In December 2021 ING announced that it will leave the retail banking market in France. Reference is made to
Note 52 'Subsequent events' for further details of the events after 31 December 2021 but before these financial
statements were authorised for issue.
In 2020 there were no significant divestments.
In July 2019 ING completed the sale of part of the ING Lease Italy business. The settlement price amounted to
EUR
a EUR
to the performance of the sold portfolio and is reported under the financial assets mandatorily measured at fair
value through profit and loss. The additional loss in 2019 amounted EUR
-2
-123
Italian lease business was reported as Assets Held for Sale as at 31 December 2018 and previously included in the
business line segment Wholesale Banking and geographical segment Other Challengers.
Reference is made to Note 24 ‘Result on the disposal of group companies’.
48 Principal subsidiaries, investments in associates and joint ventures
ING Group Annual Report 2021 on Form 20-F
F -368
Most significant companies disposed in 2021
in EUR million
Makelaarsland
BV Above BV
ING Austria Retail
Banking
Total divested
Sales Proceeds
Sales proceeds
Non-cash proceeds
Cash proceeds
Cash outflow / inflow on disposal
Assets
Cash assets
Loans and advances to customers
0
Amounts due from banks
Miscalleneous other assets
0
Liabilities
Customer deposits and other funds on deposit
Miscallaneous other liabilities
Net assets
% disposed
100%
100%
Net assets disposed
Result on disposal
-3
-26
-29
48 Principal subsidiaries, investments in associates and joint ventures
For the majority of ING’s principal subsidiaries,
owns more than half of the voting power. For subsidiaries in which the interest held is below
%, control exists
based on the combination of ING’s financial interest and its rights from other contractual arrangements which
result in control over the operating and financial policies of the entity.
For each of the subsidiaries listed, the voting rights held equal the proportion of ownership interest and
consolidation by ING is based on the majority of ownership.
For the principal investments in associates and joint ventures ING Group has significant influence but not control.
Significant influence generally results from a shareholding of between
% and
% of the voting rights, but also
the ability to participate in the financial and operating policies through situations including, but not limited to
one or more of the following:
◾
Representation on the board of directors;
◾
Participation in the policymaking process; and
◾
Interchange of managerial personnel.
The principal subsidiaries, investments in associates and joint ventures of ING Groep N.V. and their statutory
place of incorporation or primary place of business are as follows:
Principal subsidiaries, investments in associates and joint ventures
Proportion of ownership
and interest held
by the group
2021
2020
Subsidiary
Statutory place of
Incorporation
Country of operation
ING Bank N.V.
100%
100%
Bank Mendes Gans N.V.
100%
100%
ING Belgium S.A./N.V.
100%
100%
ING Luxembourg S.A.
100%
100%
ING-DiBa AG
100%
100%
ING Bank Slaski S.A.
1
75%
75%
ING Financial Holdings Corporation
100%
100%
ING Bank A.S.
100%
100%
ING Bank (Australia) Ltd
100%
100%
ING Commercial Finance B.V.
100%
100%
ING Groenbank N.V.
100%
100%
Investments in associates and joint ventures
TMBThanachart Bank Public Company Ltd
2
23%
23%
1 The shares of the non-controlling interest stake of
% are listed on the Warsaw Stock Exchange, for summarised financial information we
refer to ‘Note 36 ‘Information on geographical areas.
2 Reference is made to Note 8 Investments in Associates and Joint Ventures.
49 Structured entities
ING Group Annual Report 2021 on Form 20-F
F -369
49 Structured entities
ING Group’s activities involve transactions with various structured entities (SE) in the normal course of its
business. A structured entity is an entity that has been designed so that voting or similar rights are not the
dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks
only and the relevant activities are directed by means of contractual arrangements. ING Group’s involvement in
these entities varies and includes both debt financing and equity financing of these entities as well as other
relationships. Based on its accounting policies, as disclosed in the section Principles of valuation and
determination of results of these financial statements, ING establishes whether these involvements result in no
significant influence, significant influence, joint control or control over the structured entity.
The structured entities over which ING can exercise control are consolidated. ING may provide support to these
consolidated structured entities as and when appropriate. However, this is fully reflected in the consolidated
financial statements of ING Group as all assets and liabilities of these entities are included and off-balance sheet
commitments are disclosed.
ING’s activities involving structured entities are explained below in the following categories:
1.
Consolidated ING originated securitisation programmes;
2.
Consolidated ING originated Covered bond programme (CBC);
3.
Consolidated ING sponsored Securitisation programme (Mont Blanc);
4.
Unconsolidated Securitisation programme; and
5.
Other structured entities.
1. Consolidated ING originated securitisation programmes
ING Group enters into liquidity management securitisation programmes in order to obtain funding and improve
liquidity. Within the programme ING Group sells ING originated assets to a structured entity. The underlying
exposures include residential mortgages and SME loans in the Netherlands, Belgium, Spain, Italy, Australia and
Germany.
The structured entity issues securitised notes (traditional securitisations) which are eligible collateral for central
bank liquidity purposes. In most programmes ING Group acts as investor of the securitised notes. ING Group
continues to consolidate these structured entities if it is deemed to control the entities.
The structured entity issues securitisation notes in two or more tranches, of which the senior tranche obtains a
high rating (AAA or AA) by a rating agency. The tranche can subsequently be used by ING Group as collateral in
the money market for secured borrowings.
ING Group originated various securitisations, as at 31 December 2021, these consisted of approximately EUR
billion (2020: EUR
billion) were issued externally. The underlying exposures are residential mortgages and SME loans. Apart from
the third party funding, these securitisations did not impact ING Group’s Consolidated statement of financial
position and profit or loss.
In 2021, there are no non-controlling interests as part of the securitisation structured entities that are significant
to ING Group. ING Group for the majority of the securitisation vehicles provides the funding for the entity except
for EUR
In addition ING Group originated various securitisations for liquidity management optimisation purposes. As at
31 December 2021, these consisted of approximately EUR
portfolio loans, which have been issued to ING subsidiaries in Germany. The underlying exposures are senior
loans to large corporations and financial institutions, and real estate finance loans, mainly in the Netherlands.
These securitisations did not impact ING Group’s consolidated statement of financial position and profit or loss.
2. Consolidated ING originated Covered bond programme (CBC)
ING Group has entered into a covered bond programme. Under the covered bond programme ING issues bonds.
The payment of interest and principal is guaranteed by the ING administered structured entities, ING Covered
Bond Company B.V., and ING SB Covered Bond Company B.V. In order for these entities to fulfil their guarantee,
ING legally transfers mainly Dutch mortgage loans originated by ING. Furthermore ING offers protection against
deterioration of the mortgage loans. The entities are consolidated by ING Group.
49 Structured entities
ING Group Annual Report 2021 on Form 20-F
F -370
Covered bond programme
Fair value pledged
mortgage loans
2021
2020
Dutch Covered Bond Companies
In addition, subsidiaries of ING in Germany, Belgium and Australia also issued covered bonds with pledged
mortgages loans of approximately EUR
For the covered bond programme, third-party investors in securities issued by the structured entity have
recourse to the assets of the entity and to the assets of ING Group.
3. Consolidated ING sponsored Securitisation programme (Mont Blanc)
In the normal course of business, ING Group structures financing transactions for its clients by assisting them in
obtaining sources of liquidity by selling the clients’ receivables or other financial assets to a Special Purpose
Vehicle (SPV). The senior positions in these transactions may be funded by the ING administered multi seller
Asset Backed Commercial Paper (ABCP) conduit Mont Blanc Capital Corp. (rated A-1/P-1). Mont Blanc Capital
Corp. funds itself externally in the ABCP markets.
In its role as administrative agent, ING Group facilitates these transactions by acting as administrative agent,
swap counterparty and liquidity provider to Mont Blanc Capital Corp. ING Group also provides support facilities
(i.e. liquidity) backing the transactions funded by the conduit. The types of asset currently in the Mont Blanc
conduit include trade receivables, consumer finance receivables, car leases and residential mortgages.
ING Group supports the commercial paper programmes by providing Mont Blanc Capital Corp. with short-term
liquidity facilities. Once drawn these facilities bear normal credit risk.
The liquidity facilities, provided to Mont Blanc are EUR
liquidity amount is
nil
nil
).
The standby liquidity facilities are reported under irrevocable facilities. All facilities, which vary in risk profile, are
granted to the Mont Blanc Capital Corp. subject to normal ING Group credit and liquidity risk analysis procedures.
The fees received for services provided and for facilities are charged subject to market conditions.
4. Unconsolidated Securitisation programme
In 2013 ING transferred financial assets (mortgage loans) for an amount of approximately EUR
special purpose vehicle (SPV). The transaction resulted in full derecognition of the financial assets from ING’s
statement of financial position. Following this transfer ING continues to have two types of on-going involvement
in the transferred assets: as counterparty to the SPE of a non-standard interest rate swap and as servicer of the
transferred assets. ING has an option to unwind the transaction by redeeming all notes at their principal
outstanding amount, in the unlikely event of changes in accounting and/or regulatory requirements that
significantly impact the transaction. The fair value of the swap held by ING at 31 December 2021 amounted to
EUR
-34
-34
loss in 2021 were EUR
administrative agent, in the statement of profit or loss in 2021 amounted to EUR
The cumulative income recognised in profit or loss since derecognition amounts to EUR
million).
5. Other structured entities
In the normal course of business, ING Group enters into transactions with structured entities as counterparty.
Predominantly in its structured finance operations, ING can be instrumental in facilitating the creation of these
structured entity counterparties. These entities are generally not included in the consolidated financial
statements of ING Group, as ING facilitates these transactions as administrative agent by providing structuring,
accounting, funding, lending, and operation services.
ING Group offers various investment fund products to its clients. ING Group does not invest in these investment
funds for its own account nor acts as the fund manager.
50 Related parties
ING Group Annual Report 2021 on Form 20-F
F -371
50 Related parties
In the normal course of business, ING Group enters into various transactions with related parties. Parties are
considered to be related if one party has the ability to control or exercise significant influence over the other
party in making financial or operating decisions. Related parties of ING Group include, among others, its
subsidiaries, associates, joint ventures, key management personnel, and various defined benefit and contribution
plans. For post-employment benefit plans, reference is made to Note 36 ‘Pension and other postemployment
benefits’. Transactions between related parties include rendering or receiving of services, leases, transfers under
finance arrangements and provisions of guarantees or collateral. All transactions with related parties took place
at conditions customary in the market. There are
significant bad debt expenses recognised on outstanding balances with related parties.
Subsidiaries
Transactions with ING Groep N.V.'s main subsidiaries
2021
2020
Assets
Liabilities
Income received
Expenses paid
Transactions between ING Groep N.V. and its subsidiaries are eliminated on consolidation. Reference is made to
Note 48 ‘Principal subsidiaries’ for a list of principal subsidiaries and their statutory place of incorporation.
Assets from ING’s subsidiaries mainly comprise long-term funding. Liabilities to ING’s subsidiaries mainly
comprise short-term deposits.
Associates and joint ventures
Transactions with ING Group’s main associates and joint ventures
Associates
Joint ventures
2021
2020
2021
2020
Assets
0
Liabilities
Off-balance sheet commitments
–
Income received
Assets, liabilities, commitments, and income related to Associates and joint ventures result from transactions
which are executed as part of the normal Banking business.
Key management personnel compensation
The Executive Board of ING Groep N.V., the Management Board Banking and the Supervisory Board are
considered Key Management personnel of ING Group. In 2021 and 2020, the three members of the Executive
Board of ING Groep N.V. were also members of the Management Board Banking.
Transactions with key management personnel, including their compensation are included in the tables below.
50 Related parties
ING Group Annual Report 2021 on Form 20-F
F -372
Key management personnel compensation (Executive Board and Management Board Banking)
2021
in EUR thousands
Executive Board
of ING Groep N.V.
3
Management
Board Banking
1
Total
Fixed Compensation
– Base salary
– Collective fixed allowances
– Pension costs
– Severance benefits
4
Variable compensation
– Upfront cash
– Upfront shares
– Deferred cash
– Deferred shares
– Other emoluments
5
Total compensation
1 Excluding members of the Management Board Banking that are also members of the Executive Board of ING Groep N.V.
2 The collective fixed allowances consist of two savings allowances applicable to employees in the Netherlands; an individual savings
allowance of
% and a collective savings allowance to compensate for loss of pension benefits with respect to salary in excess of EUR
.
3 In 2021 one member of the Executive Board joined ING during the year. The table includes compensation earned in the capacity as
Executive Board member as of the appointment at the AGM on 26 April 2021.
4 One member of the Management Board Banking left ING during the reporting year 2021. In line with applicable regulation a severance
payment was granted.
5 This includes amongst others: housing, school/tuition fees, international health insurance, relocation costs and tax and financial planning.
Key management personnel compensation (Executive Board and Management Board Banking)
Executive
Board of ING
Groep N.V.
Management
Board Banking
1,4
Total
2020
in EUR thousands
Fixed Compensation
– Base salary
– Collective fixed allowances
– Pension costs
– Severance benefits
Variable compensation
– Upfront cash
– Upfront shares
– Deferred cash
– Deferred shares
– Other emoluments
5,6
Total compensation
1 Excluding members of the Management Board Banking that are also members of the Executive Board of ING Groep N.V.
2 The collective fixed allowances consist of two savings allowances applicable to employees in the Netherlands; an individual savings
allowance of
% and a collective savings allowance to compensate for loss of pension benefits with respect to salary in excess of EUR
.
3 In 2020 one member of the Executive Board left ING during the year. The table includes compensation earned in the capacity as Executive
Board member.
4 One member of the Management Board Banking left ING at the end of the year. In line with applicable regulation a severance payment
was granted.
5 Other emoluments include reimbursement of costs related to home/work commute, costs relating to tax and financial planning services,
costs associated with a company car and for expats and the costs associated with housing and schooling
6 Prior year numbers have been updated by excluding costs related to reimbursement of Directors and Officers indemnity to improve
consistency and comparability
.
ING indemnifies the members of the EB against direct financial losses in connection with claims from third parties
filed, or threatened to be filed, against them by virtue of their service as a member of the EB, as far as permitted
by law, on the conditions laid down in the Articles of Association and their commission contract. ING has taken
out liability insurance for the members of the EB.
51 Capital management
ING Group Annual Report 2021 on Form 20-F
F -373
In accordance with the Articles of Association ING indemnifies the members of the Supervisory Board as far as
legally permitted against direct financial losses in connection with claims from third parties filed or threatened to
be filed against them by virtue of their service as a member of the Supervisory Board.
Key management personnel compensation is generally included in Staff expenses in the statement of profit or
loss. The total remuneration of the Executive Board and Management Board Banking is disclosed in the table
above. Under IFRS, certain components of variable remuneration are not recognised in the statement of profit or
loss directly, but are allocated over the vesting period of the award. The comparable amount recognised in Staff
expenses in 2021 relating to the fixed expenses of 2021 and the vesting of variable remuneration of earlier
performance years, is EUR
The table below shows the total of fixed remuneration, expense allowances and attendance fees for the
Supervisory Board in 2021 and 2020.
Key management personnel compensation (Supervisory Board)
in EUR thousands
2021
2020
Total compensation
Balances outstanding with key management personnel were as follows:
Loans and advances to key management personnel
Amount outstanding
31 December
Weighted average
interest rate
Repayments
in EUR thousands
2021
2020
2021
2020
2021
2020
Executive Board members
Management Board Banking
1.7%
2.6%
Supervisory Board members
Total
The loans and advances mentioned in the table above (1) were made in the ordinary course of business, (2) were
granted on conditions that are comparable to those of loans and advances granted to all employees and (3) did
not involve more than the normal risk of collectability or present other unfavourable features. Loans and
advances to members of the Executive Board and Management Board Banking are compliant with the standards
set out in the DNB guidelines for loans to officers and directors of a regulated entity, such as ING.
As at 31 December 2021 Deposits outstanding from key management personnel amounted to EUR
December 2020: EUR
nil
Number of ING Groep N.V. shares and stock options to key management personnel
ING Groep N.V. shares
in numbers
2021
2020
Executive Board members
Management Board Banking
Supervisory Board members
Total number of shares and stock options
51 Capital management
Objectives
Group Treasury (“GT”) Balance Sheet Capital Management, is responsible for maintaining the adequate
capitalisation of ING Group and ING Bank entities, to manage the risk associated with ING’s business activities.
This involves not only managing, planning and allocating capital within ING Group, ING Bank and its various
entities, but also helping to execute necessary capital market transactions, term (capital) funding and risk
management transactions. ING takes an integrated approach to assess the adequacy of its capital position in
relation to its risk profile and operating environment. This means GT Balance Sheet Capital Management takes
into account both regulatory and internal, economic based metrics and requirements as well as the interests of
key stakeholders such as shareholders and rating agencies. ING Group’s capital position and capital distributions
are managed based on IFRS-EU.
ING applies the following main capital definitions:
Common equity Tier 1 capital (CET1) - is defined as shareholders’ equity less regulatory adjustments.
CET1 capital divided by risk-weighted assets equals the CET1 ratio.
Tier 1 capital – is defined as CET1 capital plus Additional Tier 1 (hybrid) securities and other regulatory
adjustments. Tier 1 capital divided by risk-weighted assets equals the Tier 1 capital ratio.
Total capital – is Tier 1 capital plus subordinated Tier 2 liabilities and regulatory adjustments. Total
capital divided by risk-weighted assets equals the Total capital ratio.
51 Capital management
ING Group Annual Report 2021 on Form 20-F
F -374
CET1 ratio ambition – is built on the CET1 requirements specified for ING, uncertainty of expected
regulatory RWA inflation, potential increase in the regulatory requirement of the Countercyclical Buffer
and the potential impact of a standardised and pre-determined stress scenario.
Leverage ratio (LR) – is defined as Tier 1 capital divided by the leverage exposure.
Total Loss Absorbing Capacity (TLAC) – Total capital plus senior unsecured bonds and amortisations.
TLAC ratios are based on both risk-weighted assets and leverage exposure.
Minimum Required Eligible Liabilities (MREL) – Total capital plus senior unsecured bonds and
amortisations. MREL ratios are based on both risk-weighted assets and leverage exposure.
Capital developments
ING’s capital position remained strong despite Covid-19 uncertainty. At both the consolidated and entity level,
ING has sufficient buffers to withstand various stressed scenarios.
ING’s CET1 ambition level of around
% is well above the prevailing Maximum Distributable Amount (MDA)
level of
%, implying a management buffer of about
ING’s capital ratios at the end of the year improved compared to 2020 primarily due to the addition of
% of the
full year 2021 net profit to CET1 capital. This was only partly offset by higher risk-weighted assets that were
mainly driven by model impacts, reflecting the ongoing redevelopment of internal models and EBA guidelines.
ING Groep N.V. has a CET1 ratio of
% at 31 December 2021 versus an overall SREP requirement (including
buffer requirements) of
%. The Group’s Tier 1 ratio increased to
%. All AT1 securities outstanding at 31
December 2021 are CRR-compliant. The Total capital ratio (including grandfathered securities) increased from
% to
% compared to last year.
ING Group capital position according to CRR II / CRD V
in EUR million
2021
2020
Shareholders’ equity
1)
- Interim profits not included in CET1 capital
2)
-1,568
-3,266
- Other adjustments
-2,590
-4,037
Regulatory adjustments
-4,159
-7,303
Available common equity Tier 1 capital
Additional Tier 1 securities
3)
Regulatory adjustments additional Tier 1
Available Tier 1 capital
Supplementary capital Tier 2 bonds
4)
Regulatory adjustments Tier 2
-158
-846
Available Total capital
Risk weighted assets
Common equity Tier 1 ratio
15.89%
15.45%
Tier 1 ratio
18.09%
17.31%
Total capital ratio
21.02%
20.09%
1) Shareholders' equity is determined in accordance with IFRS-EU.
2) The interim profits not included in CET1 capital as per 31 December 2021 were EUR
which EUR
3) All AT1 securities outstanding at 31 December 2021 are CRR-compliant (2020: EUR
rules).
4) Including EUR
subject to CRR grandfathering rules (2020: EUR
In accordance with the applicable regulation, credit and operational risk models used in the capital ratios
calculations are not audited.
51 Capital management
ING Group Annual Report 2021 on Form 20-F
F -375
Distribution
ING’s distribution policy is a pay-out ratio of
% of resilient net profit and additional return of structural excess
capital. The latter to be considered periodically, taking into account alternative opportunities as well as
macroeconomic circumstances and the outcome of capital planning. Resilient net profit is defined as net profit
adjusted for significant items not linked to the normal course of business. The
% pay-out may be in the form of
cash or a combination of cash and share repurchases.
For 2021, the resilient net profit amounts to EUR
distribution outside of CET1 capital reflecting ING’s distribution policy of a
% pay-out ratio. Resilient net profit
is equal to the net profit as there were no adjustments to make for significant items not linked to the normal
course of business.
In the fourth quarter of 2021 ING resumed the distribution of capital, after the ECB lifted its recommendation to
limit or refrain from dividends in light of the Covid-19 pandemic.
◾
ING paid an amount of EUR
(EUR
share).
◾
On 5 October 2021 ING commenced a share buyback programme for EUR
remaining amount originally reserved over 2019 for distribution. Approximately
% of the programme had
been completed by 31 December 2021. On 28 February 2022 the share buyback programme was completed.
At the end of 2021, ING has EUR
reserved profits in 2021 (full-year 2021: EUR
dividend in October 2021).
Following ING’s distribution policy of a
% pay-out ratio on resilient net profit, the Board has proposed to pay a
final cash dividend over 2021 of EUR
General Meeting in April 2022.
Processes for managing capital
GT Balance Sheet Capital Management ensures adherence to ING’s solvency risk appetite statements by
planning and executing capital management transactions. The ongoing assessment and monitoring of capital
adequacy is embedded in the capital planning process as part of the ICAAP framework. As part of the dynamic
business planning process, ING prepares a capital and funding plan on a regular basis for all its material
businesses and assesses continuously the timing, need and feasibility for capital management actions in scope of
its execution strategy. Sufficient financial flexibility should be preserved to meet important financial objectives.
Risk appetite statements are at the foundation of the capital plan and are cascaded to the different businesses in
line with ING’s risk management framework. Contingency capital measures and early warning indicators are in
place in conjunction with ING’s contingency and recovery plan to support the strategy in times of stress.
Adverse planning and stress testing, which reflect the outcome of the annual risk assessment, are integral
components of ING’s risk and capital management framework. It allows to (i) identify and assess potential
vulnerabilities in ING’s businesses, business model, portfolios or operating environment; (ii) understand the
sensitivities of the core assumptions used in ING’s strategic and capital plan; and (iii) improve decision-making
and business steering through balancing risk and return following a forward looking and prudent management
approach.
Regulatory requirements
Capital adequacy and the use of required regulatory capital are based on the guidelines developed by the Basel
Committee on Banking Supervision (The Basel Committee) and the European Union Directives, as implemented
by the Dutch Central Bank and the ECB for supervisory purposes. In 2010, the Basel Committee issued new
solvency and liquidity requirements that superseded Basel II, implemented in the EU via CRR / CRD. In
accordance with the CRR the minimum Pillar 1 capital requirements applicable to ING Group are: a CET1 ratio of
%, a Tier 1 ratio of
% and a Total capital ratio of
% of risk-weighted assets.
The overall SREP CET1 requirement (including buffer requirements) for ING Group at a consolidated level
remained stable during 2021 and was
% at the end of 2021. This requirement is the sum of a
% Pillar I
requirement, a
% Pillar II requirement, a
% Capital Conservation Buffer (CCB), a
% Countercyclical
Buffer (CCyB) (based on December 2021 positions) and a
% O-SII buffer that is set separately for Dutch
systemic banks by the Dutch Central Bank (De Nederlandsche Bank). This requirement excludes the Pillar II
guidance, which is not disclosed.
52 Subsequent events
ING Group Annual Report 2021 on Form 20-F
F -376
The Maximum Distributable Amount (MDA) trigger level stood at
% in 2021 for CET1,
% for Tier 1
Capital and
% for Total Capital. These MDA levels are in line with the application of Art.104a in CRD V,
which allows ING to partly fulfil the total Pillar II requirement (
%) with Additional Tier 1 and Tier 2 securities.
In the event that ING Group breaches an MDA level, ING may face restrictions on dividend payments, coupons on
AT1 securities and payment of variable remuneration.
Ratings
ING’s credit ratings and outlook are shown in the table below. Each of these ratings reflects only the view of the
applicable rating agency at the time the rating was issued, and any explanation of the significance of a rating may
be obtained only from the rating agency.
Main credit ratings of ING at 31 December 2021
SP
Moody’s
Fitch
GBB-Rating
ING Groep N.V.
Issuer rating
Long-term
n/a
Short-term
n/a
Outlook
1)
Senior unsecured rating
1) Outlook refers to the senior unsecured rating.
A security rating is not a recommendation to buy, sell or hold securities and each rating should be evaluated
independently of other ratings. There is no assurance that any credit rating will remain in effect for any given
period of time or that a rating will not be lowered, suspended or withdrawn entirely by the rating agency if, in
the rating agency’s judgment, circumstances so warrant. ING accepts no responsibility for the accuracy or
reliability of the ratings.
52 Subsequent events
ING has been active in the French retail banking market since 2000 as an online bank. In December 2021 ING
announced that it will leave the retail banking market in France in order to sharpen the focus of its business
portfolio. At February 1, 2022 ING and Societe Generale announced that a Memorandum of Understanding was
signed on 31 January between ING and Boursorama (subsidiary of Societe Generale) to offer banking solutions to
ING’s retail customers in France. The intention of both parties is to reach a definitive agreement in April 2022 at
the latest.
The exact scope of the definitive agreement remains to be specified and would concern daily banking (current
accounts and cards), savings and investment products (assurance vie brokerage). The ING France retail lending
portfolio (mortgages and consumer loans) will not be part of the agreement. Mortgages will continue to be
managed by ING. Maintaining consumer loans at ING is under consideration.
ING continues its Wholesale Banking activities in France, with a focus on strengthening our position and the
ambition to be the go-to-bank for sustainable finance.
The Russian invasion of Ukraine and rapidly escalating events in late February and early March 2022 is a
significant tragedy for the people and is causing disruption to business and economic activity in the region and
worldwide. This qualifies as a non-adjusting subsequent event. At this moment it is not possible to provide an
estimate of the financial impact of this crisis on ING (including direct impact on ING exposures to Russian and
Ukrainian markets as well as wider impacts for ING). For further details on Russian and Ukrainian exposures of
ING Group reference is made to ‘Risk Management – Top and emerging risks’.
TABLE OF CONTENTS
Part IItem 1. Identity Of Directors, SeniorItem 2. Offer Statistics and ExpectedItem 3. Key InformationItem 4. Information on The CompanyItem 5 Of This Form 20-fItem 4A. Unresolved Staff CommentsItem 5. Operating and Financial ReviewNote 36 Information on Geographical Areas , Does Not Include Intercompany Balances and Reconciles To The TotalItem 6. Directors, Senior Management andItem 7. Major Shareholders and RelatedItem 8. Financial InformationItem 9. The Offer and ListingItem 10. Additional InformationItem 11. Quantitative and QualitativeItem 12. Description Of Securities OtherPart IIItem 13. Defaults, Dividend Arrearages andItem 14. Material Modifications To TheItem 15. Controls and ProceduresItem 16A. Audit Committee Financial ExpertItem 16B. Code Of EthicsItem 16C. Principal Accountant Fees andItem 16D. Exemptions From The ListingItem 16E. Purchases Of Equity Securities ByItem 16F. Changes in Registrant S CertifyingItem 16G. Corporate GovernanceItem 16H. Mine Safety DisclosureItem 16I. Disclosure Regarding ForeignPart IIIItem 17. Consolidated Financial StatementsItem 18. Consolidated Financial StatementsItem 19. ExhibitsItem Is Recognised in The Statement Of Profit Or Loss Only When The Hedged Item Is DerecognisedItem and The Hedging Instrument Respond Similarly To Similar Risks. in Addition Ing Is Mainly Using RegressionItem Financial Assets At Fair Value Through Profit Or Loss Non-trading Derivatives EurNote 52 'subsequent Events' For Further Details Of The Events After 31 December 2021 But Before These FinancialNote 48 Principal Subsidiaries For A List Of Principal Subsidiaries and Their Statutory Place Of Incorporation