ABN AMRO Bank N.V.

Annual Report • Mar 16, 2016

ABN AMRO Group N.V.

Annual Report 2015

Long-term stakeholder value: the heart of our story

Welcome to the ABN AMRO Integrated Report

Stakeholder cases

We all have our own story. At ABN AMRO, we strive to put our clients' interests first in everything we do and to create long-term value for our stakeholders. In this Integrated Annual Report we share the stories of how ABN AMRO delivers value for them.

Private client Service

Corporate client Sector-specific knowledge

Employee Diversity

Investor Relations Our relationship with investors during the bank's IPO

Society at large Investigating our total impact on society

Introduction

Notes to the reader	2
Our external reporting landscape	3
ABN AMRO at a glance	4
Message from the Chairman of the Managing Board	7
Message from the Chairman of the Supervisory Board	11
ABN AMRO shares	13

17

Strategic Report

18
21
26
33
34
35

273

Governance Report

274
300
312
323
325

329

Annual Financial Statements 2015

Consolidated income statement	330
Consolidated statement of comprehensive income	331
Consolidated statement of financial position	332
Consolidated statement of changes in equity	333
Consolidated statement of cash flows	336
Notes to the Annual Financial Statements	338
Other information	462
Independent auditor's report on financial statements	465

41

Business Report

42
46
50
86
106
114
119

473

Other

Independent auditor's assurance report	474
Definitions of important terms	476
Abbreviations	482
Cautionary statements	484
Enquiries	485

123

Risk, funding & capital Report

Introduction to risk, funding & capital management	124
Risk, funding & capital management	134
Risk, funding & capital review	170
Additional risk, funding & capital disclosures	248

Notes to the reader

Introduction Notes to the reader

Introduction

This is the Annual Report for the year 2015 of ABN AMRO, which consists of ABN AMRO Group N.V. and its consolidated subsidiaries ('ABN AMRO' or 'the Group'). The Annual Report consists of the Managing Board report, Supervisory Board report, and the Annual Financial Statements. The Annual Report is divided into the following five sections:

• Å Strategic Report;
• Å Business Report;
• Å Risk, funding & capital Report;
• Å Governance Report;
• Å Annual Financial Statements.

This year we are taking the next step towards integrated reporting. In this Annual Report, we disclose and explain our material financial and non-financial results, strategy, governance, external developments and the risks and opportunities ABN AMRO faces.

Presentation of information

The financial information contained in this Annual Report has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU IFRS). It also complies with the financial reporting requirements included in Title 9, Book 2 of the Dutch Civil Code, where applicable. Some chapters in the Risk, funding & capital Report of this Annual Report contain audited information and are part of the Annual Financial Statements. Audited information in these sections is labelled as 'audited' in the respective headings.

ABN AMRO has increasingly integrated sustainability into its core activities. As a result, we have integrated the material sustainability issues into this report as from 2015. Compared with 2014, no significant changes have been made to either the definitions and measurement methods or reporting policies and goals for sustainability reporting. The sustainability information contained in this Annual Report has been prepared in accordance with the Sustainability Reporting Guidelines G4 of the Global Reporting Initiative. Information on our basis for sustainability reporting and the definitions applied are provided on the Sustainable Banking section of our website. Our independent auditor, KPMG, has reviewed selected sustainability figures, which are labelled '' in their respective headings. Going forward ABN AMRO will take further steps towards publishing a fully assured integrated report.

Capital metrics and risk exposures for 2015 and comparative figures for 2014 are reported under the Basel III (CRD IV/ CRR) framework. Comparative figures for 2013 are reported according to Basel II. Where applicable, we have provided pro-forma figures for comparison purposes. Some sections in this Annual Report contain information according to Pillar 3 (as part of the CRR) and Enhanced Disclosure Task Force (EDTF) requirements. These sections are labelled 'Pillar 3' and/or 'EDTF' in their respective headings.

This report is presented in euros (EUR), which is ABN AMRO's presentation currency, rounded to the nearest million, and sets out the results for the entire ABN AMRO organisation worldwide (unless otherwise stated). All year-end averages in this report are based on month-end figures. Management does not believe that these month-end averages present trends that are materially different from those that would be presented by daily averages. Certain figures in this report may not tally exactly due to rounding. In addition, certain percentages in this document have been calculated using rounded figures.

For a download of this report or more information, please visit us at abnamro.com/ir or contact us at investorrelations@nl.abnamro.com.

Our external reporting landscape

Our external reporting landscape

	Purpose	Frameworks applied	Contents	Assurance
Annual Report ABN AMRO Group (this report)	Inform about our financial and non financial performance, sustainability performance, an update on our strategic priorities and an assessment of how we create value over time	▶ International framework ▶ Internation Financial Reporting Standards (EU IFRS) ▶ Dutch Civil Code Title 9, Book 2 ▶ Capital requirements regulations (Basel III, CRD IV, CRR, EBA) ▶ Financial supervision act ▶ Corporate Governance Code ▶ Dutch Banking Code ▶ Enhanced Disclosure Task Force (EDTF) ▶ Global Reporting Initiative (GRI G4)	Strategic Report, Business Report, Risk, funding & capital Report, Governance Report, Annual Financial Statements	KPMG has audited the Annual Financial Statements, including certain disclosures in the Risk, funding & capital Report, and has expressed an unqualified audit opinion KPMG has reviewed the sustainability disclosures indicated with ''
Annual Report ABN AMRO Bank	Inform about our financial and non-financial performance to comply with regulatory requirements	▶ International Financial Reporting Standards (EU IFRS) ▶ Dutch Civil Code Title 9, Book 2 ▶ Capital requirements regulation (Basel III, CRD IV, CRR, EBA) ▶ Financial Supervision Act ▶ Corporate Governance Code ▶ Dutch Banking Code	Business Report Risk, funding & capital Report, Governance Report, Annual Financial Statements	KPMG has audited the Annual Financial Statements, including certain disclosures in the Risk, funding & capital Report, and has expressed an unqualified audit opinion
Additional Pillar 3 disclosures	Inform about how we manage risk and capital adequacy to comply with regulatory requirements	▶ Capital requirements regulations (CRR, EBA)	Selected Pillar 3 information in addition to the Pillar 3 information published in the Annual Report ABN AMRO Group	The figures presented in this document have been neither audited nor reviewed by our external auditor
Additional sustainabilty reporting	Contains a balanced and comprehensive analysis of our sustainability performance in addition to the Annual Report ABN AMRO Group	▶ Global Reporting Initiative (GRI G4)	GRI G4 disclosure index and additional sustainability disclosures	These documents have been neither audited nor reviewed by our external auditor

Strategic Report

ABN AMRO at a glance

ABN AMRO at a glance

ABN AMRO is a full-service bank with primary focus on the Netherlands and selective operations internationally. We serve retail, private and corporate banking clients based on our in-depth financial expertise and extensive knowledge of numerous industry sectors.

Headquarters

Amsterdam The Netherlands

ABN AMRO has a long-standing history in banking and roots that go back for centuries. Following various legal and operational separations, combinations and restructurings, ABN AMRO is now a leading Dutch bank. Our business profile and international footprint has changed while our historic roots and strong brand name remain.

Number of employees (FTEs)

Retail Banking Private Banking Corporate Banking

Credit ratings ABN AMRO Bank

S&P: A/stable/A-1 Moody's: A2/stable/P-1 Fitch: A/stable/F1 DBRS: A/positive/R-1 (low)

Our businesses Corporate governance structure

22,048

Two-tier board consisting of a Supervisory Board and a Managing Board.

Supervisory Board

Strategic Report

Core values

Trusted Professional Ambitious

Business principles

I only take risks I understand I build relationships

with the best solutions I am a passionate professional

I take responsibility I am committed to sustainable business practices

Operating income

2015:

By type of income (in %) 6

USA, Asia and rest of the world USA, Asia and rest of the world

Our goals

To be a full-service bank with a leadership role in the Dutch market. Internationally, we aim to be a capability-led bank in selected businesses and geographies.

5

Strategic Report

Introduction

2.03

0.81

Key figures

Underlying return on equity Target range is 10-13 (in %)

Client satisfaction (in % client ratings >7)

–

2013 2014 2015

^{79 78 82}

CET1 (fully-loaded) Target range is 11.5-13.5 (in %)

Employee engagement

Dow Jones Sustainability Index (scale 1 to 100)

5 2013 2014 2015 3,900 5,200 6,500 6,430 5,399 4,649 Sustainable client assets (in millions)

25 23 ^{20 19}

Gender diversity at the top

Of which dividend per share

10 15 20

1,300 2,600

(in %)

2013 2014 2015

Underlying cost/income ratio 2017 target range is 56-60 (in %)

Private Banking

Change in Net Promoter Score (Percentage point change compared with 2014)

+ 1 +

Banking

2 - 2 Retail

Corporate Banking

Underlying earnings per share (in EUR)

3.0

(in EUR)

Underlying earnings per share

Society at large

Introduction / Message from the Chairman of the Managing Board

Board

Message from the Chairman of the Managing Board

Message from the Chairman of the Managing

2015 was a good year for the bank. We strengthened our relationships with our clients, and our engaged workforce moved the bank forward on various fronts while maintaining its client focus. We recorded a net profit of over EUR 1.9 billion, the highest level since the new bank began operations in 2010. A milestone was our successful IPO in November. While writing this new chapter in our history, we worked hard to create long-term value for our stakeholders.

The economic environment in the Netherlands was favourable in 2015. Growth of the Dutch economy picked up speed in the course of the year, thanks to developments in consumption and investments. Exports continued to show steady growth driven by the weakening euro. Economic growth in the Netherlands was broadbased and the Dutch housing market continued to recover on the back of the economic upswing and low, further declining, mortgage interest rates.

The regulatory landscape is dynamic and subject to constant change. As a financial institution, we provide highly detailed and wide-ranging information to the supervisory authorities and clients. Examples of financial regulations are the European Market Infrastructure Regulation (EMIR), which increases reporting requirements on all derivative contracts. The upcoming Markets in Financial Instruments Directive (MiFID II) introduces additional organisational and conduct requirements. The Payment Services Directive (PSD II) will require investments on our part while opening up banks to increasing competition. It will also create the risk that the bank is less able to protect its clients against fraud and privacy abuse. Furthermore, the amended Bank Recovery and Resolution Directive (BRRD) also imposes various requirements and involves higher costs.

Strategic Report

Other

The second Basel consultation paper on credit risk (so-called Basel IV) was published at the end of 2015. The latest proposal continues to penalise mortgages with a high loan-to-value, a common product in the Dutch mortgage market with a long and good track record in terms of risk. This could result in a significant increase in capital Dutch banks have to hold on mortgages and could drive up the cost of mortgages for households.

In 2014 and 2015, we reviewed the records of an identified group of SME clients with possible interest rate derivatives-related issues. We did so in close consultation with the Netherlands Authority for the Financial Markets (AFM). In December 2015 the AFM concluded that an additional reassessment was required. We further increased the provision levels for this matter in the fourth quarter. On 1 March 2016 the AFM announced it had advised the Dutch Minister of Finance to appoint a panel of independent experts that, in cooperation with the banks involved, will try to determine a uniform recovery framework. This framework should serve as a benchmark for all file reviews. The outcome of the review under the new framework may lead to revised compensation for clients. The upcoming reassessment poses uncertainty about the scope and magnitude of the required reassessment going forward.

As regulations change, become ever more complex, and multiply in number, the risk of breaching rules grows. So we will need to remain vigilant as these developments unfold. At the same time, as we work to comply with the demanding regulatory requirements, we also recognise that they are designed to create a bigger safety net and provide more transparency. We see it as part of our profession to adjust to this new regulatory environment.

Long-term stakeholder value: the heart of our story

This year ABN AMRO is taking the next step toward integrated reporting, meaning we focus more attention in this Annual Report on the bank's future and strategy and provide more non-financial data and targets. The move to integrated reporting is in line with our drive to deliver long-term value to all our stakeholders – clients, investors, employees and society at large. We regularly met with our stakeholders in 2015 to discuss both our strategic priorities and the issues that are of material importance to them. The results of these in-depth dialogue sessions are presented throughout this report.

As we faced the challenges posed by the dynamic operating environment, we continued to pursue our corporate strategy, which is described in the Strategic Report. Our strategy is based on five priorities: enhance client centricity, invest in our future, strongly commit to a moderate risk profile, pursue selective international growth, and improve profitability.

While each of these five priorities is a key ingredient for the success of our bank, the most important one is client centricity. We are committed to maintaining long-term relationships with our clients. We took various initiatives bank-wide in 2015 to put our clients' interests centre stage in everything we do. As part of our drive to enhance client centricity, we have adopted the Net Promoter Score (NPS) methodology at our businesses, and we made it an official Key Performance Indicator (KPI) in 2015. NPS measures the likelihood of clients to recommend a company, product or service to a friend or colleague. We will use the NPS results to enhance the client experience.

Introduction / Message from the Chairman of the Managing Board

One benefit of forging lasting relationships with our clients is that we understand them, their business and their industry. This is evident at our Corporate Banking business, which has reclaimed its position in the corporate market in recent years; it also made good progress this past year in delivering sector-based advice to all its clients. Corporate Banking's industry experts understand the context in which their clients operate and use their sector expertise to proactively offer tailored advice.

In this rapidly changing digital world, we are investing in our future by enhancing our IT landscape, a process that has been gaining momentum since 2013. Among the steps we took in 2015, we installed an on-premise dedicated private cloud and migrated the first applications to this environment. At the same time, we started cleaning up redundant applications. Many of the client centricity initiatives we took consist of technological enhancements as the trend toward digitalisation gains momentum. We therefore created a new Digital Banking unit in Retail Banking, in line with the shift in client preferences for mobile and online services. Retail Banking will continue to invest in innovative ways to ensure that our mobile services – already very popular – are futureproof. Most mobile and online services of Retail Banking are also offered by Private Banking and Corporate Banking.

Our people are our future, and we continued to pursue our Top Class Employer strategy in 2015. We offer staff a rewarding workplace and an array of attractive employee benefits. The 2015 score in our Employee Engagement Survey was 76%, compared with the global financial industry's score of 74%. We also raised our gender diversity targets: our goal is to place women in 30% of senior management positions and in 35% of upper middle-management positions by 2020 (year-end 2015: 23% and 25% respectively).

As part of our efforts to be positively recognised for our position in sustainability, we defined and published our sustainability metrics and targets. At the same time, our core business of providing finance and investment services is becoming increasingly sustainable. For instance, we apply environmental, social and governance criteria (ESG) when assessing potential investment opportunities for our clients. And we continue to endorse international standards, such as the UN Global Compact. The bank also issued a EUR 500 million five-year Green Bond in May 2015 which was chosen as SRI (Socially Responsible Investment) bond of the year at the annual IFR (International Financing Review) awards.

This past October, we started working with the Global Sustainability Risk Indicator, a new tool that helps us assess the sustainability of companies. All business segments, meanwhile, made progress in our Reliable and Responsible Banking programme, which will help us register client data more efficiently and effectively in the years to come. All of this helps us to maintain a moderate risk profile and to avoid serving clients we do not want to serve.

We aim to grow our international business to 20-25% of total operating income by 2017 (20% in 2015) by increasing our Private Banking, Clearing and ECT activities abroad. Our representative office in Shanghai became a banking branch in early 2016, enabling further growth.

One of the highlights of 2015 of which we are particularly proud was our listing on Euronext Amsterdam. This was the result of years of hard work of employees across the organisation. While the IPO was a momentous event, it will not change our bank, our business or our story: clients will continue to receive the same high standard of service they have come to expect of us.

Business Report

Other

Financial results for 2015

Based on a review of our performance and results, this past September we raised two of our financial targets and added a new one. We now target a fully-loaded Common Equity Tier 1 ratio range of 11.5% to 13.5%; a cost/income ratio of 56% to 60% by 2017; a return on equity of 10% to 13% in the coming years; and a dividend payout ratio of 50% over 2017.

The underlying net profit for full-year 2015 was EUR 1,924 million, an increase of 24% compared with full-year 2014. The improvement was achieved on sharply lower impairments and despite higher regulatory levies and project costs.

Operating income was up 5%, based in part on further repricing of the loan portfolio and higher fee and commission income. Operating expenses were up by 8% compared with full-year 2014, caused by higher regulatory levies, increasing project costs (for various IT and digitalisation projects and projects to update and improve the quality of our client files and electronic archives) and higher pension costs. Loan impairments more than halved to EUR 505 million, benefiting from the improvement of the Dutch economy. Even though oil and commodity prices showed significant movements in the last six months of the year, the cost of risk for our ECT business was 52 basis points, in the middle of the estimated cost of risk of Corporate Banking.

Our cost/income ratio in 2015 was 61.8% (60.2% in 2014). Rising regulatory costs and investments in our IT landscape and digitalisation efforts caused the temporary increase. We aim to get the cost/income ratio back in the 56-60% range by 2017. The ROE increased to 12.0% from 10.9% in 2014 and was within the target range of 10-13%. The capital position continued to grow and the fully-loaded CET1 ratio was 15.5%, compared with 14.1% at the end of 2014. As implementation of the new Basel proposal may lead to significant risk-weighting inflation for the bank, we will continue to grow our capital position until there is more clarity on this topic. In the meantime, we have increased the proposed dividend payout ratio over 2015 from 35% to 40% of the reported full-year net profit, or EUR 0.81 per share. This is EUR 764 million, of which EUR 414 million (EUR 0.44 per share) is proposed as final cash dividend.

Looking back, 2015 was a year in which we as an organisation continued to grow and learn lessons from the past. In the fast-paced environment in which we operate, it is inevitable that we will sometimes have to adjust our actions to live up to what society expects of us. We take this responsibility seriously and will continue to listen closely to all our stakeholders going forward.

I would like to take this opportunity to thank our clients for doing business with us. We realise that we need to earn our clients' trust, and we strive to do so every day with our dedicated staff. I am grateful to our employees for their willingness and ability to adapt in times of continuous change. With their commitment and determination, we are confident that the bank is equipped to take on the opportunities and challenges that will come our way in the years ahead. I would also like to thank Peter Wakkie and Marjan Oudeman, both of whom resigned from the Supervisory Board in 2015. Their commitment to ABN AMRO over the years is much appreciated by myself and my colleagues on the Managing Board.

Gerrit Zalm

Chairman of the Managing Board

Board

Message from the Chairman of the Supervisory Board

Message from the Chairman of the Supervisory

This past year the Supervisory Board undertook a multitude of activities, which are described in the Supervisory Board Report. I welcome the opportunity to place these activities in the broader perspective of ABN AMRO's history as a new bank.

Since the new ABN AMRO began operations in 2010 - having been created from the nationalised parts of different institutions - the Supervisory Board has been committed to helping rebuild a stable bank. A solid bank with a strong focus on the interests of its clients. A bank that delivers on its promises. A bank standing on its own two feet.

ABN AMRO believes that its businesses and activities should always be client-oriented. Consequently, the bank no longer conducts proprietary trading for the sole purpose of making a profit for the bank. ABN AMRO strives to be a solid, resilient bank with good returns that rewards its investors appropriately when possible.

ABN AMRO seeks to create balance in its geographic focus. The bank is diversifying internationally to avoid being solely dependent on its home market in the Netherlands, but ABN AMRO seeks to grow abroad in businesses and countries in which the bank has historically had a strong position and in which it has a proven track record.

ABN AMRO is grateful for the government support it has received since 2010. Nevertheless, the IPO in 2015 was a logical first step in repositioning the bank as a healthy, independent financial institution.

The considerations described above have been continuous guidelines for the Supervisory Board in exercising its supervisory and advisory duties in recent years. Turning to 2015, ABN AMRO had an eventful year on several fronts. The bank fell short of its societal expectations with regard to remuneration.

Business Report

Other

ABN AMRO's stakeholders were understandably critical of how this was handled. We found this feedback very valuable, as it has made the bank more alert and has opened the door to further dialogue. ABN AMRO is steadily devoting more attention and resources to being a good corporate citizen. Among the many initiatives undertaken in 2015, the bank issued a EUR 500 million Green Bond, facilitated a large amount of volunteer work among employees and organised its second International Human Rights Conference in December. These and the bank's other socially oriented activities make a real difference to society.

In 2015 ABN AMRO further consolidated its strong position in Private Banking, a business that delivers an excellent return on equity for the bank, and Corporate Banking won several awards for its client-centred service.

On the regulatory front, ABN AMRO, like other banks, had to comply with stricter requirements in 2015. Many regulations - those designed to strengthen banks' liquidity and capital - are crucial to safeguarding the health of systemic banks throughout Europe. Others require banks to deliver increasingly detailed information to the supervisory authorities. These tighter reporting regulations enhance transparency and promote accurate documentation. At the same time, they placed heavy demands on our workforce and drove up costs for the bank in 2015, and will continue to do so in the future.

Other developments in 2015 present real challenges to ABN AMRO. Volatile oil and commodities prices, for example, could affect the bank's income stream in its ECT Clients segment. And while the Dutch economic environment was relatively favourable in 2015, the outlook for the economy remains uncertain. In addition, the emergence of fintechs in the financial landscape is both a threat and an opportunity, as it means that banks must continually develop new earnings models.

In this rapidly changing environment, ABN AMRO remains committed to focusing on its clients' interests at all times. There are numerous ways the bank centred its activities around its clients in 2015, which are described throughout this Annual Report. One way is by proactively approaching clients who are in danger of falling behind on their mortgage payments. The bank offers them advice and financial coaching to help them ward off potential problems. ABN AMRO sees this service as part of its duty of care to clients.

All in all, I am pleased with the bank's results in 2015 and with its development over the past six years. On behalf of the Supervisory Board, I would like to thank all of ABN AMRO's stakeholders, and in particular its clients and employees. I would also like to take this opportunity to thank my colleagues who stepped down from the Supervisory Board in 2015. Both Ms Oudeman and Mr Wakkie made significant contributions to the new ABN AMRO.

On behalf of the Supervisory Board,

Rik van Slingelandt

Chairman of the Supervisory Board

ABN AMRO shares

ABN AMRO shares

Key developments

Following the IPO on 20 November 2015 and the subsequent exercise of the overallotment option ('greenshoe'), a total of 23% of ABN AMRO's depositary receipts representing ordinary shares were listed on the Euronext Amsterdam exchange. These depositary receipts were allocated mainly to European and US-based institutional investors and to Dutch retail investors. The remaining 77% of the shares are held by NLFI ('Stichting administratiekantoor beheer financiele instellingen') on behalf of the Dutch government.

Listing information

A total of 216.2 million shares, or 23% of ordinary shares, are currently held by the STAK AAG ('Stichting Administratiekantoor Continuïteit ABN AMRO Group'), which subsequently issued depositary receipts representing such shares. For more information about

the STAK AAG, please refer to the 'About ABN AMRO' section of abnamro.com. The depositary receipts trade under ISIN code 'NL0011540547', Reuters ticker 'ABN.AS' and Bloomberg ticker 'ABN NA').

Share price development

(in millions) 31 December 2015 31 December 2014 Share count Total shares outstanding/issued and paid-up shares 940 940 - of which held by NLFI 724 940 - of which listed (in the form of depositary receipts) 216 - as a percentage of total outstanding shares 23% Average number of shares 940 940 Average diluted number of shares 940 940 Key indicators per share (EUR) Underlying earnings per share 2.03 1.65 Shareholder's equity per share 17.63 15.81 Tangible shareholder's equity per share 17.44 15.54 Dividend per share1 0.81 0.43 Share price development (EUR) Closing price (end of period) 20.67 High (during the period) 20.80 Low (during the period) 18.00 Market capitalisation (end of period, in billions) 19.43 Valuation indicators (end of period) Price/Earnings 10.2x Price/Tangible book value 1.2x Dividend payout ratio 40% 35%

¹ 2015 figure is subject to approval of the General Meeting of shareholders. For 2015 the proposed final dividend per share is EUR 0.44.

Strategic Report

Private client

Service

Other

Introduction

Risk, funding & capital Report

Introduction

Risk, funding & capital Report

Speed and personalisation are important elements of our Private Banking service. Hans Muysson, a client for fifteen years, shares what he believes is going well and what could be improved.

ABN AMRO MeesPierson advises clients on how to transfer wealth legally and tax-efficiently to future generations. Our all-inclusive, tailored service includes administration, settlement and management of the estate. Philanthropy helps clients donate their wealth to a good cause.

"The timing and high standard of service made a big impression on me when we were drawing up my estate plan. ABN AMRO MeesPierson took the initiative, in response to a number of developments we had gone through. Their attitude reflected a sincere and personal interest in our well-being. Everything was handled quickly and professionally. This was a textbook case for how to do it right. And yet there's room for improvement. The bank could take more responsibility for its own investment advice. After all, the bank and advisor should also be concerned with the relationship between their advice and the results. Showing vulnerability helps build loyalty. I also think that they would do well to place more emphasis on modernisation. That would distinguish ABN AMRO MeesPierson from the competition."

Who Hans Muysson, Client of ABN AMRO MeesPierson

Strategic Report

Introduction / ABN AMRO shares

/ Our external reporting landscape

ABN AMRO Group Annual Report 2015

Strategic Report

Strategic Report

In a challenging economic and regulatory environment, our strategy should address the opportunities and threats presented by our environment. This report highlights selected trends, our profile, an update on our strategic priorities and how we create value for our stakeholders.

18	33
Key trends	Strategic governance
21	34
Our profile	Our stakeholders
26	35
Update on our strategic priorities	How we create value

Strategic Report

Business Report

Strategic Report / Key trends

Key trends

Key trends

This selection of trends could affect our strategy, execution and business model going forward.

1 Changing role for banks in society

The public's trust in the financial sector in general, and in banks in particular, is low. This is reflected in changing regulations and government policies, heightened media scrutiny and an emphasis on duty of care towards clients.

In addition, the changing needs and preferences of both clients and employees have to be addressed in innovative and transparent ways. As a result, a broad range of stakeholders are likely to influence the shape of the banking landscape going forward. It is becoming increasingly important for banks to actively engage their various stakeholders and to act upon the material topics raised.

We take our responsibility to manage our impact on all stakeholders seriously, including clients, employees, investors and society at large. To meet stakeholder expectations, the Group is altering its role and purpose in society and further adapting to the needs and interests of its stakeholders. There is an increasing trend among banks to adopt an integrated stakeholder approach and to change the way their businesses create and sustain value, beyond solely the financial aspect.

2 Changing client behaviour and expectations

Online and mobile banking are playing an increasingly bigger role in how clients interact with banks. Clients continue to demonstrate a growing preference for online and mobile banking services. They increasingly expect a wide range of digital solutions and demand an omnichannel and real-time approach. At the same time, they expect banks to be sensitive to privacy issues regarding the use of customer data. In addition, trust has not yet been fully restored to the financial sector. As a result of this and other factors, society expects greater transparency in pricing and risk, straightforward products and better value.

Social networks and cooperative platforms, combined with a desire to be less reliant on banks, support collaborative financing models such as crowdfunding, peer-to-peer lending, social savings and social lending. As a result, banks are competing increasingly with new financing and less regulated platforms. Technological developments in areas such as mobile banking, social media, data analytics ('big data') and cloud computing create both opportunities and challenges for banks to respond to changing client behaviour and needs.

Clients also expect banks to play a role in influencing social and environmental issues, such as the protection of human rights and reduction of carbon emissions. Correspondingly, we have witnessed growing demand for more environmentally friendly and socially responsible solutions.

In light of the above trends, we need to establish and retain client intimacy, put client centricity at the heart of the Group's business and work in our clients' best interests, now and in the future.

Other

3 Rapid technological change

In the coming years, financial institutions will depend on technology more than ever to satisfy the customer's need for convenience and to comply with regulatory rules, which are increasing in number and complexity.

A digital architecture based on core systems renewal, the cloud, and data analytics is fundamental for banks to cope with the challenges of the rapidly-changing financial landscape. This means we need to re-engineer our core systems and processes on a modern digital platform. In addition, new technologies, such as blockchain, are gaining the interest of many banks and may potentially have an even greater disruptive effect on the financial sector.

Open innovation and ecosystems are of increasing importance in design and delivery in the digital era. The market is moving fast, and we need to launch new technologies with a short time-to-market by means of internal innovation and collaboration with external partners. As new start-ups – 'fintechs' – become an important feature in the market, forging connections with these players (either through collaboration or acquisitions) will be necessary, as will close partnerships with the major players leading the digital era revolution.

Rapidly-changing technology is also increasing the potential impact of cyberattacks as more personal information is rapidly migrating into digitally open and globally interconnected technology platforms. Banks must ensure that their technology platforms remain robust and secure against evolving threats.

4 Increasing regulation and supervision

The banking landscape will continue to be dominated by higher and stricter capital, liquidity and conduct requirements, ongoing changes to accounting and regulatory rules, and uncertainty about a financial transaction tax. The evolving regulatory and supervisory landscape in the EU is challenging for banks, and there are concerns that this may lead to an uneven playing field with banks in other regions, such as the US and Asia-Pacific, or with new start-ups, such as fintechs.

There is a relatively lower level of regulation imposed on players with new business models (such as Apple Pay and Google Wallet) which are entering parts of the traditional value chain of banks. Developments in areas such as payment services could harm our access to clients and result in lower business volumes for the Group.

Many regulations designed to integrate EU financial markets will continue to be implemented (such as MiFID II, PRIIPS, MCD, PSD II and IDD). In addition, recent developments indicate that the European Commission intends to support access to finance, increase investments and remove barriers to cross-border investments within the EU going forward. Examples of developments include the formulation of an action plan for a Capital Market Union, plans for a Green Paper on boosting consumer choices and cross-border competition, and a proposed Digital Single Market to simplify and promote access to digital content and online sales across the eurozone.

Developments in US regulations, such as the Foreign Account Tax Compliance Act (FATCA) and sanctions regulations, will significantly affect international banks as these regulations may require banks to put additional controls and procedures in place.

Other

The sheer number and intensity of regulatory and supervisory requirements is expected to stretch the resources of banks in their operations, IT infrastructure, and management time and focus. Supervision has moved from principles-based to rules-based standards, and data requirements are expected to be much more granular since the Single Supervisory Mechanism (SSM) was implemented in 2014. In response to the 'conduct agenda' of regulators, banks are required to ensure that they set the right tone at the top and embed a culture of doing the right thing for clients. Examples of such developments have an impact on strategic choices, client pricing and costs.

5 Increasing competition

Increasing competitive pressure continues to come from both non-traditional and traditional players such as insurance companies and pension funds. Traditional bank activities are being re-shaped and new business models are being examined and developed. A different form of competition comes from technology firms and other new entrants, which are not subject to the same regulatory controls imposed on banks and have already entered parts of the traditional banking value chain. Commoditisation of mass market segments as a result of new technology results in fiercer competition and pressure on margins.

Regulatory frameworks also contribute to more intense competition. For example, higher lending costs of banks, as a result of stricter requirements on capital buffers and the liquidity ratio imposed by CRD IV, create an impetus for clients who are considering seeking alternative sources of funds in order to be less reliant on banks. Another example is the Payment Services Directive (PSD II), which will require investments on our part while opening up banks to increasing competition.

6 Macroeconomic trends, economic and monetary environment

After having contracted, GDP in the eurozone rose again in 2014 and 2015, with the Dutch economy growing on average slightly faster than the eurozone economy in 2015.

Even though there are signs that the Dutch economy will continue to grow in 2016, major uncertainties continue to exist and need to be monitored closely. Emerging market economies have been slowing, partly as a consequence of the strong drop in commodities prices. Global economic growth may continue to show weaknesses. In addition, we will continue to monitor other factors or events that may affect Dutch, European and global economic conditions, such as the potential exit of the United Kingdom from the European Union, political risks that could lead to financial stress in the eurozone, a sharper slowdown in China, a negative market reaction to (stronger than expected) interest rate increases by the US Federal Reserve, developments in oil and other commodities prices, the risk of real deflation in the eurozone and heightened geopolitical tensions in other parts of the world.

Business Report

¹ The Group has a clean and strong balance sheet, which means a balance sheet with predominantly traditional banking products resulting in client-driven assets and liabilities. The clean balance sheet is also underpinned by the Group's limited trading and investment banking activities geared towards serving the basic needs of clients in the Commercial Clients and International Clients business lines and the absence of non-core operating units.

Banking. Our stable client base generates recurring and

This section presents an overview of who we are, our values and the business

principles that guide us in pursuing our mission and vision.

We operate an omni-channel distribution network in the Netherlands to serve our Dutch retail, private and

We are a leading Dutch full-service bank with a transparent and client-driven business model, a moderate risk profile,

and strong balance sheet with predominantly traditional banking products, and a solid capital position and strong funding profile. We serve retail, private and corporate banking clients with a primary focus on the Netherlands and with selective operations internationally. We hold a strong position in the Netherlands across all three market segments: Retail Banking, Private Banking and Corporate

Strategic Report / Our profile

Our profile

Description of ABN AMRO

resilient operating income.

a clean1

22

Operating income by business segment

2015 EUR 8,455m

46

Operating income by geography

9

The Netherlands Rest of Europe

CET1 (fully-loaded) Target range is 11.5-13.5 (in %)

6

12

12.2

18

24

30

USA, Asia and rest of the world

2015 EUR 8,455m

80

15.5 14.1

2013 2014 2015

(in %)

11

2

Retail Banking Private Banking Corporate Banking Group Functions

20

2013 2014 2015

^{62 60 64}

40

60

80

100

15

Underlying cost/income ratio 2017 target range is 56-60 (in %)

(in %)

37

Our profile

corporate clients through a mix of branches (approximately 260 Retail Banking branches, 21 Private Banking branches, 22 Corporate Banking branches and a dealing room), 24/7 online and mobile banking, and telephone and remote advice.

Internationally, our operations across the Private Banking and Corporate Banking business segments are based on in-depth financial expertise and extensive knowledge of numerous industry sectors and established market positions.

With a long-standing history in banking and roots that go back for centuries, we have emerged from the financial crisis as a leading Dutch bank.

Our organisation

and mobile banking

In the Netherlands.

1

We are organised into three business segments -- Retail Banking, Private Banking and Corporate Banking -- which are supported by Group Functions.

Strong business segments that complement each other

Our three business segments – Retail Banking, Private Banking and Corporate Banking – complement each other in terms of income, profitability, capital and funding.

	Retail Banking	Private Banking	Corporate Banking
Income	Stable income in mature market	Stable generator of income, with gearing to market cycles	Income growth potential
Profitability	Consistently high profits	Attractive financial profile, with scale an important driver	Operations with impairments trending down
Capital	Lower RWA intensity	Capital light	Higher RWA intensity
Funding	Funding gap	Funding surplus	Funding gap

Business Report

Introduction

Other

Our three businesses work together to ensure that clients are served by the business that best meets their needs and to optimise the use of resources and expertise across the organisation, including in the key areas of technology and product solutions.

Private Banking and Corporate Banking cooperate by means of referrals. For example, Corporate Banking introduces business owners, shareholders and executives to Private Banking. Conversely, Private Banking refers business owners and executives to Corporate Banking for their business needs.

Private Banking works together with Retail Banking to optimise the use of organisational expertise in areas such as core banking services, internet and mobile solutions, and product management. Corporate Banking also supports Retail Banking and Private Banking in areas such as investment research, FX and hedging products.

We regularly talk with our clients to understand and assess their needs. During these discussions, we also take into consideration the wealth category and risk profile of individual clients and the annual turnover of business clients.

Strong focus on the Netherlands

We have a strong exposure to the Dutch economy, which has the following characteristics:

• Å An internationally oriented economy;
• Å Highly competitive economy;
• Å Sound financials;
• Å Large, persistent current account surplus
• Å Recent reforms further strengthen the fundamentals of the Dutch economy in areas such as pensions, the labour market and the housing market.

Based on key statistics, there are signs that the Dutch economy is entering a period of economic growth in terms of real GDP growth and an improving housing market. This is reflected in rising house prices and transactions volume. For more information on the economic environment, please refer to the Economic environment section in this report.

Selective international activities

We are active in selected focus areas internationally through our businesses below:

• Å Private Banking International;
• Å ECT Clients;
• Å Asset Based Financing;
• Å Clearing;
• Å MoneYou.

These activities provide us with an avenue for profitable growth and geographic diversification, subject to clearly defined criteria. Growth must:

• Å support client-driven activities;
• Å be capability-led;
• Å be in line with our moderate risk profile;
• Å improve profitability.

Our ambition is to generate 20-25% of operating income from outside the Netherlands by 2017.

More information on our international activities is provided in the Business review section.

Our mission and vision, identity, core values and business principles Our mission and vision

Our mission is to be successful through the success of our clients, to strongly commit ourselves to and be positively recognised for our position on sustainability and transparency, and to be an organisation that has the best talent and where people grow both professionally and personally.

Our vision is to be a professional, full-service bank with a leadership role in the Dutch market. Internationally, we aim to be a capability-led bank in selected businesses and geographies. We recognise that our competitive advantage will always be our people, their talent and the trustworthy relationships they have with our clients. Our capabilities, sector knowledge and brand awareness give us a competitive edge over our competitors in selected markets.

Our identity

Our identity is based on our core values and business principles. It consists of the ambition to carefully listen to stakeholders, understand their goals, take their interests into account and help them take the next step based on responsible financial decisions; to combine the Group's

knowledge, expertise and network to craft smart solutions that meet today's needs; and to make a difference and continuously improve.

Our core values

The core values of the Group are Trusted, Professional and Ambitious.

At ABN AMRO we believe trust is all about establishing and maintaining lasting relationships. We take the time to get to know our clients by listening to their specific needs and aspirations.

Our goal is to find the products and services that are right for our clients. When we make a promise, we always live up to it; when we communicate with our clients, we are always straightforward and never have hidden agendas.

Our commitment to responsible banking means we carefully weigh risks and returns so that our clients know their money is in good hands at all times.

At ABN AMRO we understand banking. As true professionals, we have a thorough grasp of the banking industry and the discipline to achieve results.

We genuinely believe in our profession and take responsibility by saying 'no' if saying 'yes' would not do right by our clients.

We create solutions that are simple, understandable and workable, and we strive to improve ourselves every day by working together and learning from one another – and from our clients.

At ABN AMRO we are always stretching ourselves and striving to achieve more for our clients. We always strive to improve ourselves.

We make it our business to know what is going on in the market and to respond proactively, and we do everything possible to understand what clients really need and to design innovative solutions.

Our optimism about the future drives our ambition to offer our clients more. At ABN AMRO, we are not afraid to venture outside our comfort zone to put our ambition to work for our clients.

Our business principles

Our business principles are formulated in the 'I' form to denote individual responsibility:

I aim to provide my clients with the best solutions I am a passionate professional

I take responsibility

I am committed to sustainable business practices

I build relationships through collaboration

Our SWOT

The following summary of our SWOT provides a brief overview of our perceived capabilities within the environment in which we operate.

• Leading player in the Dutch market as a full-service bank with strong core and local brands
• Low complexity, client-driven business model that generates resilient operating income
• Strong positions in selected international activities
• Experienced senior management with a proven track record which includes establishing the 'new' ABN AMRO and its successful IPO
• Diversified mix of activities combined with a solid liquidity position, well capitalised, strong balance sheet contributing to a moderate risk profile
• Strong mobile and internet capabilities, which are highly appreciated by clients

• Large exposure to and dependence on the Dutch economy
• Growth opportunities in the Dutch home market limited by current leading position
• Solid but complex IT landscape following the integration of ABN AMRO Bank and Fortis Bank Nederland (FBN)
• Suboptimal scale of businesses in a few countries

• Dutch economy well-positioned to benefit from continued momentum in the recovery of the global economy and the eurozone
• New technological developments can be leveraged to respond to changing client behaviour and needs
• Increasing client desire to be environmentally and socially responsible provides opportunities for new product development
• Lowered barriers to enter other EU markets as a result of the European Banking Union
• Partnership with other players, including new entrants, which could enhance our ability to respond to challenges posed by the increasing speed of change caused by technology
• Risk management activities for clients

• Potential macroeconomic and geopolitical headwind effects on the Netherlands and the eurozone
• Mature market combined with ageing population resulting in relatively limited GDP growth upside
• Regulatory pressure, complexity and number of regulations
• New entrants (including fintechs) within the banking value chain with potentially disruptive effects from the accelerating pace of (technological) innovation
• Increased competition from incumbents and non-traditional players, especially in the mortgage and savings markets
• Lack of public trust in traditional banks, if not recovered, could increase sympathy towards new entrants

Update on our strategic priorities

Update on our strategic priorities

Our strategy is based on five priorities designed to create sustainable value for our stakeholders – our clients, investors, employees and society at large – and with measurable financial targets and key metrics. These five priorities are: enhance client centricity, invest in our future, strongly commit to a moderate risk profile, pursue selective international growth and improve profitability. The following section provides an overview of our achievements in 2015.

Strategic targets	Targets	Results 2015	Results 2014
Return on equity	10% - 13%1	12.0%	10.9%
Cost/income ratio	56% - 60%2	61.8%	60.2%
CET1 ratio (fully-loaded)	11.5% - 13.5%	15.5%	14.1%
Dividend payout ratio	50%2	40%	35%

¹ Target for coming years.

² Target for 2017.

• ⁵ Source: TNS NIPO/Scorpio Partnership.
• and ECT Clients weighted by actual operating income. The set-up of the NPS surveys differs among the business lines.
• ABN AMRO Group Annual Report 2015

¹¹ Scale 1 to 100

Business Report

Strategic Report / Update on our strategic priorities

Enhance client centricity

We aim to stand out from other banks based on the quality and relevance of our advice and services. We intend to further distinguish ourselves by enhancing our needs-based client segmentation and providing solutions that suit our clients' unique situations.

We are embedding the Net Promoter Score (NPS) way of working in our operations. We focus on continuously improving our services and internal processes based on feedback from our clients. In 2015 Retail Banking launched a successful closed-loop feedback pilot to act on feedback gathered from clients, and we plan to implement this process throughout the rest of Retail Banking in 2016.

We work with our clients to avoid residual debt and to help them meet their payments. An example is our Carefree Living programme under which dedicated care teams and certified financial coaches proactively support clients with a higher risk of arrears.

Several initiatives were implemented to improve the quality of investment advice provided to our Private Banking clients in the Netherlands. These include 'best fit' initiatives based on risk profiles harmonised across Retail and Private Banking, the Financial Scan with enhanced needs-based integrated financial advice and the establishment of a dedicated Private Banking Advice & Service Team.

Further steps were taken in 2015 to enhance our sector expertise as part of our service to Corporate Banking clients. For example, we have increased the level of specialisation of our Commercial Clients relationship managers, as 85% of these managers are expected to have their portfolios consolidated to allow them to focus on one of the 15 sectors covered.

We continued our journey in 2015 in enhancing our omni-channel offering. Besides releasing updates of our mobile app, we introduced new, innovative ways to serve our Retail Banking clients. These include an Alert & Check app for iPhone and Apple Watch, a service enabling individuals to become clients using a selfie (a first for a major Dutch bank), and a pilot financial planning app launched in collaboration with a fintech start-up. Philanthropy Advice and several basic banking services

were integrated into online channels for Private Banking clients. We designed a digital strategy for Corporate Banking that should help us achieve our ambition to make every client a promoter.

We made improvements to our product offering in 2015. New mortgage services include a tool to help clients better manage payments, a pilot programme to assist flex workers with the application procedure, and a plan which we announced to offer interest rate averaging to help clients benefit from the low interest rate environment. Following the accelerated rollout of the new bank cards, almost all of our Retail Banking clients can now make payments with contactless cards. A pilot was launched to use biometric recognition technology for credit card payment verification. For our Private Banking clients, we introduced an innovative discretionary portfolio management solution called the Single Manager Mandate Funds, which incorporates the skill and experience of external asset managers with our internal investment management expertise. We introduced several new products for our Corporate Banking clients such as eMandates, which supports a new selection of corporate savings accounts and foreign ABN AMRO accounts. Furthermore, we launched Online Credit Indication (OKI), enabling Corporate Banking clients to apply for a loan through online channels using Standard Business Reporting.

We are committed to providing transparent information about our products and services. To this end, we invite clients to rate the bank's products on our website. We have received more than 4,000 reviews and ratings to date, with an average rating of 4.0 on a scale of 1 to 5 for insurance, payment and savings products.

TOPS 2020

The TOPS 2020 programme, launched in 2013, aims to re-engineer our IT landscape and simplify our processes based on three aspirations: easiest to do business with, creating value through innovation and providing best-inclass productivity. The new IT landscape will be delivered in multiple stages until 2020. By reducing complexity, we will increase our agility and reduce our cost base. We took

Other

several important steps in 2015 on our roadmap towards 2020. We installed an on-premise dedicated private cloud and migrated the first applications to this environment. Since 2014, we have been rationalising our IT landscape by decommissioning around 650 redundant applications, with a further reduction of 280 applications planned for 2016. And in 2016 we also intend to migrate a substantial part of our applications to our on-premise dedicated private cloud environment and will continue to rationalise processes and applications. Furthermore, we will accelerate the delivery of re-usable services in our service-oriented software architecture. We aim to further consolidate our international platforms and finish the initial implementation of a new advanced security concept designed to protect our clients' and employees' digital data in this age of 24/7 accessibility.

Retail Digitalisation

The Retail Digitalisation programme, launched in 2014, will help us accelerate the digitalisation of key process. By making further investments in our online service offering and mobile apps, we aim to deliver a seamless online, mobile and branch experience. In 2015, we further optimised our distribution channels by integrating the servicing of small business clients, further embedding remote advice in our offering, and increasing the number of advisors and specialists across our branches. In light of the rapid digitalisation of society and increasing client preference for mobile and online banking, we consolidated our branch network into 260 branches in the Netherlands. We aim to be at the forefront of technological developments so that we can swiftly address shifts in client behaviour. We seek to use the latest online and mobile technology to improve the client experience and enhance convenience.

Innovation

We teamed up with The Startup Orgy (TSO) to launch a co-working space, TSO Munt Square, to support Dutch startups by sharing our expertise. Through our Digital Impact Fund, we invest in innovative start-ups specialising in the digitalisation of financial products and services. This also gives us access to smart innovations which could benefit our business and retail clients. We have started, and will continue, to explore new ways of working by organising hackathons and promoting lean start-up and agile processes.

Positively recognised position on sustainability and transparency

Our pledge is to be a better bank contributing to a better world. As such, we are committed to being positively recognised for our position on sustainability and transparency. Our sustainability strategy supports this commitment and is based on five aspirations:

• Å We pursue sustainable and transparent operations by acting within the letter and spirit of the laws and standards for financial services;
• Å We offer clients safe and reliable service by combining highly secure and stable systems with client centricity;
• Å We increase our contribution to a sustainable society by putting our expertise to use for the benefit of society;
• Å We enhance the bank's positive value creation by transparently integrating ESG criteria into our investment advice and lending;
• Å We make our employees ambassadors of ABN AMRO by giving them a role in increasing transparency and sustainability.

In 2015, we translated our sustainability strategy into goals and metrics. As an overall indicator of how we are performing, we aspire to be in the top 15% of the Dow Jones Sustainability Index by 2017. The goals are presented in the Sustainability section of this report.

Below are a number of sustainability results we achieved in 2015:

• Å In June 2015, ABN AMRO issued the largest Certified Climate Bond to date – with a notional amount of EUR 500 million – the proceeds of which are earmarked for loans to fund low-carbon residential mortgages, commercial real estate and solar panels on existing residential real estate. IFR named this bond the 'SRI Bond of the Year';
• Å We developed sustainable investment principles that focus on environmental, social and governance (ESG) criteria;
• Å We lowered the threshold for the sustainable fund mandate, making it available to retail clients. This makes it possible for a larger group of clients to invest in sustainable assets;
• Å We continued to promote social entrepreneurship in the Netherlands through our Social Impact Fund by making new investments. In 2015 a new social impact

bond was launched in which the Fund collaborated with BuzinezzClub and the city of Utrecht (the Netherlands);

Å In September 2015, ABN AMRO announced that it had become a Climate Bonds Partner and that it is pursuing growth on the green property bond market.

We now report on the material sustainability results in the Annual Report, instead of in a separate Sustainability Report. Publication of a single Annual Report including the bank's financial and sustainability results will help us achieve our goal of being positively recognised for our position on transparency.

More details are provided in the Sustainability section of this report.

Top Class Employer

Making a difference to our clients now and in the future requires a talented, committed workforce. Our people strategy is based on our aspiration to be a Top Class Employer and is designed to help us attract, develop and retain the best people.

In 2015, we defined a new Corporate Identity Statement based on our core values – Trusted, Professional and Ambitious – and our business principles. We further embedded the business principles in our performance management cycle and had 97% of all ABN AMRO employees in the Netherlands take the Banker's Oath. All employees of a bank must have taken the Banker's Oath by 1 April 2016. These measures are important steps in helping the bank restore confidence in the Dutch financial sector.

To support our vision of attracting the best talent in an evolving labour market, we have redesigned our traineeship programme. The programme will now focus on six target groups, and the hiring procedure is based on an approach that is more personal than the traditional interviews. Furthermore, we began the process of reviewing and optimising our employee value proposition. This resulted in several project deliverables, including enhancing our employees' knowledge, personalised benefits statements and increasing the capabilities of our HR professionals and managers.

We continued to build a diverse and inclusive workforce and focused mainly on three areas: gender, cultural diversity and disability. In 2015, we received recognition for our efforts as a best practice company for cultural diversity and gender diversity, as well as nominations for two awards in relation to our work with disabled people. New gender diversity targets have been set and we are on track to meet these targets. At the end of 2015, 23% of senior management positions and 25% of upper middle-management positions were held by women.

We also devoted attention to talent management in 2015 by introducing a new HR IT system called Talent2Grow to promote continuous learning across the organisation. For managers, we set up the Leadership Impact Framework and a 360-degree e-survey to help them to further develop their skills and effectiveness.

We continued to do well in terms of employee engagement: we had a record response of 83%, and a total of 76% of our employees felt engaged. This is equal to the 2014 figure and higher than that of the global financial sector (74%). A total of approximately 9,500 suggestions were given on how to improve the bank.

Our new collective labour agreement and social plan (redundancy scheme) focus on sustainable employability and continuous development of talent. We have collective labour agreements and/or social plans (redundancy schemes) in place not only in the Netherlands, but in other parts of Europe, Australia and Japan as well.

We continue to care for our employees as we care for our clients and are committed to the health of our people and safety of the working environment. We encourage vitality among our employees by offering a range of facilities to support their physical, mental, emotional and spiritual well-being.

Strongly commit to a moderate risk profile

We are committed to maintaining a moderate risk profile, which is reflected by: (i) a clean and strong balance sheet, (ii) diversification and focus in our portfolio, (iii) sound capital and liquidity management, (iv) sustainability and transparancy, and (v) clear governance.

Business Report

In 2015, we continued to optimise the sector-based credit risk approach throughout the Risk Management organisation, which focuses on improved risk knowledge and awareness. This approach allows us to better monitor and manage portfolio intake and sector concentration and to add value in credit risk-taking and decision-making. We again heightened our focus on our concentration framework for sector, one obligor and country concentration. We continuously monitor and manage our credit risk proactively in several sector deep dives, scenarios and stress testing (e.g. for our ECT and mortgages portfolio).

We also continued to further strengthen the operational risk management framework using the best practices of the most advanced industry approach towards operational risk management based on the Advanced Measurement Approach (AMA). We submitted a formal application to the ECB in the fourth quarter of 2015 on using the AMA model to calculate regulatory capital and implemented the model in a parallel run in 2014. The ECB's decision is expected in the second quarter of 2016. The AMA model is already used to calculate economic capital for operational risk purposes. This helps us in our continued efforts to integrate this approach into all types of operational risk (convergence) and to strengthen awareness of operational risks among business managers and staff.

In February 2016, we obtained formal approval from the regulator for the use of the IMA approach for calculating regulatory capital. This approach was already being used for internal risk management purposes, as well as for computing economic capital.

In terms of risk culture, we continued to ensure that employees are aware of the drivers of our risk profile and feel accountable for the risks they take. Part of our employee training is the Integrated Risk Management course, which is mandatory for all Risk Management department staff. The training was extended to most employees of the International Clients segment in 2015 and we plan to roll it out to Commercial Clients staff in 2016. Furthermore, our employees are expected to adhere to the ABN AMRO business principles. These principles guide us in everything we do and describe how we act as a bank, how we make decisions, and how we deal with various dilemmas.

We review our risk appetite annually and continue to focus on actively managing it based on capital, liquidity and interest rate risks. We increasingly manage our bank based on risk-adjusted return on risk-adjusted capital (RARORAC) to ensure that our capital is employed in the most efficient way.

We further improved our capital buffer and revised our target for the fully-loaded CET1 ratio to 11.5-13.5%. Going forward, we will continue to grow our capital position while awaiting more clarity on the impact of Basel IV. Details on our capital position are provided in the Risk, funding & capital Report.

Pursue selective international growth

We target growth in businesses where we have a strong and proven track record (capability-led growth) and that fit into our moderate risk profile.

The foreign currency branch licence granted by the China Banking Regulatory Commission in September 2015 further enables our ECT business to serve the international needs of our clients. In addition, Financial Institutions set up local relationship management units in the major Western European financial centres of London, Frankfurt and Paris.

The launch of our Clearing business on the Brazil equity market in 2015 further enhances our global market access, with our clearing services now spanning more than 150 liquidity centres worldwide.

In 2015, ABN AMRO sold its diamond and jewellery activities in India to IndusInd Bank Limited. These activities were conducted under cohabitation with Royal Bank of Scotland in India.

To strengthen our value proposition by leveraging our scale, we announced the integration of our Private Banking activities in Jersey into our subsidiary in Guernsey. Integrating our Jersey and Guernsey activities will enable us to further strengthen the combined value proposition to our clients in the region, leverage our scale, create synergies and simplify our governance.

Improve profitability

Underlying ROE improved to 12.0% in 2015 from 10.9% in 2014, which is in the revised target range of 10-13% announced in September 2015. Underlying profit for 2015 amounted to EUR 1,924 million, up 24% or EUR 373 million compared with the previous year. The improvement was achieved on sharply lower impairments and despite higher regulatory levies, project costs and provisions. The decrease in loan impairments, seen across the consumer loan and mortgage portfolios, was driven mainly by stringent credit monitoring, balanced portfolio intake and continued improvement of the economic environment in the Netherlands.

The underlying cost/income ratio increased marginally to 61.8%, which is above the targeted range of 56-60% we set for 2017. We were faced with higher IT investments and increasing regulatory levies in 2015, and this will continue in 2016. Our cost saving measures are expected to bring down the cost/income ratio to within our target range as planned by 2017.

Retail Digitalisation TOPS 2020 Retail Digitalisation

A total investment of EUR 699 million

is projected between 2013 and 2017

As part of the drive to enhance the client experience, Retail Banking intends to accelerate the digitalisation of key customer processes. An initial investment of EUR 190 million is projected between 2014 and 2017, generating estimated annual recurrent cumulative cost savings of EUR 35 million as from 2017 onwards. In 2015 we invested in expanding our digital offering and released several updates of our mobile banking app, enhancing usability and introducing new features that make it easy for clients to interact with the bank. In addition, we reshaped our omni-channel distribution in anticipation of changing client needs by further integrating distribution for retail clients and small business clients, by further embedding remote advice into our omni-channel offering and by pooling of expertise within the branch organisation.

TOPS 2020

Under the TOPS 2020 programme, we are investing in the current IT landscape to reduce complexity and costs and to enhance agility. A total investment of EUR 488 million is projected between 2014 and 2017. The annual recurrent cumulative cost savings achieved (EUR 230 million as from 2017 onwards) will positively influence our business results as operating expenses at Group Functions are allocated to the business segments.

Strategic governance

Strategic governance

Below is an overview of the steps we take to assess, review and monitor the execution of our strategy. We review the validity and relevance of the long-term strategy annually in the Yearly Strategy Review (YSR).

The Managing Board bases its discussions on, among other things, external developments (macroeconomic trends, competitive analysis, country landscape and scenario analysis) and internal developments. We discuss strategic subjects with various stakeholders. During the Yearly Strategic Review (YSR), the Managing Board discusses the most notable developments in terms of their impact on the long-term strategy and whether corrective actions are required.

As part of the Strategy Control Cycle, the Managing Board monitors execution of the long-term strategy throughout the year by means of Quarterly Execution Monitoring (QEM). The QEM process consists of three building blocks: high-level monitoring of selected initiatives, performance reviews and in-depth dialogue sessions.

The results of both the YSR and QEM are discussed, reviewed and approved by the Supervisory Board as part of the corporate governance process. The Employee Council also receives updates on these results.

Strategic Report

Our stakeholders

Our stakeholders

What drives value for our stakeholders

We strive to create long-term, sustainable value for all of our stakeholders. We take the interests of these stakeholders seriously and believe it is our responsibility to manage the impact of our activities. Part of this entails being a healthy and stable company. We therefore focus on systematically balancing the bank's interests with those of our stakeholders in everything we do.

Key value drivers raised by stakeholders Examples of how are we responding

▶ Further improving our integrated reporting approach

Strategic Report

ABN AMRO Group Annual Report 2015

How we create value

	Key value drivers raised by stakeholders	Examples of how are we responding
Employees	▶ Being able to make a difference for clients and society with a sense of purpose ▶ Fair, inclusive and flexible working environment ▶ Well-supported by an efficient and collaborative working environment ▶ Build sustainable employability through continuous improvement of employee skills and expertise ▶ Effective management style based on 'walking the talk' by senior management whose actions are in line with what they say	▶ Encouraging employees to work in a more environmentally friendly manner ▶ Creating a professional climate in which an inclusive workforce is given the opportunity to continuously improve their expertise and skills in order to master their profession ▶ Offering a collective labour agreement and social plan (redundancy scheme) with a focus on employability and continuous talent development ▶ Encouraging employees to personalise their working conditions and benefits, giving them the autonomy to create a healthy work-life balance ▶ Developing our people continuously and keeping our organisation agile ▶ Developing our managers' leadership skills through training tools and 360-degree feedback
Society at large	Community ▶ Safeguarding human rights, health & safety, and the environment via financing and investment activities ▶ Embedding sustainability of our finance and investment services and offering sustainable products and services to our clients ▶ Minimising the organisation's environmental impact ▶ Actively contribute to restoring the public's trust in the banking industry	▶ Focusing on achieving a positively recognised position on sustainability and transparency ▶ Actively seeking ways to offer our financial expertise to society ▶ Embedding environmental, social and governance (ESG) criteria into our investment advisory process and environmental, social and ethical (ESE) standards in our lending activities ▶ Building sustainable business operations and reducing our environmental footprint (such as BREEAM certification for head office building and our fully energy neutral branch in 'the Netherlands)
	Governments and regulators: ▶ Compliance with national and international legislation	▶ Adopting a proactive stance in meeting regulatory requirements ▶ Implementing the Banker's Oath

ABN AMRO Group Annual Report 2015

How we create value

Input

Social and relationship Capital

• We forge and maintain cooperative relationships with our key stakeholders – clients, investors, employees and society at large – to make us a better bank and
• a good corporate citizen.

Financial Capital

We use financial capital to invest in our activities, including reserves generated through equity, customer deposits and other funding sources.

Human Capital

We need talented and committed employees to make a difference for our clients, now and in the future. As of year-end 2015, we had 22,048 FTEs based in the Netherlands and abroad.

Intellectual Capital

This includes our specialised financial skills and expertise based on our strong Dutch and local brands abroad, and innovative capabilities we use to develop the best solutions and optimise the customer experience, as well as our in-depth sector knowledge across 15 different industries.

Natural Capital

This relates to the natural resources on which we depend to create value for all our stakeholders. The direct environmental impact of our operations is relatively limited; the bank's primary energy footprint consists of carbon emissions and waste generation.

Technological Capital

This consits of tangible and intangible infrastructures that we use to conduct our business activities. We are heavily dependent on our IT infrastructure for the continuity of our operations.

international growth

Strongly committed to a moderate risk profile Group Functions

Key trends

External environment

at large

Invest in our future

ities 36

We recognise our dependence and impact on the forms of capital that are fundamental to our ability to create long-term value.

Main output 2015 How we create value

Social and relationship Capital

▶ Change in Net Promoter Score

• ▶ Retail Banking: +1
• ▶ Private Banking: +2
• ▶ Corporate Banking: -2
• ▶ Client satisfaction (% clients rating ≥7): 78
• ▶ Trust Monitor score: 3.1 (scale 1 to 5)

▶ ROE: 12.0%

• ▶ CET1 ratio: 15.5%
• ▶ C/I Ratio: 61.8%
• ▶ Dividend per share: EUR 0.81
• ▶ Earnings per share: EUR 2.03
• ▶ Regulatory charges and taxes in the Netherlands: approximately EUR 1,912 million

▶ Employee engagement score: 76%

▶ Global training costs as % of total staff costs: 2.1%

• ▶ Female representation in upper middlemanagement positions: 25%
• ▶ Female representation in senior management positions: 23%

▶ Number of times employees volunteered for the community: 10,045

• ▶ Digital impact fund: EUR 10 million
• ▶ Social impact Fund: EUR 10 million

▶ % reduction in energy consumed since 2012: 33%

• ▶ CO2 emissions per FTE: 1.95 tonnes
• ▶ Sustainable client assets: EUR 6.4 billion
• ▶ Groenbank sustainable financing: EUR 216 million
• ▶ Waste generated per FTE: 181 kg
• ▶ Availability of our digital services: 99.5%
• ▶ Number of households using internet banking: 5.8 million
• ▶ Applications decommissioned since 2014: Approximately 650

relationships with them.

Financial Capital One of our key activities involves providing loans and advances to individuals, small businesses as well as corporates. We contribute to a strong and stable financial sector through our moderate risk profile. Our management actions, combined with improvements in the Dutch economy, have contributed to an improving ROE which underpins our dividend paying capacity. We invest in major initiatives such as TOPS 2020 and Retail Digitalisation to further drive efficiency improvements.

Our ambition is to build on our client-centric approach and to make our clients promoters by giving them the best experience. We continue to monitor and address the public's trust in ABN AMRO and in the financial industry. By actively engaging other stakeholders through dialogue and acting on material issues raised, we continue to strengthen our cooperative

Human Capital

Under our Top Class Employer strategy, we aim to attract, develop and retain the best people by defining a strong corporate identify, creating a culture of excellence and helping employees create their best place to work. We continue to make progress in the area of diversity, focusing on gender, cultural background and disability.

Intellectual Capital

We continuously strengthen our advisory capabilities, expand our digital offering and reshape our distribution model to respond to changing client needs. We actively pursue collaboration with external parties to extend our innovative capabilities. In terms of contributing to society, we actively seek ways to offer our financial expertise, including sharing sector-specific knowledge and promoting social entrepreneurship.

Natural Capital

One of our priorities is to reduce our environmental footprint by making our operations more sustainable. We aim to decrease energy consumption in 2017 by 20-30% compared with 2012. Another way we contribute to society is by embedding our sustainability approach in our financing to corporates and investment services to retail and private clients.

Technological Capital

We deliver value to our clients through a stable, secure and robust IT landscape with a high availability of systems and low losses from cybercrime and fraud. We are currently in the process of re-engineering and simplifying our IT landscape and accelerating the digitalisation of client processes, enabling us to be more agile and ready for the future.

Other

Corporate client Sector-specific knowledge

Who Petter Heier, CEO of Grieg Green

My advice to ABN AMRO is to continue the dialogue with clients on sustainability and use its leverage to make them act responsibly.

Corporate Banking's Relationship Managers are specialised in a particular sector and use their in-depth knowledge to support clients in embedding sustainability in their business.

One of those clients is Grieg Green, which provides ship recycling services to companies in the shipping industry. Petter Heier, CEO of Grieg Green, describes the cooperation with ABN AMRO: "Our parent company Grieg Shipping Group had worked with ABN AMRO before, so they knew about our recycling operations. ABN AMRO wanted to know more about what we were doing and thinking in terms of sustainability, and we quickly found common ground."

"As a result, ABN AMRO now provides funding for our sustainable recycling solutions. Moreover, we got access to a network of potential business partners. The bank connected us to ship owners in North America and Southeast Asia. We share knowledge with each other whenever an interesting development occurs. For example, we recently made a financial and environmental analysis for a ship that was bound to be recycled in Pakistan. Based on ABN AMRO's research, it turned out that Turkey was the better option in both respects".

"We quickly found common ground. ABN AMRO now provides funding for our sustainable recycling solutions and we got access to a network of potential business partners."

Strategic Report

Strategic Report / ABN AMRO shares / Our external reporting landscape

ABN AMRO Group Annual Report 2015

Business Report

This Business Report includes an overview of our operating environment, discussion and analysis of the results of operations, financial condition and business review of the Group and its different segments for the years 2015 and 2014.

Business Report

86

Financial review

Group results	88
Retail Banking	95
Private Banking	97
Corporate Banking	99
Group Functions	104

Our people

119 Responsibility statement Business Report / Economic environment

Economic environment

Economic environment

This section provides an overview of the main economic developments and trends that had an impact on our operating environment and results.

Overview

Growth of the Dutch economy picked up speed in the course of 2015, thanks to developments in consumption and investment, and exports continued to show steady growth driven by the weakening euro. Global trade, on the other hand, disappointed. The Dutch housing market continued to recover on the back of the economic upswing and low – and declining – mortgage interest rates. Bank lending faltered in 2015.

Economic convergence

Normally, emerging countries notch up the highest growth figures, followed by the US and with the eurozone following at a respectable distance. This was again the case in 2015. At an estimated average of almost 4%, growth of emerging economies was clearly higher than it was in the US and the eurozone (2.4% and 1.5% respectively). Yet a shift was noticeable this past year. A number of emerging countries, such as Russia and Brazil, hit stormy weather. The biggest emerging market, China, saw its growth percentages slowly decline. This was the side effect of the transition from an exports-focused economy to an economy focusing on domestic spending. While growth of emerging countries weakened, growth in the eurozone strengthened somewhat.

Converging global cycles (GDP, % year-on-year)

Source: Thomson Reuters Datastream, EIU Emerging Markets Figure for 2015 is an ABN AMRO estimate.

For the US economy, 2015 was a slightly bumpy, yet ultimately satisfying year. The period of growth percentages coming in at around 2%, which began in 2010, continued. The steep decline in unemployment and improvement of the housing market were favourable developments. In addition, cheap oil drove up consumer spending.

Unlike the US, the eurozone has staged a fragile recovery in recent years, with the economy growing at a modest pace in 2015 – enough to bring down unemployment slightly and to improve public finances in most countries. The monetary union had the wind in its back on several fronts, benefiting from low oil prices, the depreciated euro against the dollar, very low interest rates and improved credit conditions. The Greek debt crisis once again reached the boiling point in the summer. Fortunately, 'Europe' proved able to tackle problems when under pressure. Although things are less urgent now, the situation in Greece remains vulnerable.

The eurozone and US economies were both inhibited by the slowdown in emerging countries. Recovery came mainly from domestic economies. At the same time, emerging economies were held back by the imminent interest rate increase in the US, which triggered an outflow of capital to the US. This mainly affected countries such as Brazil, which are dependent on foreign loans. The US is affected by developments in emerging economies, and vice versa.

Monetary divergence

As the previous graph shows, economic cycles converged in 2015. Monetary policies, on the other hand, diverged. In this respect, all eyes were on the US Federal Reserve (Fed) and the European Central Bank (ECB) – and they took divergent paths. Whereas the ECB opted to loosen the monetary reins in late 2015, the Fed decided in December to raise the Fed funds rate. This was presumably the first of a series of interest rate hikes.

There was already evidence of this divergence on the capital market, as the graph shows. Meanwhile, the US was in an advanced stage of economic recovery, whereas the upswing in the eurozone was fragile. What is more, this was coupled with inflation that was far below the ECB's target. Due to this monetary divergence, the euro weakened against the dollar in 2015 from 1.21 USD to 1.09 USD.

Diverging bond yields

(Interest on ten-year government bonds)

Source: Thomson Reuters Datastream

Slight acceleration of Dutch economic growth

Recovery produces recovery. After bottoming out in 2012, the Dutch economy has picked up for three consecutive years. Whereas in the previous years exports were the key driver, the recovery was rather broad-based in 2015. Growth of consumption and investment accelerated throughout the year.

Broad-based growth of the Dutch economy

Dutch economic growth was higher in full-year 2015 than it was in 2014 (1.9% versus 1%). Growth would have been a half percentage point higher in both years if the production of natural gas had not been restricted due to earthquakes in the north of the Netherlands caused by gas extraction. The Dutch economy benefited from a number of favourable developments. Some of these were movements that buoyed the entire eurozone, such as lower oil prices and low interest rates. The weak recovery of the eurozone and depreciation of the euro stimulated Dutch exports. A notable development in 2015, however, was that domestic spending was responsible for the growth acceleration compared with 2014.

Source: Thomson Reuters Datastream

Consumption and investment continued the upward trend that began in 2014. Consumers benefited from the rise in real wages, thanks to low inflation, and from the decline in pension contributions. The improving housing market had positive wealth effects, while investment in homes also rose steeply. There were no substantial government cutbacks in 2015. The upturn in the housing market, improved financing conditions, higher capacity utilisation rates and better growth prospects stimulated businesses to invest more. Employment went up, causing wages to rise slightly. All in all, there was a chain of favourable domestic developments in 2015.

Sector developments

The broad-based recovery of the Dutch economy (exports, investments and consumption grew) pushed up turnover growth in all business sectors in 2015 – most of which grew for the second consecutive year. Some sectors even experienced a growth spurt. Business services, for instance, increased by 5% in 2015. The TMT sector (Technology, Media & Telecommunications) posted steep rises in percentages, benefiting from strong demand created by the digital changeover that many companies are making. Construction led the pack, growing by around 9% in 2015. The upturn in the housing market caused a significant increase in new building activities.

Growth figures for the sector are not always reflected in corporate financial results. Overcapacity and changing earning models could drag down business performance, mainly in the retail sector. Despite two continuous years of modest sales growth, many retailers are contending with big problems caused by the steep rise in online sales. Strategic Report

Good year for housing market

The housing market continued its upward trend in 2015. The economic recovery, combined with low and further declining mortgage interest rates, led to increased transaction volumes in the housing market, both for existing and for new homes. Sixteen per cent more existing homes were sold in 2015 than in the previous year. The number of homes up for sale declined to 156,000 at year-end 2015, or 43% fewer than in 2014. Sellers had a better negotiating position, as is reflected in higher selling prices, which rose by 3.2% in 2015. Major differences were seen between regions, with large cities in the lead. In this strengthening market, problems with negative equity gradually melted and backlog demand picked up momentum. A return of the gift tax exemption to lower levels and tighter mortgage standards barely dented the housing market.

The market is recovering, but the peak seen before the credit crisis is a distant memory. House prices are still 11% lower than when they were at their highest in August 2008, although they have risen by 13% since the low in June 2013.

Credit volume in the Netherlands continues to contract

Lending at eurozone level grew in 2015. Loans outstanding to businesses and families rose, though by modest percentages. It is hard to say to what extent monetary relaxation filtered through to the real economy and to what extent the demand for credit grew. Both factors presumably played a role.

The credit volume of banks in the Netherlands did not grow. The total volume of mortgage lending by banks to families inched down (-0.5% after adjusting for securitisations). One factor at play here is that annuity mortgages have become popular once again, due to tax reasons. This means that consumers are repaying their mortgages more quickly than they were with previously popular mortgage forms. Furthermore, banks have tightened their credit standards and competition with non-banks intensified. Lending by banks to non-financial businesses fell by 3.3% (after adjusting for securitisations). On the business front, banks relaxed their acceptance criteria in 2015. The surveyed banks attributed

this development to competitive pressure and changing risk perceptions. They also reported stronger demand for credit among businesses. The results of this survey seem to be inconsistent with the decline reflected in 'hard' data. A possible explanation is that the survey only relates to new loans, whereas the 5% decline was partly the result of repayments. There are no indications that alternative credit platforms caused these declines, as these platforms are very small.

Dutch bank loans continue to shrink (Outstanding loans to Dutch entities, % year-on-year)

Source: DNB Data adjusted for securitisations and breaks

Costs of loan losses among the major Dutch banks declined significantly in 2015. The economic recovery led to a significant decline in the number of bankruptcies, which benefited these banks. We do not have a clear picture of how interest margins developed among Dutch banks in 2015. Data provided by the Dutch central bank point to downward pressure on interest rates on both sides of the balance sheet. Interest rates on home mortgages decreased, both for new contracts and for renewals. Interest rates for short-term deposits, both for businesses and for families, were also under downward pressure. Savings balances of Dutch residents at banks in the Netherlands rose by 1.3% in 2015. Banks' capital buffers have grown in recent years to levels required in 2019 under Basel III. Yet there is uncertainty about these buffers as solvency rules will probably be further tightened in the coming period. The way it looks now, that will mainly affect risk-weighting for home mortgages, corporate loans and government bonds and the

Strategic Report

Business Report

this development to competitive pressure and changing risk perceptions. They also reported stronger demand for credit among businesses. The results of this survey seem to be inconsistent with the decline reflected in 'hard' data. A possible explanation is that the survey only relates to new loans, whereas the 5% decline was partly the result of repayments. There are no indications that alternative credit platforms caused these declines, as these platforms

2010 2011 2012 2013 2014 2015

Non-financial corporations Households, for house purchase

Costs of loan losses among the major Dutch banks declined significantly in 2015. The economic recovery led to a significant decline in the number of bankruptcies, which benefited these banks. We do not have a clear picture of how interest margins developed among Dutch banks in 2015. Data provided by the Dutch central bank point to downward pressure on interest rates on both sides of the balance sheet. Interest rates on home mortgages decreased, both for new contracts and for renewals. Interest rates for short-term deposits, both for businesses and for families, were also under downward pressure. Savings balances of Dutch residents at banks in the Netherlands rose by 1.3% in 2015. Banks' capital buffers have grown in recent years to levels required in 2019 under Basel III. Yet there is uncertainty about these buffers as solvency rules will probably be further tightened in the coming period. The way it looks now, that will mainly affect risk-weighting for home mortgages, corporate loans and government bonds and the

are very small.

Dutch bank loans continue to shrink (Outstanding loans to Dutch entities, % year-on-year)

Source: DNB

-6

-4

-2

2

4

0

Data adjusted for securitisations and breaks

Researching and forecasting our economic environment

Georgette Boele, precious metals and currency analyst

named no.1

predictor of the price of precious metals by Metal Bulletin

around1,200 external publications produced by Group Economics

Group Economics continued to support the bank's businesses, Finance and Risk departments, and clients in 2015. Our research efforts, for example, were a crucial element in cementing client relationships in the area of fixed-income sales and trading. Among other things, ABN AMRO was added to the counterparty list of a prominent European central bank with which we had not done business before. In its annual evaluation, the bank labelled our research as 'very strong performance'. In addition, the prestigious Metal Bulletin awarded our precious metals analyst first prize for accurate forecasting in 2015. Group Economics provided most of the content to the Insights platform, where research and commentary are made available to the rest of the bank, clients and other interested parties. And lastly, 2015 was another year in which our research earned significant media exposure both in the Netherlands and internationally.

requirements for bailing in a bank in the event of bankruptcy. In addition, internal risk models used by banks are under discussion.

Looking ahead to 2016

There are signs that the Dutch economy will continue to grow in 2016, as the upward spiral described does not seem to have come to an end. There are major uncertainties, however, and we update our forecasts regularly. The imminent monetary tightening in the US, the strong decline in oil prices, and turmoil in emerging economies caused volatility in the financial markets in 2015. Turbulence increased in the first two months of 2016, making a forecast of limited value.

Regulatory environment

Regulatory environment

Overview

In 2015 further progress was made under post-crisis legislation in implementing rules under the Bank Recovery and Resolution Directive (BRRD) and Deposit Guarantee Scheme Directive (DGSD). And, as the final step towards a Banking Union, a proposal for the European Deposit Insurance Scheme (EDIS) was published. Large numbers of implementing measures of other European legislation,

such as the Directive on Markets in Financial Instruments (MiFID II), were also published.

The European Commission shifted its focus in 2015 to jobs and growth. This resulted in an action plan for the Capital Markets Union (CMU) and a Green Paper on retail financial services.

Regulatory overview

Given the need to assess, respond and implement the vast stream of new rules and regulations in a timely and efficient manner, ABN AMRO recognises that a robust regulatory function is paramount. The Managing Board

therefore decided to install a Regulatory Committee directly under the Managing Board and a Regulatory Office under the supervision of this Regulatory Committee.

Strategic Report

47

Completing the Banking Union

In response to the financial crisis, the European Commission pursued a number of initiatives to create a safer and sounder financial sector. These initiatives, Capital Requirements Directive IV/Capital Requirements Regulation (CRD IV/CRR), BRRD and DGSD, form the basis for the Banking Union. To further create the Banking Union, a Single Supervisory Mechanism (SSM) and a Single Resolution Mechanism (SRM) for banks became operational. As a final step to completing the Banking Union, the European Commission published a proposal for a European Deposit Insurance Scheme (EDIS) in 2015.

Capital Requirements Directive IV and Capital Requirements Regulation

On 16 December 2010 (revised in June 2011), the Basel Committee on Banking Supervision (the 'Basel Committee') released the measures referred to as Basel III: A global regulatory framework for more resilient banks and banking systems (the Basel III Framework). This framework was implemented in the European Economic Area (EEA) through the Capital Requirements Directive (CRD IV) and the Capital Requirements Regulation (CRR).

On 22 December 2014, the Basel Committee published consultations (informally referred to as Basel IV) for revised standardised RWA calculations and on the application of capital floors. As a result, banks that apply advanced approaches to risk categories may be required to apply the higher of (i) the RWA (REA) floor based on (new) standardised approaches and (ii) the RWA (REA) based on advanced approaches in the denominator of their ratios. Although the timing for the adoption, content and impact of these proposals remains subject to considerable uncertainty, implementation of the standardised RWA (REA) floors would have a significant impact on the calculation of the Group's risk-weighted assets due to the substantial difference in RWA (REA) calculated on the basis of advanced approaches and such calculation on the basis of new standardised rules for mortgages and, to a lesser extent, exposures to corporates.

For revisions to the standardised approach for credit risk, the Basel Committee published a second consultation on 10 December 2015. The proposals differ in several ways from the initial set of proposals of December 2014.

Bank Recovery and Resolution Directive

The Bank Recovery and Resolution Directive (BRRD), which establishes a framework for the recovery and resolution of banks and certain investment firms, came into force on 2 July 2014. The BRRD sets out a set of tools available to competent authorities to intervene in an unsound or failing bank sufficiently early and quickly so as to ensure the continuity of the bank's critical financial and economic functions, while minimising the impact of the bank's failure on the economy and financial system. The measures of the BRRD took effect on 1 January 2015, with the exception of the bail-in resolution tool which may be applied as from 1 January 2016 at the latest. However, Dutch implementation of the BRRD only came into effect on 26 November 2015.

As a result of the introduction of the Single Resolution Mechanism (SRM), the Single Resolution Board (SRB) will, as from 1 January 2016, be the single resolution authority for the Group ultimately in charge of the decision to initiate the resolution, while operationally the decision will be implemented in cooperation with national resolution authorities (NRAs).

Single Resolution Fund

In addition to the SRB, the SRM also provides for a single resolution fund (Single Resolution Fund). The Single Resolution Fund will be financed by ex-ante individual contributions from banking entities included in the SRM. The individual contribution of each bank will be based on a flat contribution (pro rata based on the amount of liabilities excluding own funds and covered deposits, in comparison to the total liabilities, excluding own funds and covered deposits, of all participating banks) and a risk-based contribution. In addition, where the funds of the Single Resolution Fund are not sufficient to cover the losses, costs or other expenses incurred by the use of the Single Resolution Fund in resolution actions, extraordinary ex-post contributions from the participating banks may be raised, with a maximum of three times the annual amount of the individual contribution. The funding obligation will enter into force on 1 January 2016, and in principle after eight years from that date the available financial means of the Single Resolution Fund must in principle be at least 1% of the amount of covered deposits of all participating banks.

Deposit Guarantee Schemes Directive

The deadline for the transposition of the majority of provisions of the Deposit Guarantee Schemes Directive (DGSD) into national law was 3 July 2015. In the Netherlands the provisions of DGSD were implemented on 17 November 2015. The funding of the current deposit guarantee scheme is amended from an ex-post funded system to a partially ex-ante funded system. This means that participating banks will have to contribute to the scheme on a periodic basis rather than facing charges only when an actual insolvency event occurs requiring them to compensate the clients of the affected banks. The available means in the deposit guarantee scheme system will in principle need to be 0.8% of the amount of covered deposits held with the participating banks in 2024. Contributions will be based on the covered deposits of the bank and risk-based contributions, but member states may also impose minimum contributions to compensate clients of the affected bank. The ex-ante funding system is expected to increase the Group's expenses in connection with the deposit guarantee scheme. In addition, if the available financial means of a deposit guarantee scheme is insufficient to repay depositors when deposits become unavailable, an extraordinary contribution is required, which will in principle not exceed 0.5% of the covered deposits held with the participating banks per calendar year. Additional requirements of the DGSD include a broadening of the scope of clients for whom the deposit guarantee will be available (in addition to consumer deposits, deposits of businesses will be included, whereas currently only companies who publish abridged annual accounts fall within its scope), transparency and information requiremets to customers and shortening of the period for making payments under the DGSD from 20 working days to 7 working days.

European Deposit Insurance Scheme

On 24 November 2015, the European Commission proposed a euro-area wide insurance scheme for bank deposits. The European Deposit Insurance Scheme (EDIS) would develop over time and in three stages. It would consist of a re-insurance of national deposit guarantee schemes, moving after three years to a co-insurance scheme, in which the contribution of EDIS will progressively increase over time. As a final stage, a full European Deposit Insurance Scheme is envisaged in 2024.

Launch of the Capital Markets Union

On 30 September 2015, the European Commission published an action plan for building a Capital Markets Union (CMU). The key objectives of the CMU are to improve the free movement of capital by removing the barriers for cross-border investments and to diversify the sources of funding.

The CMU aims to complement Europe's tradition of bank financing by (i) unlocking more investments from the EU and the rest of the world, (ii) connecting financing more effectively to investment projects across the EU, (iii) making the financial system more stable, (iv) reinforcing financial integration and (v) increasing competition.

In this respect, the European Commission published proposals for establishing a framework for simple, transparent and standardised securitisations and new regulatory capital requirements for securitisations for banks in CRR.

In addition, the European Commission has started a public consultation on covered bonds. On 30 November 2015 the European Commission proposed a regulation to revise the Prospectus Directive to reduce barriers for the listing of smaller firms, secondary issuances and frequent issuers.

Focus on retail financial services

On 10 December 2015, the European Commission published a Green Paper on retail financial services and insurance to boost consumer choice and competition in cross-border retail financial services and insurance. The Green Paper complements the action plan for building a CMU (which will provide more options and better returns for savers and retail investors), the Digital Single Market (which is designed to ensure that digitalisation can be used most effectively in supporting consumers) and the Internal Market Strategy (to create an open single market that delivers for consumers, professionals and job creators).

Recently adopted measures such as the Insurance Distribution Directive (IDD), Mortgage Credit Directive (MCD), Regulation on Packaged Retail Investment and Insurance based Products (PRIIPS), MiFID II and Payment Services Directive II (PSD II) already address a number of issues across the retail financial and insurance sectors.

49

Changing European rules for financial markets

> 6,200 pages

have been published in the legislative process (to date)

> 60 measures

related to second level legislation are expected to include MiFID II

In 2015, the European Securities and Market Association (ESMA) published a substantial number of draft implementing measures (delegated acts) under the Markets in Financial Instruments Directive II (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR). The definitive implementing measures will replace, extend and improve existing European rules on markets in financial instruments, give more extensive powers to supervisory authorities and introduce the possibility to impose higher fines in case of infringement of requirements.

A project group is preparing the timely implementation of these measures. ABN AMRO and its subsidiaries that fall within the scope of MiFID II will have to review their existing activities and, where necessary, may need to adjust the manner in which they operate. These Group entities will probably also be required to provide more information to their clients about such matters as the costs and charges involved in providing investment services.

However, the European market for retail financial services and insurance remains fragmented, and consumers do not shop abroad. Therefore, the objective of this Green Paper is to see how the European market for retail financial services (insurance, loans, payments and savings accounts and other retail investments) can be further opened up. This would not only benefit consumers, but also financial institutions by giving them access to a much wider marketplace.

Outlook for 2016

Many initiatives to integrate European financial markets will continue to be implemented in 2016 (a few examples are MiFID II, PRIIPS, MCD, PSD II and IDD). In addition, further steps under the action plan for a Capital Markets Union are expected, such as a legislative initiative on

insolvency, by the end of 2016. The next steps in respect of the Green Paper for retail financial services will be presented in an action plan, to be published around summer 2016.

Considering the latest consultation of the Basel Committee for revisions to the Standardised Approach for credit risk, there may be other items on the agenda of the Basel Committee for 2016. Lastly, the discussion paper of the European Supervisory Authorities (ESAs) on automation in financial advice could indicate that 2016 will see a stronger focus on technological development and financial innovation.

Business review

Business review ABN AMRO Group

ABN AMRO

Retail Banking Private Banking Corporate Banking Group Functions

Business description

ABN AMRO is a leading Dutch full-service bank with a transparent and client-driven business model, a moderate risk profile, a clean balance sheet with predominantly traditional banking products, and a solid capital position and funding profile. ABN AMRO serves retail, private and corporate banking clients with a primary focus on the Netherlands and with selective operations internationally. ABN AMRO presents four reporting segments: Retail Banking, Private Banking, Corporate Banking (including sub-segment information) and Group Functions.

Geographic presence

ABN AMRO is present in 22 countries and territories. In the Netherlands, our home market, ABN AMRO is a full-service bank. We have an extensive presence both in terms of bricks and mortar and through a leading online banking service offering. Our international presence is for selected businesses in which ABN AMRO has specific expertise and leading positions, such as Energy, Commodities & Transportation (ECT Clients), Clearing, Private Banking and asset-based financing. In these businesses:

• Å ABN AMRO has critical size and expertise;
• Å risk-taking is well understood and modest;
• Å significant value-creating opportunities exist.

In addition, the international network serves Dutch clients outside the Netherlands. This is part of our strategy to develop and maintain sustainable relationships with Dutch clients, both as their primary bank in the Netherlands and for their businesses abroad. Partner agreements are in place with selected banks to ensure coverage for clients where ABN AMRO is not physically present.

Strategic Report

Retail Banking is a leading retail bank with a solid and recognised position in our home market, the Netherlands. We are the principal bank for approximately 21% of the Dutch population and have a market share of 21% in the small business segment in the Netherlands. We provide a full range of transparent retail banking products and high-quality services under the ABN AMRO brand, and specific products and services under different labels. We offer our products and services through omni-channel distribution with extensive physical and digital coverage.

m Number of retail clients

m

Number two1 in savings (including Private Banking) Number one2 in new mortgage production. Leading position in the Netherlands. Principal bank for 21%3 of the Dutch population and market share of 21%4 in the small business segment

Investable assets. 300,000 small businesses with annual turnover up to EUR 1 million

±260

Number of branches

worldwide

Seamless omni-channel distribution with a nationwide network, Advice & Service Centres and 24/7 internet and mobile banking

51

Introduction

Strategic Report

Business Report

Risk, funding & capital Report

Governance Report

Overview

In 2015 we maintained a leading market position and captured a number one market position in new mortgage production, with a combined market share of all ABN AMRO brands in the Dutch mortgage market of approximately 20%. Retail and Private Banking together held a market share of 21% in the savings and deposits market.

Building on our client-centric approach, we aspire to offer the best client experience among our peers, making clients the bank's ambassadors. To this end, we measure the Net Promoter Score (NPS). More important than the score itself, however, is our approach: we carefully monitor client feedback on what we can improve and what we are doing well. In 2015 we started a pilot to help us improve our service based on clients' feedback. We will further roll out the NPS way of working in 2016.

We continued and launched several initiatives in 2015 to further improve the client experience. For example, we are redesigning

• ¹ Source: calculated based on DNB Domestic MFI statistics and internal analyses, H1 2015 figures.
• ² Source: calculated based on information provided by the Dutch Land Registry (Kadaster), 2015.

our omni-channel distribution network and accelerating digitalisation of our client processes. We released several updates of our mobile banking app this past year, enhancing usability and introducing new features that make it easy for clients to interact with the bank. Clients are rapidly adopting digital channels, yet at the same time physical distribution remains important, with clients increasingly requiring high-quality advice. We aim to provide seamless navigation and easy accessibility in every distribution channel. To this end, we reshaped our distribution network in anticipation of changing client needs by further integrating distribution to retail clients and small business clients, further embedding remote advice in our omni-channel offering and pooling expertise in the branch network.

Looking ahead, Retail Banking will continue to put clients' interests first by further embedding the NPS way of working, expanding our digital services offering, optimising and simplifying products and services, and focusing on high-quality advice.

³ Source: GfK Online tracker, 2015. ⁴ Source: TNS NIPO, 2015.

Annual Financial Statements

Enhance client centricity

Business description

Retail Banking is a leading retail bank in the Netherlands with stable and recognised market positions and a loyal client base. We serve approximately 5 million retail clients with investable assets up to EUR 1 million and approximately 300,000 small businesses with annual turnover up to EUR 1 million. We expect to lower the threshold of EUR 1 million in investable assets to EUR 500,000 in 2016.

Retail Banking and Private Banking cooperate closely to deliver a seamless offering across all wealth categories in the Netherlands through institutionalised upstreaming and downstreaming of clients to the right segment. We provide a feeder channel of business clients to Corporate Banking based on annual turnover criteria and receive business clients who are better served by Retail Banking.

The Retail Banking client proposition is based on three principles: always easily accessible, ease in daily banking services and high-quality financial advice. We believe these principles will help us create a positive client experience, turning the bank's clients into ambassadors.

We provide a full range of transparent retail banking products and high-quality services under the ABN AMRO brand, and specific products and services under different labels.

We offer our products and services through omni-channel distribution with extensive physical and digital coverage. Our complementary offering is provided by intermediaries and subsidiaries. We aim to be at the forefront of technological developments so that we can swiftly address shifts in client behaviour. We seek to use the latest online and mobile technology to improve the client experience and enhance convenience.

Product offering Retail Banking
Product	Retail clients	Small businesses
Mortgages	•
Savings and deposits	•	•
Consumer lending	•
Commercial lending		•
Credit cards	•	•
Payments	•	•
Investments	•	•
Insurance	•	•
Financial Planning	•	•

Business developments

Putting clients' interests first

Building on our client-centric approach, we aspire to offer the best client experience among our peers, making clients the bank's ambassadors. We measure the Net Promoter Score on a continuous basis with TNS NIPO interviewing approximately 2,100 of our retail clients every quarter. in 2015, the Net Promoter Score (NPS) went up by 1 percentage point compared with 2014.

The NPS methodology measures how likely customers are to recommend a company to their family and friends. Promoters are those who respond with a score of 9 or 10 (out of 10) and are thus considered loyal enthusiasts. Detractors are those who respond with a score of 0 to 6 (unhappy customers). NPS is calculated by subtracting the percentage of customers who are detractors from the percentage of customers who are promoters. The Net Promoter Score is an absolute number between -100 and +100. Passives (score 7 or 8) are not included in the formula. Strategic Report

More important than the Net Promoter Score itself is the NPS way of working. We carefully monitor client feedback on what we can improve and what we are doing well, and continuously improve services and internal processes based on our clients' needs. Besides conducting research, we run a client community consisting of 300 active clients, an online client survey panel (with more than 5,000 clients) and a high-tech usability lab where clients can test proposed innovations and provide suggestions for improving the online client experience.

Our slightly higher NPS score in 2015 shows that our efforts are paying off. At the same time, the absolute score tells us that we still have some work to do. In 2015 we started closed-loop feedback pilots to help us improve our service based on our clients' feedback. Clients give feedback to financial advisors and specialists, who follow up in direct contact with the client. We will roll out the NPS way of working across the Retail Banking organisation in 2016. In response to NPS surveys suggesting that we can benefit from understanding what drives our clients, we are investing in developing our staff's interpersonal skills. NPS surveys are also being used to optimise client journeys, the sum of experiences that clients go through when interacting with ABN AMRO. We have started optimisation of client journeys related to our service to the bereaved and the elderly and to clients who are applying for a new mortgage or getting a divorce.

In September 2015, the Dutch Banking Association published the Trust Monitor (Vertrouwensmonitor) for the first time. The Trust Monitor presents the results of a survey conducted by market research institute GfK on how Dutch people think about banks in general, their own bank and how they experience various aspects of services provided by banks. It also includes individual scores given by the Dutch Authority for the Financial Markets (AFM) in its client centricity dashboard. On a scale of 1 to 5, the sector as a whole scored 2.8. The survey shows that trust in individual banks is higher: 3.2 on a scale of 1 to 5. On nine items out of 13, ABN AMRO scored slightly more negatively than the

average of the group of banks in the Netherlands for which results were included in the survey. On the other four items, ABN AMRO scored average or higher.

Based on the survey results, the banks will focus on three areas in the period ahead: offer advice or suggestions to clients who have stated that their personal situation has changed or might change, make explicit how banks can help clients who have fallen behind, or might fall behind, on their mortgage payments, and make it clear to clients how they can easily submit a complaint to the appropriate person or department.

Leading market position

Retail Banking has a strong and recognised market position in the Netherlands. In 2015 we maintained our number three principal bank position for retail clients (21%1 of the Dutch population) and our number three position in the small business segment, with a market share of 21%.2

The Dutch mortgage market at 30 September 20153 amounted to EUR 638 billion in terms of outstanding loans, of which Retail Banking held a market share of approximately 23%.4 Retail Banking offers mortgages in the Netherlands under various brands, ensuring flexibility and ample choice for clients. We mainly offer mortgages under the brands ABN AMRO (main brand), Florius (targeting intermediaries) and MoneYou (online). ABN AMRO captured a number one market position in 2015, with a market share of approximately 20% in new mortgage production. As a result of legal amendments in 2013, new mortgage production consists increasingly of redemption mortgages, while demand for interest-only mortgages and other types of mortgage is declining. More information on the mortgage portfolio is provided in the Risk, funding & capital Report.

The Dutch retail deposit market amounted to EUR 336 billion at year-end 2015.5 Growth of the savings market has slowed down since 2013, due mainly to low

¹ Source: GfK online tracker, 2015.

² Source: TNS NIPO, 2015

³ Source: components of assets and liabilities of Dutch households, December 2015.

⁴ Source: calculated based on DNB Components of assets and liabilities of Dutch households, December 2015.

⁵ Source: DNB Domestic MFI statistics, December 2015.

Business Report / Business review / Retail Banking

interest rates, prepayments on mortgages and increased consumption. At year-end 2015, Retail Banking and Private Banking together held a market share of 21%1 in the Dutch savings and deposits market. In the course of 2015 we lowered interest rates on all our saving accounts and deposits. Besides the Netherlands, Retail Banking is also active in other countries (Germany, Belgium and Austria) under its MoneYou label. At year-end 2015, 72% of MoneYou savings volume was generated outside of the Netherlands.

Most Retail Banking products and services are offered under the ABN AMRO brand. Specific services are offered through other labels or by subsidiaries. Various labels, such as Florius, serve intermediary sales channels to meet the needs of clients who prefer the service of an intermediary agent. Some labels strive for product excellence or product leadership, such as International Card Services (ICS), which remained market leader in 2015 in the Netherlands based on the number of consumer credit cards in circulation. In addition to offering an additional sales channel, other labels are used to differentiate pricing to target highly competitive or price-sensitive markets without affecting the ABN AMRO brand. For example, Alfam, our subsidiary specialised in consumer loans, grew its consumer credit loan book for the fifth consecutive year. We act as an intermediary for ABN AMRO Insurances by selling and providing advice on a comprehensive range of life and non-life insurance products. The ABN AMRO legal assistance insurance was rated number one by the Dutch Consumer Association (Consumentenbond) in 2015, with a score of 7.9. MoneyView rated both the ABN AMRO legal assistance insurance and the ABN AMRO annual travel insurance number one for conditions and flexibility.

Organisational changes and our people

To meet our clients' changing needs, we restructured our organisation in 2015. Our organisational setup is now in alignment with our strategy and reflects our strong digital and client focus. We created a dedicated Customer Experience unit and also have two distribution units: Personal Banking and the new Digital Banking unit. Personal Banking covers both the branch network and the Advisory & Service Centres. The Retail Banking organisation also includes two dedicated product management units covering daily banking services and mortgages. Together with the Private Banking product management team, which focuses on wealth and advisory services, these teams align products across the organisation and pursue synergies. These organisational changes support our strategy of putting clients' interests first.

In 2015 we started implementing Retail Banking's long-term strategy announced in 2014. We made our omni-channel offering and distribution more efficient and effective by further integrating distribution to retail clients and small business clients, further embedding remote advice in our omni-channel offering, pooling expertise within the branch organisation, and staffing branches with on average more advisors and specialists per branch. In light of the rapid digitalisation of society and increasing client preference for mobile and online banking, we consolidated our branch network. At the end of 2015, we had a nationwide branch network of 260 branches.

We continued to invest in the expertise and professionalism of our financial advisors and specialists. As from 2014 regulations under the Financial Supervision Act (Wet op het Financieel Toezicht) define new professional standards applying to financial services providers, under which client-facing employees must hold valid diplomas relevant to their work. The regulations provide for transitional arrangements. At year-end 2015 nearly all advisors and specialists held the relevant diplomas. We will further invest in training front-office staff in order to enhance their professional and interpersonal skills.

ABN AMRO measures employee engagement in an annual Employee Engagement Survey. Employee engagement remained stable and high, with a score of 78% in 2015, meaning 78% of our staff feel engaged with the bank. The 2015 survey revealed a number of focus areas which we will address in 2016, such as facilitating cooperation across the retail bank so we can respond quickly to our clients' changing needs.

¹ Source: calculated based on DNB Domestic MFI statistics, December 2015.

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Other

Retail Digitalisation programme

Clients are increasingly switching to online banking channels, as is reflected by the success of Retail Banking's mobile banking app in the Netherlands. Clients use the app more than 60 million times a month and the number of logins via the app is now over four times as high as the number via internet banking.

The Retail Digitalisation programme, launched in 2014, will help us accelerate the digitalisation of key customer processes. By making further investments in online service offerings and mobile apps, we aim to deliver a seamless online, mobile and branch experience. These initiatives are expected to generate estimated recurrent cumulative yearly cost savings of EUR 35 million from 2017 onwards, based on an initial investment of EUR 190 million projected between 2014 and 2017. As part of this programme, we invested in 2015 in expanding our digital offering and released several updates of our mobile banking app, enhancing usability and introducing new features that make it easy for clients to interact with the bank. New features include access to credit card details in the mobile banking app and the possibility to add images to individual debit card transactions, making transactions more personal and more transparent. The app and internet banking offer a visual search function allowing clients simply to click on an image to retrieve all debit and credit entries relating to a particular person or organisation. We have made it possible to execute iDEAL payments in the app, and clients can now transfer money to unknown account numbers up to a daily limit by simply entering a 5-digit identification code to authorise the transfer. Previously, such transfers could only be made if the beneficiary was an account number to which the client had already transferred funds within the past 18 months. Every new feature is carefully tested during development (before launch) at our usability lab and among a group of employees.

In 2015 we introduced new and innovative ways to serve our clients better and faster. A good example is the new Alert & Check app for the iPhone and Apple Watch. This app gives clients free push alerts, meeting their need for real-time information on their finances, and visualises the client's spending and income. We were the first major Dutch bank to enable individuals to become clients using only their smartphone and without visiting a branch.

For identification purposes, clients must submit a photo of their identity card or passport and a selfie and must make an iDeal payment transfer of EUR 0.01.

In December 2015 we launched a pilot for a financial planning app called Grip. Ten thousand clients will be trialling the app, which offers a range of financial planning features helping them to get a grip on their spending. We will further develop Grip using feedback from these clients and, if the results are promising, will make the app available to all clients. We believe we can speed up access to innovative digital products by collaborating with fintech start-ups. Grip, for example, was developed together with the successful Swedish fintech start-up Tink, which has launched a similar app used by over 300,000 of their Swedish clients.

ABN AMRO aims to invest in start-ups that focus on digitising financial products and services. To this end, the bank launched the Digital Impact Fund this past October. ABN AMRO will invest in companies, preferably European fintechs, that have already launched a product and have entered the growth phase. We will invest in these companies provided they develop products and technologies that are useful to our clients or our own operations. The new investment fund represents the logical next step in our innovation and digitalisation strategy.

While digital channels are still on the rise, physical distribution continues to play an important role, with a shift towards high-quality advice. We offer our products and services through an extensive network of 260 branches and through Advice & Service Centres. A broad range of financial advisors and specialists are available to advise clients at every stage of their life. In addition, dedicated teams serve specific client segments, such as medical specialists, self-employed professionals, expats in the Netherlands and non-Dutch residents. We aim to provide seamless navigation and easy accessibility in every distribution channel. Small business clients conduct banking affairs primarily online and by telephone, but financial specialists are also available to provide in-depth advice.

Our remote advice service, allowing clients to consult their advisor by webcam six days a week, days and evenings, has shown strong growth since it was introduced several years ago. More than 15,000 webcam

meetings have been held since the service was launched. Clients in an increasing number of locations can now decide what communication channel to use for each individual step of the advisory process. We have made the most progress with this omni-channel approach in our mortgage advice and are in the process of introducing it for other bank products.

In July 2015 Retail Banking started a six-month trial using WhatsApp to provide customer service (in addition to the service already offered via Facebook, Twitter and LinkedIn). We want our clients to be able to contact the bank as quickly and easily as possible, whenever they want. As the trial was successful, we will launch the new service to all of our account holders in 2016.

Retail Banking was the first Dutch bank to launch a broker app for the intermediary channel. This new app allows the bank's intermediaries to inform their clients better and provide accurate mortgage information more quickly. Intermediaries can use the app to directly view the current status of mortgage files, interest rates and the latest news.

Product innovation and operational excellence

Retail Banking offers a full range of transparent retail banking products and services. We offer small business clients a comprehensive range of standard business banking products and services, such as cash management, lending and insurance. We continuously explore opportunities for product innovation and operational excellence.

In 2013 ABN AMRO was the first bank in the Netherlands to start issuing contactless debit cards. Contactless debit cards allow clients to pay amounts up to EUR 25 simply by holding their card against a card reader, making it no longer necessary to enter a PIN code. By the end of 2015 almost all retail clients were able to pay with contactless cards. Contactless payment terminals are also rising in number, with one in every three terminals now equipped for contactless payment. This new payment method has grown explosively, with the number of contactless payments made by ABN AMRO clients rising from around 3 million in 2014 to around 46 million in 2015.

In response to the growing demand for ultra-fast payment, Dutch banks, including ABN AMRO, announced a plan

in 2015 to facilitate instant payment within four years. This means payments will be credited to the payee's account within five seconds, twenty-four hours a day, seven days a week.

Together with other Dutch banks, we aim to start offering an online service called iDIN in 2016, which allows clients to prove their identity to online service providers. Clients who use this service will be able to use their own bank's familiar and secure login applications to identify themselves, for example to insurance companies, government authorities and webshops. With digital services on the rise, companies and institutions are experiencing a growing need for assurance about the identities of their online customers and users. Banks can offer this assurance, having previously authenticated the identity of each client when they opened a bank account.

In 2015, ICS, the credit card issuing subsidiary of ABN AMRO, launched a pilot with MasterCard to use biometric recognition technology for payment verification. Instead of using passwords, clients can pay online using fingerprint or facial recognition. The pilot was held in the Netherlands among 750 ABN AMRO credit card users.

Retail Banking started implementing a bank-wide, multi-year programme designed to optimise mortgage processes in order to increase agility and lower costs. This programme involves simplifying the mortgage product offering, digitising client processes, investing in IT systems and simplifying the governance and organisational structure. We want to enable clients to handle more of their mortgage business online, freeing up our mortgage advisors so that they can spend more time giving advice. Clients can now make additional mortgage repayments on internet banking, without having to visit a mortgage advisor. Other examples are the option to use internet banking to access mortgage data and to renew interest rates at the end of the fixed-interest period. Furthermore we introduced a new orientation tool allowing clients to calculate their maximum mortgage and expected monthly payments. This tool was rated number one by independent online market research company WUA! and has been used by more than one million clients and prospects. We will continue to make new and improved functionalities available to our clients in 2016 and 2017. Retail Banking's mortgage label Florius won the 2015

Gouden Spreekbuis award for mortgage services to intermediaries and consumers. The jury report stated that Florius is one step ahead of the competition in the area of digitising and innovating services. Digitising the mortgage process helps us put our clients' interests first.

Retail Banking also introduced new and improved mortgage products in 2015. At the beginning of the year, we started offering new mortgage clients the option to refinance residual debt. Previously, only existing clients were given this option. We also welcome freelancers for a mortgage interview after just one year of selfemployment. A large majority of self-employed people believe that it is difficult or even impossible to get a mortgage from a bank when looking to buy a home. We have specially trained our advisors to listen to the needs of self-employed clients and to help them discover what the bank has to offer them. At the end of 2015 ABN AMRO joined the Work Prospects Statement pilot – initiated by Obvion (a Dutch mortgage firm which is a subsidiary of Rabobank), Randstad (employment agency) and the Dutch homeowners' association Vereniging Eigen Huis (VEH) – to help people with flexible employment contracts to obtain a mortgage. Applicants with a work prospects statement will be assessed on the basis of their income security rather than job security. We also announced that we will offer mortgage clients interest rate averaging as soon as possible. Interest rate averaging allows clients in some cases to benefit from the current low interest rate by spreading the penalty and fees over the remaining term of their current mortgage.

Sustainable banking

As part of our commitment to build sustainable relationships with clients and to put clients' interests centre stage, we addressed material topics arising from the materiality analysis. These issues are the privacy of clients' financial transactions and the bank's mortgage policy.

We understand the importance of data protection in providing financial services. In the Netherlands, ABN AMRO is bound by the Dutch Personal Data Protection Act (Wet bescherming persoonsgegevens, Wbp). In addition, ABN AMRO has adopted Binding Corporate Rules (BCRs), a set of self-imposed rules written in consultation with several data protection

authorities. In implementing the BCRs, ABN AMRO has developed a policy that sets out the privacy principles that all staff must observe when processing personal client and employee data. Compliance with the policy is overseen by the newly established Privacy Office. We strive to guarantee the privacy of our clients' financial transactions. To evaluate our approach, we use a system for complaints handling with which we actively monitor, for instance, complaints where the client's interest is at stake and where the client believes his or her privacy has been violated.

Providing mortgages is an important element of our service to retail clients. Various stakeholders have expressed concerns about aspects of the mortgage policies pursued by ABN AMRO and other Dutch banks, which are highly influenced by laws and regulations. We communicate with our stakeholders about our mortgage policy and take their opinions and expectations into account when fine-tuning the policy. We also work with our clients to avoid residual debt and to help them meet their payments. As part of our aim to make our mortgagerelated products as widely accessible as possible, we launched a proposition targeting self-employed clients in 2015. In addition, Retail Banking offers several financial solutions, such as GreenLoans, designed to help improve the energy efficiency of our clients' homes.

We are committed to providing transparent information about our products and services. To this end, we invite clients to rate the bank's products on our website. We have received more than 4,000 reviews and ratings to date, with an average rating of 4.0 on a scale of 1 to 5 for insurance, payment and savings products.

Strategic ambitions

Retail Banking's strategic ambitions are in line with ABN AMRO's strategic priorities: enhance client centricity, invest in our future, strongly commit to a moderate risk profile, pursue selective international growth and improve profitability.

Enhance client centricity

Our ambition is to build on our client-centric approach and to be perceived as offering the best client experience among our peers, making clients the bank's ambassadors.

We aim to deliver high-quality advice through seamless multi-channel distribution. Our competitive value proposition for clients combines a personal element (highly qualified advisors), state-of-the-art technology (online banking) and broad accessibility of advice (at a branch, by telephone or via webcam). In addition, we strive to offer self-directed small business clients dedicated online services in an efficient and effective manner.

By focusing on customer loyalty, we aim to increase the business generated by existing clients. We actively involve our clients in developing and improving our services. At the same time, we seek to respond to opportunities in the market with initiatives targeting specific client groups or products.

In 2015 we started measuring our clients' opinions of our products, service and staff by means of the Net Promoter Score (NPS). We aim to enhance the client experience based on the results of the NPS. Starting in 2016, NPS will be a prominent part of all employees' KPIs.

Invest in our future

We want to build on our leading market positions and continue making investments in order to seize opportunities to better serve clients, create more value and respond to challenges posed by non-traditional banking players.

We intend to make further investments in our digital offering to address the shift in client preferences for these distribution channels and to encourage clients to use self-service channels. As part of our drive to enhance the client experience, we intend to accelerate digitalisation of key customer processes and will continue to simplify products and streamline processes and channels. We aim to stay at the forefront of technological developments and use the latest technology to enhance the client experience and boost convenience. Technology developed by Retail Banking, such as mobile and internet banking, is also available to Private Banking and Corporate Banking clients.

Retail Banking intends to invest a total of EUR 190 million between 2014 and 2017 – the majority of which in 2016 and 2017 – generating an estimated annually recurring cumulative cost savings of EUR 35 million as from 2017 onwards. These investments will be geared towards a

coherent range of measures designed to enhance the client experience and supplement the investments being made to re-engineer the IT landscape and optimise digital processes.

We will also continue to invest in the future by training front-office staff. Our goal is to enhance their professional and interpersonal skills. ABN AMRO believes that the ability to offer a full range of competitive and transparent products and services in an omni-channel environment is key to maintaining contact with clients. As the same time, we aim to make our omni-channel offering and distribution more efficient and effective. In light of the rapid digitalisation of society and increasing client preference for mobile and online banking, we expect to further reduce the number of branches in the next few years.

Strongly commit to a moderate risk profile

Retail Banking strives to maintain a stable mortgage book relative to the market. We actively managed our portfolio in 2015, aiming to strike the right balance between risk, return and volume/market share by focusing on sustainable margins for new mortgage production (mainly with the ABN AMRO, Florius and MoneYou brands) and repricing.

We continued our Carefree Living programme under which dedicated care teams and certified financial coaches actively support clients with a higher risk of arrears. Activities range from raising client awareness of their personal financial situation (e.g. with an online selfdiagnosis tool) to providing personal advice and coaching to prevent payment arrears (individual plans). While this programme's primary aim is to support clients (as part of our effort to enhance client centricity), these initiatives also help to reduce the risk and impairment levels of the overall mortgage and consumer loan portfolios.

In addition, Retail Banking aims to reduce the Loan-to-Deposit ratio to strengthen the balance sheet in line with ABN AMRO's moderate risk profile.

Pursue selective international growth

Retail Banking focuses on ABN AMRO's home market of the Netherlands. We pursue international growth selectively, mainly via the MoneYou label. MoneYou currently offers savings accounts in the Netherlands, Germany, Belgium and Austria, with 72% of its savings

Business Report

Business Report / Business review / Retail Banking

A mortgage for self-employed people

This is how we calculate income:

Qualifying income1 of your average income as self-employed

100%

90%

75%

Number of years self-employed

> 3 years 2-3 years 1-2 years

1 The full conditions are available at abnamro.nl/nl/prive/hypotheken/zzp-hypotheek/index.html You are self-employed and you want to buy a house. Many believe that it is difficult or even impossible to get a mortgage from a bank in that case. Yet more and more people are self-employed. ABN AMRO wants to cater for their specific needs and was the first bank to introduce a dedicated mortgage offering for this fast growing segment. Self-employed people can apply for an ABN AMRO mortgage after just one year of freelancing, with up to 75% of their income taken into consideration when calculating the maximum mortgage.

Many self-employed clients are doing well professionally and financially, and the longer they have been self-employed, the higher the percentage of their income taken into account. ABN AMRO has specially trained advisors to listen to the needs of self-employed and help them discover what the bank can offer them. We have introduced an online orientation tool for the self-employed and are committed to providing clarity within 48 hours on what will qualify as income to allow a swift and clear view on financing possibilities. We look at the average income from the years a client has been self-employed.

volume generated outside of the Netherlands. In the Netherlands, the MoneYou product offering also includes residential mortgages and consumer loans. In Germany, MoneYou intends to provide investment services on an execution basis only.

Improve profitability

Retail Banking has a proven track record of efficiency thanks to strict cost control, FTE reductions and channel efficiency initiatives. Given the growing use among clients of mobile and internet banking, the number of branch visits has been steadily decreasing over the past few years. In five years' time, Retail Banking has closed around half of its branches, with virtually no impact on client satisfaction.

We will focus on retaining and growing the share of wallet of the most promising clients (high contribution to income) while at the same time leveraging our broad client base by realising efficient cross-sell (selling additional products or services to existing clients).

Retail Banking's strategy is to continuously optimise risk and reward with respect to the volume, margin and market share of key products (mortgages, savings and consumer loans) using the ABN AMRO brand and other brands. We aim to have a market share of 20-25% in the Netherlands and to improve top-line revenue and cost efficiency.

Private Banking

ABN AMRO Private Banking is a modern private bank, internationally present and locally involved, that understands changing client needs while providing agile service and distinctive financial solutions to ensure true client engagement.

1

Fully integrated financial advice

And a broad array of services focused on wealth structuring, wealth protection and wealth transfer

Seamless multi-channel client servicing

In the Netherlands and is investing in order to do the same in other selected geographical markets

Overview

1

>100,000

Number of clients. Year-end 2015 present in 11 countries with > 50 offices

ABN AMRO Private Banking operates through strong local brands. The Dutch brand, ABN AMRO MeesPierson, maintained its position as market leader in the Netherlands in terms of client assets, totalling EUR 199 billion in 2015. Banque Neuflize OBC (NOBC) is our well-known private bank in France, with eleven branches in the main French cities. NOBC holds a top 4 position in the French private banking market. Bethmann Bank is a top 3 private bank in Germany, with twelve branches in the main economic regions of Germany. Private Banking is also active in Belgium, Luxembourg, the Channel Islands and in Asia and the Middle East.

Market leader in the Netherlands under the brand name ABN AMRO MeesPierson. Ranked 4th in France, 3rd in Germany and the eurozone, with a solid position in selected countries in Asia and the Middle East

A modern private bank

ABN AMRO Private Banking is a modern private bank, internationally present and locally involved, that understands changing client needs while providing agile service and distinctive financial solutions to ensure true client engagement.

To realise its ambition, Private Banking has defined five strategic drivers:

• Å We develop relevant client solutions;
• Å We innovate;
• Å We are dedicated to leadership and culture;
• Å We deliver consistent execution and risk management;
• Å We drive sustainable performance and scale.

Based on its strong commitment to putting clients' interests first, ABN AMRO Private Banking's pledge is that 'every interaction counts'.

Introduction

Strategic Report

Business Report

Enhance client centricity

Strongly committed to a moderate risk profile

Pursue selective international growth

Operating income from international activities

Improve profitability

¹ % clients rating ≥7 (scale 1 to 10).

• ² Source: TNS NIPO. ³ Percentage point change compared to 2014.
• ⁴ Source: Scorpio Partnership.
• ⁵ Consists of clients in France, Germany and Belgium.

⁶ Source: Towers Watson.

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Business description

Private Banking serves high net worth individuals with more than EUR 1 million in investable assets and ultra high net worth individuals with more than EUR 25 million in investable assets. The threshold of EUR 1 million in investable assets is expected to be lowered to EUR 500,000 in the Netherlands in the course of 2016. Private Banking is dedicated to long-term relationships and putting clients' interest first. We have put client centricity and open architecture at the heart of our identity and business model. This is the cornerstone of our long-term strategy, both in our policies and services and in the way we conduct our daily business.

Private Banking offers fully integrated financial advice and a broad array of services focused on wealth structuring, wealth protection and wealth transfer. Private Banking provides clients with a full service offering combined with tailored solutions for specific client segments. Private Banking's international network encourages knowledge sharing and expertise across borders, allowing it to provide the service best suited to its clients. Investment services range from discretionary portfolio management to investment advisory and self-directed investments ('execution only'). Our open architecture approach allows clients to benefit from a wide range of solutions provided by highly experienced and skilled asset managers. We provide lending products, including mortgages. Our specialised services include insurance, informal investment services (e.g. a matchmaking platform for clients, bringing together supply and demand for capital and coaching), philanthropy advice, art advisory and world citizen services.

Private Banking's products and services are offered through various channels. In addition to the branch network, clients in the Netherlands have access to the dedicated Private Banking Advice & Service Team with extended opening hours as well as a 24-hour call centre for basic banking needs. We offer a full range of online and mobile services in most locations and are committed to offering clients a seamless multi-channel experience. Our online and mobile channels are used for portfolio reporting and investment proposals and support our investment alerts, and are gradually being implemented across our franchise.

Private Banking currently recognises four key client segments: private wealth management (individuals with investable assets exceeding EUR 25 million), family money (family wealth acquired and to be transferred over generations), entrepreneurs (integrated services for former and active business owners), and institutions & charities (non-profit organisations). In the Netherlands, ABN AMRO MeesPierson has a fifth key segment of professionals & executives. Client segmentation enables Private Banking to develop and deliver client-centred solutions with distinctive propositions for each segment.

Private Banking has a network of strong local brands in selected geographical markets, with more than 50 branches across 10 countries at the end of 2015. This includes our Jersey office. On 30 September 2015 we announced our intention to integrate our Channel Islands activities into Guernsey. In addition, we have a branch in Spain with a small team providing local assistance to clients from other Private Banking locations. We serve clients with dedicated client service teams, consisting of a relationship manager and an investment specialist, supported by dedicated assistants and specialists in lending, mortgages, estate planning and other specialised services.

1 Informal Investment Services: matchmaking platform for our clients between supply of and demand for capital and coaching. 2 Lombard Credit: Loans fully collateralised with securities portfolios.

Business developments Market and organisational developments

ABN AMRO believes that private banking remains an attractive business, as wealth is expected to continue to grow worldwide. The private banking industry is characterised by strong competition and consolidation, driven by the need for scale to be able to address mounting regulatory requirements and increasing operating costs. In addition, clients have become more knowledgeable and demanding, and increasingly expect transparency and simplicity. Clients have access to a wide range of virtual communities and tools providing financial information. We have responded to these changes in both our strategy and organisational structure.

Client assets in Private Banking increased to EUR 199 billion at year-end 2015. Organic growth was supported by a focus on client acquisition and a more effective front office. In the Netherlands, we significantly strengthened our cooperation with Retail Banking. As a result, we have more opportunities to optimise the use of specific expertise in areas such as technology and standard banking services. We have restructured our organisation in alignment with our strategic ambitions.

On 30 September 2015 we announced our plans to integrate our private banking activities in the Channel Islands into our Guernsey operation. This move will enable us to strengthen our value proposition, leverage our scale, create synergies and simplify governance.

Other

Private Banking has initiated a programme involving a comprehensive risk-based review of client files in order to ensure that client portfolios in the various Private Banking locations meet our global standards and applicable regulations. The programme also aims to reinforce compliance with the bank's anti-money laundering policies and standards and head office oversight in accordance with the Dutch Anti-Money Laundering and Counter-Terrorist Financing Act and other applicable regulations.

Putting clients' interest first

To put the interests of our clients first, and to develop relevant value propositions, we must understand their needs. In the Netherlands, we developed 'best fit' initiatives to ensure clients receive a suitable investment proposition, and introduced harmonised risk profiles between Retail Banking and Private Banking in 2015. We also introduced the Financial Scan, helping us to maintain long-term client relationships and serving as a starting point for relevant and needs-based integrated financial advice. In addition, a dedicated Private Banking Advice & Service Team was installed to assist clients in their daily banking affairs.

We make use of the digital expertise of the Retail Banking organisation across Private Banking. The Retail Banking platform is used for the Private Banking website and app design in the Netherlands. Outside the Netherlands, we are developing an ambitious digital offering consisting of a blend of omni-channel services combined with personal interaction. Using the expertise across the bank helps us to develop innovative solutions and improves cost efficiency, time-to-market and security.

Open architecture is a key aspect of our investment service. In 2015 we introduced an innovative discretionary portfolio management solution in the form of Single Manager Mandate Funds. These funds are managed by highly experienced and skilled asset managers from renowned, external organisations. The funds are exclusively tailored to our clients' needs. In bringing this innovation to our clients, we successfully combined the expertise available within the bank in the fields of investment management and manager selection.

Although we are investing in direct channels, we aim to be close to our clients whenever possible. In the Netherlands, for example, the branch network will be expanded by five locations. Communication with clients is supported by our connecting online and offline channels. Philanthropy Advice and several basic banking services were brought online, and Institutions & Charities introduced crowdfunding for a number of clients.

Private Banking scores consistently high on client satisfaction, and 2015 was no exception. In the Netherlands, the Net Promoter Score for 2015 was up by 2 percentage points compared with 2014. Clients in our markets outside the Netherlands continue to rate us above the benchmarks on key satisfaction metrics. The European markets in particular have seen key improvements on most key satisfaction metrics, with Net Promoter Score, for example, rising 2 percentage points from 2014 to 2015.

ABN AMRO Private Banking won a number of prestigious industry awards in 2015. Professional Wealth Management/ The Banker gave ABN AMRO Private Banking prizes in three categories: 'Best Private Bank in the Netherlands', 'Highly Commended: Best Private Bank in Europe' and 'Highly Commended: Best Private Bank in Germany'. Asiamoney named ABN AMRO Private Banking '#1 Most Reputable and Financially Stable Private Bank in Asia'. ABN AMRO MeesPierson was recognised by Euromoney as 'Best private bank in the Netherlands' for the 13th consecutive year, while MT Finance 2015 awarded ABN AMRO MeesPierson a prize for 'Best wealth management & private banking' in the Netherlands. This industry recognition underlines the success of our efforts to put our clients' interests first.

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Our people

As part of our ambition to be a top class employer,we invest in our people to help them realise their full potential. Private Banking is dedicated to leadership and culture, while focusing on attracting best-in-class employees, developing inspiring leadership and promoting cross-border teamwork. These efforts are supported by a dedicated leadership programme. ABN AMRO measures the engagement of its employees by means of its yearly internal Employee Engagement Survey. Private Banking scored 77% in 2015, meaning 77% of Private Banking staff feel engaged with the bank.

We launched a training programme in 2015 for all private banking employees in the Netherlands to help them live up to our promise that 'every interaction counts'. The programme will also address the opportunities that arise from changes in the private banking environment and the impact of changes in client behaviour on the behaviour and expertise required of our employees.

Following the success of the ABN AMRO INSEAD Private Banking Certification Programme for relationship managers in 2010 to 2013, this programme was extended to investment professionals. Under this global programme, investment professionals are given the opportunity to deepen their understanding of risk and return in the current dynamic investment landscape, develop new asset allocation behaviour, reflect on broader macroeconomic trends and financial markets, and explore the ABN AMRO investment process and service models.

More than 470 investment professionals will be invited to participate in this programme between 2015 and 2017. The first sessions were held in 2015. Alumni had the opportunity to continue their education by attending four webinars in 2015, held by INSEAD professors, on current and relevant topics.

Sustainable banking

ABN AMRO seeks to offer products and services that have a positive, sustainable impact on society. We help mobilise capital for sustainable businesses, while facilitating financing of and investment in socially responsible companies. We believe that companies that take responsible and sustainable decisions are the

successful companies of the future. Facilitating such investments is one way we integrate sustainable banking into our core business.

Thorough ESG screening is part of our core investment process. As a result, none of the EUR 148.8 billion of securities we manage in Retail and Private Banking are invested in companies that are on our Controversial Weapons List. Furthermore, all securities are equipped with a 'sustainability indicator' which gives clients insight into how specific companies perform on sustainable banking and corporate responsibility. This indicator is comprised of independent data from Sustainalytics, a responsible investment firm specialised in ESG research and analysis. We added information on controversies and company policies to this sustainable banking indicator.

Total sustainable assets under administration at year-end 2015 amounted to EUR 6.4 billion. These assets include our sustainable discretionary mandates and qualified sustainable investment products, such as funds and structured products. These are all highly sustainable investments. We saw a significant increase and growing client interest in these assets in 2015.

Total sustainable assets under administration

In 2015 ABN AMRO lowered the threshold for its Sustainable Fund Mandate, making it available to retail clients and consequently allowing a larger group of clients to invest in sustainable assets.

Business Report / Business review / Private Banking

ESG criteria in investments

We are convinced that doing business with companies and other professional parties requires a responsible approach. We put our principles into practice in our investment services, by applying environmental, social and governance (ESG) criteria when assessing potential investment opportunities for our clients. This allows clients to integrate ESG considerations into their investment decisions.

Our ESG criteria are based on independent research and on our own interpretation of policies. These policies comply with international agreements such as the UN Global Compact and the UN Principles for Responsible Investment. We also take into account the OECD Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights and the standards of the International Labour Organisation. Our ESG policy framework is constantly evolving, as we develop new policies or adjust existing ones as necessary.

In 2015 we developed sustainable investment principles which incorporate the above elements and give guidance to staff on sustainable and responsible investing.

ABN AMRO engages with companies in its investment universe that have severely breached the UN Global Compact. Rather than excluding these companies, we work with Robeco SAM, an investment specialist focused on sustainable investing, to engage them in a dialogue in order to bring about improvement. If this proves unsuccessful, ABN AMRO can put the company on the Soft Exclusion List. ABN AMRO engaged with a total of twelve companies regarding environmental and social issues in 2015.

ABN AMRO continued to promote social entrepreneurship in the Netherlands in 2015 through its social impact fund by making new investments and launching a new social impact bond. Our collaboration with Social Enterprise NL was extended for another three years.We also make a positive impact through our Philanthropy Advice Solutions, a service that is rated very highly in the countries where it is offered.

Strategic ambitions

Private Banking seeks to achieve disciplined growth in a number of selected markets where it already has a sustainable presence. Our ambition is to be a modern private bank that is internationally present and locally involved; a private bank that understands clients' needs, now and in the future, while providing agile service and financial solutions.

The strategic ambitions of Private Banking are in line with ABN AMRO's strategic priorities: enhance client centricity, invest in our future, strongly commit to a moderate risk profile, pursue selective international growth and improve profitability.

Enhance client centricity

Private Banking focuses on understanding clients' needs and developing relevant value propositions for specific client segments in order to ensure client engagement and to attract new clients. We are moving towards a consistent and distinctive segmentation of all our markets. For example, we want to attract entrepreneurs and 'next generation' clients by offering these segments innovative services. Lean programmes in customer excellence and continuous improvement are helping us to increase the available commercial time of front-office staff. In addition, we intend to continue developing cross-border connectivity to leverage the network of our international markets and offer clients solutions that best match their needs. In 2016 we will prepare for implementation of the MiFID II directive. We also intend to lower the Private Banking threshold in the Netherlands to EUR 500,000 in the course of 2016 to open up our service offering to a broader group of clients. These clients will receive a service offering more tailored to their specific needs.

Invest in our future

Private Banking is developing innovative solutions that deliver a seamless multi-channel client experience and extend our sustainable product offering. We intend to build on our leading position in the Netherlands, ensuring smooth implementation of new technology. Beyond the Netherlands, we have mapped out a multi-channel strategy to continue improving our digital capabilities consistently across our markets and will start executing this strategy in 2016.

Other

Private LiveXpert

16 years lower

average age of our Private LifeXpert clients compared to other Private Banking clients

At ABN AMRO MeesPierson, we offer our clients comprehensive service, from daily banking and investment advice to advice on complex wealth issues. Personal contact is an essential aspect of our service. At the same time, thanks to social media, we are communicating more quickly and frequently. Private LiveXpert responds to this development: 100% private banking using the latest means of communication. We use state-of-the-art digital innovations to offer services such as video calls for advisory consultations with a private banker and a chat app for fast one-on-one communication over the secure Private LiveXpert app.

We surprise our clients with smart data, alerts and short videos and involve them in the development of Private LiveXpert. ABN AMRO's Private LiveXpert is a new service for existing clients that also reaches a group of new clients who are looking for a bank that meets the needs of clients who appreciate frequent and brief contact, fitting in with their lifestyle.

Strongly commit to a moderate risk profile

Private Banking delivers consistent execution and focuses on prudent risk management for its clients and the bank, while providing distinctive products, services and advice. Long-term volatility in the cost of risk is expected to be low due to strict risk acceptance and monitoring criteria and rationalisation of our product offering in alignment with the bank's moderate risk profile. We are in the process of implementing similar investment propositions across our national and international networks by applying uniform risk profiles to clients, while tailoring advice to individual client portfolios.

Pursue selective international growth

Private Banking's international ambition is twofold: to generate disciplined organic growth in line with expected annual wealth growth as estimated in industry reports, and to selectively pursue acquisitions in its existing core markets.

Improve profitability

Private Banking drives sustainable performance and scale by deepening and broadening client relationships in a cost-effective manner. We actively control costs and manage channels efficiently, and continuously optimise risk and reward parameters for our products and services.

Other

a

Corporate Banking is an established business partner of the Dutch corporate sector. Our clients are corporates in all sectors of the Dutch economy with annual turnover exceeding EUR 1 million. Internationally, we serve our domestic client base through local Dutch Desks in selective markets and through cooperation with partner banks.

Client- and capabilityled international strategy

With a focus on three specialities ECT Clients, Clearing and asset based financing

>1 m Annual turnover

70,000

Number of corporate clients

International presence

In the key financial and logistical hubs

Overview

Corporate Banking is strongly committed to the Netherlands, where we offer our clients a broad range of standard and tailormade products and services based on in-depth client and sector knowledge. Our clients are corporates in all sectors of the Dutch economy with annual turnover exceeding EUR 1 million.

We have a client- and capability-led international strategy that focuses on three specialities for which we operate in selective markets: (i) serving clients that are internationally active in the energy, commodities and transportation sectors (ECT Clients), (ii) clearing activities in more than 150 liquidity centres worldwide and (iii) asset-based financing (consisting of commercial finance and lease).

Our key strengths are our existing leading market positions and strong brand name, relationship-driven business model combined with a dedicated sector approach, strong focus on risk management, resilient revenues and proven management track record.

We launched several initiatives in 2015 that further enhanced client centricity: we strengthened our sector-based organisation and increased the in-depth sector knowledge across Corporate Banking, and we pursued controlled international growth in selective markets abroad.

Looking ahead, we believe that our key strengths form a solid foundation for adapting to the challenges presented by changing client needs, economic conditions and increased competition and regulation.

Enhance client centricity

² Source: TNS NIPO.

• ³ In 2016 the client satisfaction surveys of former Business Banking Clients and former Corporate Clients will be aligned with the current set-up of Commercial Clients.
• ⁵ NPS for Corporate Banking is composed of the NPS results of former Business Banking Clients, former Corporate Clients, Public Sector Clients, Large Corporates and ECT Clients weighted by actual operating income. The set-up of the NPS surveys differs among the business lines.
• ⁷ Source: Towers Watson.
• ⁸ Global Sustainability Risk Index (GSRI) is used to assess credit applications on environmental, social and ethical (ESE) aspects.

Business description

Corporate Banking is organised into three business lines: Commercial Clients, International Clients and Capital

Markets Solutions. Each business line offers a tailored business proposition to clients and is supported by a central department, Products & Business Development.

ABN AMRO Lease

• Financial Institutions
• Diamond & Jewellery Clients

Commercial Clients serves Dutch clients that have annual turnover between EUR 1 million and EUR 250 million, as well as clients in the Dutch real estate and public sectors. In addition, Commercial Clients offers asset-based financing to corporates in the Netherlands, Belgium (cross-border), France, Germany and the United Kingdom through its subsidiaries ABN AMRO Lease and ABN AMRO Commercial Finance. International Clients offers integrated financial and strategic advice and solutions to Netherlandsbased Large Corporate clients that have annual turnover of at least EUR 250 million. International Clients also serves clients of ECT Clients, Financial Institutions and Diamond & Jewellery Clients internationally. Capital Markets Solutions

consists of Sales & Trading and ABN AMRO Clearing. Sales & Trading offers capital markets products that play an essential role for Corporate Banking clients and partners within the bank (such as the Asset & Liability Management and Treasury departments and Private Banking). In this way, Sales & Trading aims to contribute to client relationships. ABN AMRO Clearing intermediates in the international capital markets with a client base of investors, corporates and liquidity providers.

Corporate Banking offers its clients a broad range of standard and tailor-made products and services (see below) based on client needs and annual turnover.

Strategic Report

	Commercial Clients International Clients					Capital Market Solutions
Product	Corporates	Real Estate & Public Sector Clients	Commercial Finance/ Lease Clients	Large Corporates	ECT Clients	Financial Institutions	Diamond & Jewellery Clients	Clearing Clients
Asset-based solutions	•	•	•	•	•	•	•1
Capital markets products				•	•	•
Cash and liquidity management	•	•		•	•	•	•
Clearing				•	•	•		•
Commercial lending	•	•		•	•	•	•
Debt solutions	•	•		•	•	•	•
Equity participations	•			•	•
Financing products				•	•	•		•
Investment products				•	•	•
M&A/ECM	•	•		•	•	•	•
Risk management products	•	•		•	•	•	•
Trade finance	•	•		•	•	•	•

Product offering Corporate Banking

1 No Lease and Commercial Finance.

The Commercial Clients and International Clients business lines combine client centricity with a sector-oriented organisation. The Corporate Banking organisation has been tailored to serve its clients in 15 different industry sectors (see table below). We offer clients tailored service based on their needs, annual turnover and earnings potential, enhancing the quality of advice. Clients have been assigned a relationship manager or a client service team consisting of a relationship banker and product and sector specialists. These relationship managers and client service teams have in-depth knowledge of their clients' activities and industries because most of their portfolios contain clients in a limited number of sectors. The sector expertise of relationship managers is supported by ABN AMRO's knowledge centres, Sector Advisory and Economic Research. In addition, cross-business line teams for all 15 industry sectors have been established to ensure knowledge-sharing. Moreover, our sector orientation has been adopted by our Risk Management and Financial Restructuring & Recovery departments. We believe that clients benefit from an in-depth understanding of their needs, activities and sectors. Our dedicated sectororiented organisation helps limit impairments as it increases in-depth client and sector knowledge and the understanding of sector-specific risks.

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We are convinced that doing business with companies and other professional parties requires a responsible approach. We put our principles into practice in our corporate lending activities, by applying environmental, social and ethical (ESE) standards to clients who operate in industries that are exposed to sustainability risks. These standards are integrated into the assessment process for our corporate lending activities. In this way, we systematically identify potential sustainability risks and assess whether they can be adequately managed by our clients. Our ESE standards reflect the risk profile of specific industries: if an industry has a high risk profile, we intensify our due diligence efforts and require our clients to put in place thorough sustainable risk management procedures.

Our ESE criteria are based on international treaties and voluntary agreements, such as the UN Global Compact, the OECD Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights and the standards of the International Labour Organisation.

In the Netherlands Corporate Banking serves Dutch-based clients with annual turnover between EUR 1 million and EUR 250 million through its five regional units, including 22 regional sub-units. Netherlands-based clients with annual turnover exceeding EUR 250 million are served by our Amsterdam office. In addition, Corporate Banking serves commercial real estate clients (Amsterdam) and public sector clients (Utrecht) through its two central units. All clients have access to a dedicated and professional support unit for their day-to-day banking affairs.

Corporate Banking has a selective international network that is consistent with its clients' financial needs abroad and with the three specialities in which Corporate Banking has a long track record. Domestic clients that are internationally active are served by local Dutch Desks in selective markets (i.e. Belgium, France, Germany, the United Kingdom, Hong Kong, Singapore and the United States). To extend the Group's international cash management offering to countries where it has no or limited presence, Corporate Banking cooperates with partner banks to serve its clients. Furthermore, Corporate Banking's international presence is aligned with the focus on its three international specialities. Clients of ECT Clients are served from major logistical and financial hubs, i.e. Amsterdam, Rotterdam, Athens, Moscow, Oslo, Dallas, New York, São Paulo, Dubai, Hong Kong, Shanghai and Singapore. ABN AMRO Clearing offers global market access and clearing services in more than 150 liquidity centres worldwide. In asset-based financing, ABN AMRO Commercial Finance and ABN AMRO Lease offer assetbased solutions in Belgium (cross-border), Germany, the United Kingdom and France (Commercial Finance only).

Sales & Trading (part of Capital Markets Solutions) is instrumental in our efforts to strengthen the relationship with our clients as their principal bank. This business line offers capital markets products and services to, in particular, Corporate Banking clients (see also the product offering table). We have a sales and trading presence in the Netherlands and the United States, and sales desks (no trading services) in France, Germany, Norway, the United Kingdom and Singapore.

Business developments Putting clients' interest first

To meet our clients' changing needs, we have further enhanced our focus on putting our clients' interest first throughout the Corporate Banking organisation. We believe that enhancing client centricity will lead to long-lasting relationships and make clients promoters of Corporate Banking.

Further embedding the sector orientation

By focusing on our sector orientation, we want to add more value and further improve our position as a strategic partner for our clients. We took further steps in 2015 to implement the sector approach across Corporate Banking. At the end of 2015, we started reorganising the portfolios of Commercial Clients relationship managers. Eighty-five per cent of the portfolios managed by a relationship manager will consist of clients in only one sector.

Our sector orientation is also visible in the way we address sustainability topics that are material to our business activities. In 2015 the following sectors mapped out a business plan for integrating sustainable banking into their activities by means of KPIs: ECT Clients, Real Estate Clients and the Transportation & Logistics sector.

Business Report

Business Report / Business review / Corporate Banking

Products & channels

We continued to enhance client centricity in 2015 by introducing several new products. For example, in transaction banking we launched a new selection of corporate saving accounts, foreign ABN AMRO accounts (Payments Eigen Netwerk) and e-Mandates. The latter solution supports the legally valid collection of electronic mandates. ABN AMRO also set up a joint venture in order to develop a merchant services proposition. This proposition is based on omni-channel service, offering clients a wide range of physical and electronic payment methods. The target date for launching this service is the first quarter of 2016.

Furthermore, ABN AMRO participated in the launch of a new government guarantee for the shipbuilding industry (Garantie Scheepsnieuwbouwfinanciering) and the set-up of a new club deal structure with Robeco (Bedrijfsleningen Fonds). Our Targeted Long Term Refinancing Operations (TLTRO) programme, which passes on the advantage of favourable ECB funding directly to our clients, was extended to run for the full year. Corporate Banking launched the Online Credit Indication (OKI), enabling clients to apply for a loan through online channels using Standard Business Reporting. Towards the end of 2015, we signed a first covenant with a selected and screened alternative finance provider, helping our clients on their way when additional (risk-bearing) funding is required.

ABN AMRO seeks to offer clients products and services that have a positive, sustainable impact on society. We help mobilise capital for sustainable businesses, while facilitating financing of, and investment in, responsible companies and projects. This is one way we integrate sustainable banking into our core business. In September 2015, ABN AMRO announced that it had become a Climate Bonds Partner and that it is pursuing growth on the green property bond market. ABN AMRO is taking a leading role to further develop the green bond market for its clients. We have been a member of the Green Bond Principles since its founding year and are a founding member of the GRESB Green Bond working group. In June 2015, ABN AMRO issued the largest Certified Climate Bond to date – worth a total of EUR 500 million – the proceeds of which are earmarked for loans to fund

low-carbon residential mortgages, commercial real estate and solar panels on existing residential real estate. In addition to these various initiatives, ABN AMRO ECT Clients is involved in many roundtables and committees (including the Roundtable on Sustainable Palm Oil, Sustainable Shipping Initiative and the Equator Principles).

One of Corporate Banking's focus initiatives in 2015 was to design a digital strategy for the coming years. We see increasing client demand for digital and self-service banking. One of the ways we are developing our digital offering is by working together with innovative fintech companies. To emphasise our commitment to these partners, ABN AMRO launched a Digital Impact Fund and invested EUR 10 million in the fund. The goal of this fund is to invest in start-ups specialising in the digitisation of financial products and services and to support ABN AMRO in further enhancing our digital client proposition.

Client recognition

The awards we won in 2015 are a recognition of our efforts to put clients' interests first. ABN AMRO regained its position as best equity bank in the Benelux region (Euromoney). Moreover, our number one position in the annual Thomson Reuters Extel Awards is a clear reflection of how much our services as an equity broker are valued by our own clients. Also, in October 2015 MT Finance Magazine ranked ABN AMRO Corporate Banking number 1 in 5 categories: Corporate Asset Management, Cash Management – Payments, Credit Management, Factoring and Collections, Corporate Finance and Risk Management. Examples of awards won by ECT Clients are Best Commodity Trade Finance Bank in Asia-Pacific and the Netherlands and number 2 Global Commodity Bank.

We measure our client satisfaction and the Net Promoter Score per client segment. According to a survey by TNS NIPO, client satisfaction showed positive results, with 68% of the former Business Banking Clients and 92% of the former Corporate Clients giving scores of 7 or higher.1 In the Dutch large corporates segment ABN AMRO is joint Quality Leader for Large Corporate Banking and the number 1 for Large Corporate Cash Management as measured by the Greenwich 2015 survey. The change in

¹ In 2016 the client satisfaction surveys of former Business Banking Clients and former Corporate Clients will be aligned with the current set-up of Commercial Clients.

Business Report

the aggregated Net Promoter Score for Corporate Banking1 was -2 percentage points, compared to the score for 2014.

Review of interest rate derivatives files

Since 2014, there has been a public debate in the Netherlands on a bank's duty of care towards SMEs with respect to interest rate derivatives. ABN AMRO has entered into interest rate derivatives with approximately 4,500 SME clients in combination with floating interest rate loans. These SME clients entered into an interest rate derivative with the purpose of fixing their interest rate risk on their floating rate loans. A combination of a floating interest rate loan together with an interest rate swap was less expensive for the clients than the alternative of a loan with a fixed interest rate. As a result of the decline in interest rates, the interest rate swaps have a negative mark-to-market value. There are no negative consequences for clients as long as the loan is not repaid, in whole or in part, prior to its maturity date. Some SME clients needed or wanted to repay their floating interest rate loans prior to their maturity date. As a consequence, the interest rate swap needed to be unwound in order to assure that no overhedge was created. As a result of the declining floating interest rates, the interest rate derivatives had a negative mark-to-market value. In line with standard market practice, the SME clients had to pay the bank the negative mark-to-market value of the interest rate swap. The negative mark-to-market value may be compared to the penalty interest on a fixed rate loan. The bank received several complaints and some clients and/or interest groups instigated legal proceedings about the bank's alleged violation of its duty of care, for instance that the bank did not properly inform them of the risks associated with interest rate swaps. In some of these cases, the client's claim was denied. In some other cases, the bank paid compensation to the client. For litigation in relation to SME derivatives, the bank does not recognise provisions for claims that do not meet the recognition and/ or measurement criteria. There can be no assurance that additional proceedings will not be brought or that the amount demanded in claims brought to date will not rise. Current proceedings are pending and their outcome is uncertain. The uncertainties are likely to continue for some time. In conclusion, claims in relation to the alleged breach of the duty of care remain contingent.

At the request of the AFM, a dedicated project team within the bank, with the assistance of external specialists and in regular consultation with the AFM, has been reviewing our SME client files containing interest rate derivatives. The objective of this review is to determine whether the bank acted in accordance with the laws and regulations applicable at that time and, if necessary, to offer the relevant clients a solution. Based on the outcome of this review, ABN AMRO recognised a provision at year-end, details of which are included in to the Consolidated Annual Financial Statements note 28, Provisions.

In December 2015 the AFM concluded that some aspects of the reviews banks were conducting would need to be amended. The AFM installed a taskforce with the objective to arrive at a uniform solution for all clients and banks. On March 1 2016, the AFM published a press release and a letter addressed to the Dutch Minister of Finance advising him to appoint a panel of independent experts. These experts, in cooperation with the banks involved, will try to determine a uniform recovery framework which will serve as a benchmark with which banks will need to re-perform all client file reviews. This may lead to revised compensation solutions for clients. The uniform recovery framework is expected to be finalised by mid-2016. ABN AMRO will consult with the panel of independent experts to determine how these changes will affect ABN AMRO's review process. As a result, the future review process may change and parameters for future compensation levels may increase. This may impact the scope of the contracts that require compensation as well as the level of compensation per contract. As this is a possible liability dependent on a future event, there is no provision for this possible outflow of resources and it is therefore considered a contingency. More details are provided in the Consolidated Annual Financial Statements, note 33 Commitments and contingent liabilities.

Reliable and Responsible Banking

In 2015 the Reliable and Responsible Banking programme began at Corporate Banking, alongside the programmes at Retail and Private Banking and Private Banking

¹ Source: NPS for Corporate Banking is composed of the NPS results of former Business Banking Clients, former Corporate Clients, Public Sector Clients, Large Corporates and ECT Clients weighted by actual operating income. The set-up of the NPS surveys differs amongst the business lines.

Business Report / Business review / Corporate Banking

International. The programme aims to ensure that consistent client acceptance standards are applied across segments, to upgrade relevant client acceptance and anti-money laundering policies, to raise awareness among staff, and to improve the quality of documentation in client due diligence files and the associated risk assessment. Regulators are tightening up the requirements for clear and accessible documentation of data. Moreover, documented and accessible client information is crucial in order to deliver relevant and suitable advice through all channels.

Regulatory changes

The current banking landscape is affected by ongoing regulatory changes. The evolving regulatory and supervisory landscape in the European Union is challenging for banks as initiatives to further integrate European financial markets will be implemented in the coming years (such as MiFID II, Basel IV, CDR and PSD II). We started various initiatives in 2015 to ensure we comply with all legislation and to assess the impact on our business and opportunities.

For example, in 2015 we developed a strategy to address the revised European payment services directive (PSD II). This directive will introduce additional requirements with respect to payment services in the European Economic Area. Banks will be obliged to allow access to their customers' accounts to third-party payment services providers offering payment initiation services or account information services. The bank supports the greater transparency intentions of PSD II. Towards the implementation of the PSD II Directive, there are a number of client privacy considerations that need more clarification and guidance.

Strict credit risk management

ABN AMRO works according to the three lines of defence risk management model. As the first line of defence, Corporate Banking is primarily responsible for the risk that it takes, the results, execution, compliance and effectiveness of risk control. Corporate Banking has a strong focus on risk management to help it maintain a moderate risk profile in line with the bank's risk appetite. Risk Management and Corporate Banking have made various changes to strengthen the bank's credit policy in recent years, such as tightening acceptance criteria for real estate finance, lower loan-to-values, stricter borrowing base criteria and the rejection of credit applications for new clients below certain internal ratings.

Commercial Clients conducted a successful pilot of the DNA project (Detect 'N Act) in 2015. The project aims to enhance credit management and transform credit control from time-based to risk-based. DNA enables us to increase monitoring of early warning signals, to improve and standardise the client assessment procedure and to reduce risks by undertaking action in a systematic way. As a result, we can address financial issues in a timely manner and find relevant solutions together with our clients. Following the successful pilot, we have decided to further implement DNA within Commercial Clients.

As the Dutch economy is recovering, impairments in the Netherlands are decreasing. ECT Clients operates in cyclical sectors. This cyclicality is carefully considered in relation to lending policies, financing structures, advance rates and risk management. As market circumstances are challenging for some of the clients in the ECT sectors, close monitoring of the impact of these developments is required. The bank periodically performs sensitivity analyses and stress testing exercises to gain insight into the credit performance under price scenarios, economic scenarios and risk measures. Developments in commodity prices, and specifically in oil and gas, are under continued close risk management attention and stringent credit monitoring.

ABN AMRO has a published energy policy with very strict criteria for financing coal-fired power plants. ABN AMRO has not provided any new direct lending to coal-fired power plants since 2007. Credit policies are updated on a regular basis and/or in response to changing circumstances. In addition, our ESE policy framework is constantly evolving. We develop new policies or adjust existing ones based, among other things, on feedback and input from stakeholders, if any gaps become evident or if new developments take place. To accommodate improvements in our ESE standards, we hosted a stakeholder meeting in 2015 where we discussed our ESE criteria with key stakeholders. Employees are trained to apply ESE criteria by means of the Learn2Sustain game.

In addition to the rollout of the Sustainability Management Operating System (SMOS) for International Clients in 2014, we introduced the Global Sustainability Risk Index (GSRI) for Commercial Clients in October 2015. The tool helps us determine the sustainability risk involved in lending to specific clients. When we receive

Business Report / Business review / Corporate Banking

a credit application, we perform a risk assessment consisting of a total of ten to fifteen questions, based on the company's AGIC code and the country where the company is established. These questions always vary according to country and sector and are based on the ABN AMRO sustainability policies and interviews with clients and sustainability and sector experts. The sustainability questions focus on four aspects: compliance, commitment, capacity and the client's track record (CCCT).

As part of its sustainable banking ambition, Clearing introduced a sustainability screening questionnaire in the summer of 2015. The questionnaire is part of the client due diligence and onboarding procedure and covers social themes. The client's answers give Clearing a comprehensive picture of the client's potential sustainability risks. All potential clients are screened, and existing clients are screened either annually or once every three years.

International developments

ABN AMRO aims to grow its international business to 20-25% of operating income by 2017. In 2015, 25% of Corporate Banking's operating income was generated internationally. Several Corporate Banking initiatives contributed to the bank-wide international growth ambition in 2015.

ABN AMRO has been present in Shanghai with a representative office since April 2012. In January 2016 ABN AMRO received all necessary approvals from the regulators to open a branch office for its ECT Clients business.

Financial Institutions aims to build on the commercial successes and track record in the Dutch insurance sector and has therefore established local relationship management units in the major Western European financial centres of London, Frankfurt and Paris. These relationship bankers will focus on local insurance companies and asset managers.

In 2015, we sold our diamond and jewellery activities in India to IndusInd Bank Limited. These activities were conducted under cohabitation with Royal Bank of Scotland in India. ABN AMRO and IndusInd Bank agreed to enter into a partner banking agreement to continue their cooperation in diamond and jewellery activities in India.

Clearing benefited from the volatile market circumstances in 2015 and further expanded its business offering by going live on the Brazil equity market.

ABN AMRO Lease further developed the branches in the United Kingdom and Germany that were opened in 2014. The company has been successful in recruiting local staff with in-depth industry expertise and a relevant network in the local leasing markets. Double-digit growth was achieved in both countries.

In 2015, ABN AMRO Commercial Finance improved its asset-based cross-border financing solutions for international clients with subsidiaries in Europe. This resulted in a number of interesting asset-based structured deals with international clients.

Strategic ambitions

Our overall ambition is to be the strategic business partner to the Dutch corporate sector, guided by our strong domestic and focused international strategy. Our strategy is aligned with the five strategic priorities of ABN AMRO: (1) enhance client centricity, (2) invest in our future, (3) strongly commit to a moderate risk profile, (4) pursue selective international growth and (5) improve profitability.

Enhance client centricity

To enhance client centricity, we aim to further strengthen our sector-based organisation and to increase our in-depth sector knowledge across the entire Corporate Banking organisation. This allows us to be a distinctive strategic partner for our clients and deliver first-rate service by understanding the client's business and performance. By improving our service offering to clients and focusing on client centricity, we aim to realise our ambition to make every client a promoter of Corporate Banking.

Invest in our future

We intend to invest in our future by pursuing standardisation, straight-through processing and flawless execution of business processes, in part by investing in our IT infrastructure and by enhancing our service offering through new partnerships. We also aim to further embed sustainable banking in our daily operations and to further invest in passionate professionals by enhancing the

78

Digital Impact Fund

Engagement ratio on average during our campaign, compared with other times

EUR 10 million

More and more innovative start-ups are developing digital financial products and services that could benefit our retail and corporate clients. ABN AMRO is eager to work with promising fintechs and is investing EUR 10 million in these start-ups through the Digital Impact Fund.

Our collaboration with fintech start-ups means our clients benefit from smart innovations to our service, helping us to improve, among other things, our mobile apps and client portals. We are investing more than just growth capital; we also make our network, expertise and systems available to leverage the new and innovative services from the start-ups.

Investments range between

EUR 0.25-1.5 million

empowerment, knowledge, skills, development and working environment of our employees.

Strongly commit to a moderate risk profile

We are strongly committed to maintaining a moderate risk profile, in line with the bank's risk appetite. To this end, Corporate Banking has a strict credit policy and executes this policy in a highly disciplined manner. To further strengthen our moderate risk profile, we continue to focus on asset-based financing, a sustainable loan-to-deposit ratio and risk-return capital allocation.

Pursue selective international growth

We pursue controlled and capability-led international growth in serving clients of ECT Clients from the major logistical and financial hubs and asset-based financing (through ABN AMRO Lease and ABN AMRO Commercial Finance) in Western Europe. We explore other opportunities for moderate international growth while focusing on building on our existing product expertise and specific sector knowledge.

As critical mass has been reached for ECT Clients, future growth is expected to be more gradual, with a continued focus on disciplined return on equity and a moderate risk profile. We also intend to broaden existing client relationships based on fee income and cross-sell.

Improve profitability

We aim to improve profitability by maintaining our focus on revenue growth, increasing cost efficiencies and pursuing stringent risk-reward steering. As part of our efforts to improve profitability, we actively applied -- and will continue to apply -- repricing. We will continue our efforts to increase our cost efficiency and to improve operational efficiency. Corporate Banking also pursues stringent risk-reward management, focusing on effective allocation of capital within the business lines to improve return on equity and to offer a profitable overall client proposition.

Group Functions

Group Functions supports and controls all group-wide business activities. Its main focus areas include realisation of the Group's long-term strategy by means of management control, compliance with regulations, and second and third line responsibilities.

Overview

Group Functions is organised into four main departments, each of which is headed by a member of the Managing Board: Finance, Risk Management & Strategy (RM&S), People, Regulations & Identity (PR&I) and Technology, Operations & Property Services (TOPS). Group Audit and the Corporate Office are also part of

Group Functions. Group Audit reports to the Chairman of the Managing Board, and the head of Group Audit has direct access to the Chairman of the Audit Committee. The majority of Group Functions' costs are allocated to the business segments.

Business Report / Business review / Group Functions

Technology, Operations & Property Services (TOPS)

TOPS supports the Group by providing services in the areas of IT (software and hardware), operations, facility management, information security, procurement, and programme or project management in the Netherlands and internationally. TOPS consists of the following main departments: Business Services, TOPS IT and Chief Architecture & Data Management (CADM). Three Chief Operating Officer departments (COO Departments) coordinate matters between TOPS and Retail Banking, Private Banking, Corporate Banking and Group Functions.

TOPS IT ensures the daily operation of IT systems used by clients and employees, designs and develops IT solutions and maintains the service quality of systems and infrastructure. The Group has a widely centralised and integrated IT infrastructure and application landscape with two central data centres, optimising synergies and cross-business line use by customers.

Business Services is the overarching Group-wide department consisting of Operations, International Business Services (IBS), Property Services and Procurement. Business Services also oversees the activities of Stater, an independent mortgage service provider in the Netherlands that is owned by the Group and provides back-office and mid-office administrative and transaction processing services. Operations is responsible for processing transactions by or with clients, mutations in client contracts or relationships and administrative processing of products and services. IBS provides all Business Services-related services to offices abroad. Property Services (also known as Facility Management) provides housing, facility and logistical services.

CADM defines and safeguards the use of data models, data and IT architecture framework and data quality within the Group. Alignment between the business lines and TOPS is required in order to set standards of architecture and to adhere to the agreed standards. CADM is also responsible for safeguarding standards in the event of changes, including monitoring realisation of the desired target IT architecture.

COO departments use a business process management method to manage the entire end-to-end value chain of service delivery to clients and business lines in areas including payments, credits, trade finance, securities and savings. The COO departments are responsible for end-to-end daily operations and management of changes to these chains, coordinating IT demand and their respective IT portfolio management, and ensuring successful delivery of strategic and tactical projects and their budgets.

TOPS 2020 IT Programme

The Group expects technological advancements to lead to significant changes in client expectations in the near future. We believe that personal financial management tools will become a crucial basic functionality for clients as they adopt a more digital lifestyle. We therefore expect that clients will increasingly switch to online banking channels. The success of the introduction of the mobile banking app in the Netherlands in 2011 confirms this rapid adoption of web-based services by Dutch consumers.

The Group's current IT infrastructure is stable and solid, but complex. As a result, maintenance costs are relatively high. More importantly, a complex infrastucture reduces our agility in responding quickly to market trends and new innovations. The Group aims to create a more competitive client experience in a constantly changing environment and to deliver agile, seamless and fully web-based client processes via the internet and mobile applications. The Group therefore intends to continue investing in IT.

An important part of TOPS 2020 involves upgrading the two data centres in the Netherlands with cloud technology, enabling computing resources, such as servers, storage and applications, to be accessed and shared as virtual resources in a secure and scalable manner. The aim is to create an on-premise dedicated private cloud infrastructure for the Group based on industry standards adopted by IBM which will (i) run in the Group's data centres and store client and other data, and (ii) offer a uniform and secured proprietary computing architecture to provide hosted services to the Group's business. Updating to cloud technology is an important step in implementing a more effective and agile IT architecture for the Group to support new business initiatives.

Business Report

Other

Moving to our private cloud

around 300 applications

will migrate to the cloud by the end of 2016

On-demand network access provided by cloud computing to a shared pool of computing resources on a 'pay per use' basis

Our on-premise, private cloud got up and running in 2015. This environment is located in our own data centres and can only be accessed by ABN AMRO. This gives us total control over data and secures the privacy of our clients, while being compliant with the regulatory requirements set by the AFM and the ECB.

The main benefits of working in the cloud are:

• Å Rapid availability of computing resources, with self-service to be introduced in the future
• Å High scalability of computing resources, accommodating a varying workload
• Å High utilisation of computing resources, with 'pay per use' reducing operational costs

We will improve the cloud in 2016, for example by lowering provisioning times and introducing a service portal.

Several important steps were taken this past year in our roadmap towards 2020. In 2015 we installed an on-premise dedicated private cloud and migrated the first applications to this environment. In parallel, we continued rationalising our IT landscape by decommissioning approximately 650 applications.

Our organisation's environmental impact

The direct environmental impact of financial services providers is rather limited given the nature of their activities. ABN AMRO's direct impact on the environment consists primarily of the bank's energy consumption, carbon emissions through its car fleet (lease cars) and waste generation. In Property Services, we are concentrating our efforts on reducing our energy consumption and waste generation, and are using Dutch wind power by purchasing Guarantees of Origin. In addition, we are focusing on the circularity of the materials we use. We track energy consumption, waste production and use of material at our branches and offices in order to make continuous

improvements. Having developed significant expertise in sustainable buildings, we are actively sharing our knowledge with our clients and suppliers.

• Å We obtained the first BREEAM Excellent In-Use certificate for the Gustav Mahlerlaan office in Amsterdam for a building of this size, acquiring the highest total score in the Netherlands;
• Å Our Alkmaar branch is now fully energy-neutral;
• Å 100% of our electricity demand is met by wind energy, in 2014 with wind generated in Europe and in 2015 with wind generated in the Netherlands.

Introduction

Business Report / Business review / Group Functions

Direct environmental impact1

	2015	2014
Energy consumption in kWh
Total consumption	168,227,418	173,647,075
- per m2	273	273
- per FTE	10,634	11,030
Waste
Total (in tonnes)	2,869	3,217
- per FTE (in kg)	181	204

¹ All figures are for the Netherlands only.

Finance

Finance helps keep the Group on track to achieve the goals defined in its long-term strategy. Finance is the primary supplier of management and reporting information to the Group's internal and external stakeholders. It plays an independent role in delivering management information and challenging business decisions. Finance provides a strong financial control environment and ensures compliance with accounting standards and requirements set by the regulatory authorities. Finance consists of the following main departments: Financial Accounting, Controlling, ALM, Treasury and Tax.

Financial Accounting is responsible for the financial accounting, consolidation and reporting function for the Group as a whole (i.e. operating income, operating expenses and balance sheet recognition), ensuring transparent and efficient delivery of financial data to internal and external stakeholders. Financial Accounting ensures that correct and complete financial data relating to the Group is received, processed, recorded, analysed, consolidated and reported in a timely manner. Financial Accounting also provides an accurate, timely and complete handling of incoming and outgoing invoices, statements and company cards.

Controlling is responsible for management accounting and management information (i.e. delivering monthly reports and analyses to all relevant organisational levels of the Group, including the Managing Board, Supervisory Board, the Group's various business segments and account managers). Controlling is also responsible for supervising the Group-wide management control cycle, including budgeting and forecasting, and for independently challenging the implementation of the Group's strategy, not only at corporate level but also within the business segments. To this end, Controlling's Business CFOs liaise with all business Management Teams.

ALM is responsible for managing the Group's balance sheet with respect to interest rate risk, liquidity risk and capital adequacy. In accordance with Group policy, ALM centrally manages the interest rate risk and liquidity risk run by the Group's business lines enabling them to fully focus on their commercial tasks and credit risk management. By applying a funds transfer pricing methodology, the Group's business lines transfer risks to ALM so that ALM can provide them with a stable margin that is not affected by movements in interest rates or liquidity spreads. ALM performs long-term capital, liquidity and interest rate risk planning, taking into account expected developments within the business lines and anticipating regulatory developments. ALM also liaises with RM&S to ensure that the Group's risk appetite is in line with its corporate strategy and manages the balance sheet in line with the Group's moderate risk profile.

Other

Treasury is responsible for executing the Group's liquidity, collateral, capital and interest rate risk position. Treasury is the lender of last resort for the daily funding need of several business lines (National & International Money Markets Desk) and is responsible for maintaining and executing all secured and unsecured programmes. Treasury manages the Group's cash position and interest risk in all currencies up to one year through its Money Markets Desk. Treasury is also involved in structuring and raising capital and funding for the Group through, among other things, capital instruments, unsecured funding transactions, securitisations, covered bonds and long-term repo transactions. Treasury manages the Group's investment and collateral portfolio (including the Group's liquidity buffer) and is involved in securities financing where securities are temporarily transferred or financed against collateral (reverse repo, securities borrowing and lending, sell and buy back, securities financing transaction).

Tax is responsible for the Group's tax declarations and controls the Group's tax positions worldwide within the defined risk profile and applicable tax regulations. The Tax department plays a role in many business processes. A specific tax control framework enables Tax to have control over tax risks within the Group. The Group's tax control framework is an internal control instrument focused specifically on the business's tax function and contains control procedures and policies. Tax works within the boundaries of the Group's risk profile to optimise tax rates.

Risk Management & Strategy (RM&S)

A strong, sustainable bank relies on sound risk management. Risk management is a core and vital competence at the heart of our bank. We have a risk culture in which all members of staff understand risk and act accordingly. The bank's moderate risk profile is a pivotal element of our corporate strategy and is reflected in our clean and strong balance sheet.

The bank works according to the three lines of defence risk management model. This model is generally accepted as the best practice standard for risk management in the financial industry and makes risk management the responsibility of every employee of the bank. It enhances risk awareness and promotes the bank's risk culture. The Risk, funding & capital Management section of this report further elaborates on this model.

Risk Management & Strategy (RM&S) secures a sound risk/return ratio based on a moderate risk profile. The bank-wide risk appetite determines our moderate risk profile. All different events or risk types to which the bank is exposed are defined and categorised in the risk taxonomy. Risk Management identifies and manages all of the risk types classified in the risk taxonomy. The RM&S organisation consists of Risk Management departments, Group Economics and Strategy & Corporate Development. ALM/Treasury risk was further embedded in the risk organisation to strengthen the second line of ALM and Treasury and to ensure that ABN AMRO's risk appetite is in line with the bank's corporate strategy and capital position, taking into consideration the economic outlook and activities of ALM and Treasury.

For our views on the economic environment, refer to the Economic environment section of this report. For an explanation of our strategic priorities, an explanation of our risk governance and portfolio developments, refer to the Risk, funding & capital Report.

People, Regulations & Identity (PR&I)

The primary responsibility of PR&I is to help the Group's businesses put clients centre stage. PR&I consists of five departments: Human Resources, Compliance & Conduct, Legal, Security & Intelligence Management and Communications & Sustainability. To help the Group pursue its ambition to invest in the future, PR&I has formulated and implemented two main strategies Group-wide: (i) Top Class Employer and (ii) Sustainability.

Other

Human Resources is dedicated to implementing the Top Class Employer strategy and is responsible for managing and implementing human resources strategies across all business segments. Working in partnership with the businesses to meet their goals, Human Resources advises and supports management on people and organisation-related issues, such as staff operations planning, recruitment, retention, benefits and reward management, performance management, employee development, and culture and leadership.

Compliance & Conduct provides independent oversight and control on behalf of senior management and the Managing Board of the core processes, policies and procedures that are designed to ensure that the Group complies with general and industry-specific laws and regulations, both in letter and in spirit, thereby helping to protect the Group's reputation. Compliance & Conduct advises and supports the organisation with the implementation of laws and regulations. It acts as a navigator for good conduct by promoting a culture in which all employees feel responsible for maintaining compliance and fosters an environment in which staff are comfortable escalating concerns about conduct or potential non-compliance with regulations. The function includes a dedicated monitoring and reporting team to support senior management and the Managing Board in effectively identifying, managing and monitoring the Group's compliance and conduct risks, including support in contacts with national and international regulators.

The Group defines compliance risks as the risk of failure to comply with laws and regulations, self-regulatory standards, values and business principles, codes of conduct or generally accepted market standards applicable to the Group's services and activities. Compliance and conduct risks could result in legal or regulatory sanctions, material financial losses and harm to the Group's reputation.

Legal provides exclusive, in-house and independent legal advice and support to all business segments of the Group (e.g. advising on specific transactions, developing and maintaining standard documents). Legal is responsible for proactively managing the legal risk within the Group, both within and outside the Netherlands, and preserving the Group's reputation.

Security & Intelligence Management aims to prevent financial losses arising from abuse of the financial system by the Group's clients and/or employees and to prevent reputational damage arising from the unethical behaviour of clients, the Group and/or its employees. Security & Intelligence Management assists the Group with its social responsibility to preserve the functioning of, and confidence in, the domestic and international financial infrastructure.

Communications & Sustainability formulates the Group's overall communication and sustainability strategies and the Group's corporate identity. The Communications & Sustainability department strives to manage and improve the Group's reputation, brand name and brand value within and outside the Netherlands in a consistent manner and to position the Group as a trustworthy and sustainable organisation. The Communications & Sustainability department aims to ensure that sustainable banking is embedded in the Group's business practices. ABN AMRO Foundation runs social projects and coordinates activities that promote social engagement.

85

Compliance with national and European rules and regulations

Compliance with rules and regulations is at the heart of our licence to operate. Infringements could cause significant financial and reputational damage. ABN AMRO wishes to adhere to both the letter and the spirit of all applicable rules and regulations, including regulations governing financial services and international standards applicable to financial institutions. We have a Regulatory Committee that maintains oversight of the changing regulatory landscape and how the bank adapts to it. We regularly review our policies and make adjustments where necessary.

Results in 2015

• Å The Banker's Oath was implemented in 2015. By the end of 2015, 97% of our employees in the Netherlands had taken this oath. This oath signifies our employees' commitment to doing their job with full conviction and a sense of engagement with ABN AMRO and our acceptance of the rules of conduct for the banking sector;
• Å The bank's Global Personal Account Trading Policy was updated to ensure that personal account transactions are conducted in compliance with applicable laws and regulations;
• Å ABN AMRO improved its processes to help employees easily identify and manage conflicts of interest in a timely manner;
• Å Compliance & Conduct developed a new compliance educational framework to strengthen employee awareness, knowledge and capabilities with regard to compliance and good conduct. An intensive training programme to promote the right conduct and culture was rolled out internationally in 2015.

Financial review

Financial review

The following section includes a discussion and analysis of the financial condition of ABN AMRO Group and its different segments for the years 2015 and 2014. The information in this section is presented on the basis of underlying results. A reconciliation from reported to underlying results is provided in the Group results of this section. More information on the activities, clients and products of the different segments is provided in the Business review section of the Business Report.

As of 2015, ABN AMRO has extended the definition of assets under management for the Group to include client assets in Retail Banking and changed the name of assets under management to client assets. Client assets include cash and securities of clients held on accounts with ABN AMRO. The development of client assets is explained for Private Banking.

In 2015, the definition of the underlying return on average equity was altered to reflect the implications of the

accounting treatment for Additional Tier 1 instruments. Return on equity is now calculated as underlying profit for the period attributable to owners of the company (i.e. underlying profit after deduction of net reserved payments for capital securities and result attributable to non-controlling interests) divided by the average equity attributable to the owners of the company (i.e. excluding capital securities and non-controlling interests).

Other

Business Report / Financial review

Overview

ABN AMRO Group reported an underlying net profit of EUR 1,924 million, up EUR 373 million compared with the previous year on the back of lower impairment charges and higher operating income partly offset by higher regulatory levies and project costs. This resulted in an underlying Return on Equity (ROE) of 12.0% and an increased cost/income ratio of 61.8%.

Reported net profit for 2015 was equal to the underlying net profit, as no special items were identified in 2015. Reported net profit for full-year 2014 was EUR 1,134 million and included EUR 417 million of negative one-off special items (SNS Reaal levy and pension settlement charge).

The total balance sheet ended at EUR 390.3 billion, an increase of EUR 3.4 billion compared with December 2014. The increase in Cash and balances at central banks was partly offset by Financial assets held for trading, Derivatives and Loans and receivables - banks. Total liabilities increased mainly in Due to customers and Subordinated liabilities, largely offset by decreased Derivatives and Financial liabilities held for trading.

Retail Banking's underlying net profit was EUR 1,226 million, up EUR 147 million compared with 2014. The increase in underlying net profit was mainly

driven by lower impairments partly offset by lower net interest income and higher regulatory levies.

Private Banking posted an underlying net profit of EUR 214 million, an increase of EUR 54 million compared with 2014. Higher net fee and commission and other operating income accompanied by lower loan impairments were partly offset by higher operating expenses, including higher regulatory levies. The acquired German private banking activities were consolidated as of September 2014, contributing to full-year 2015 underlying net profit.

Corporate Banking doubled underlying net profit to EUR 596 million, up EUR 298 million compared with 2014. This increase was driven by higher operating income and considerably lower loan impairments, partly offset by higher operating expenses, including higher regulatory levies. Commercial Clients and International Clients contributed to the underlying profit, while Capital Markets Solutions reported a small underlying loss.

Group Functions posted an underlying net profit of EUR 112 million negative compared with an underlying profit of EUR 14 million in 2014. This was impacted by a tax-exempt provision related to the part of the Securities Financing activities discontinued in 2009.

Group results

Income statement

Operating results

(in millions)	2015	2014	Change
Net interest income	6,076	6,023	1%
Net fee and commission income	1,829	1,691	8%
Other operating income	550	341	61%
Operating income	8,455	8,055	5%
Personnel expenses	2,492	2,396	4%
Other expenses	2,736	2,453	12%
Operating expenses	5,228	4,849	8%
Operating result	3,227	3,206	1%
Impairment charges on loans and other receivables	505	1,171	-57%
Operating profit/(loss) before taxation	2,722	2,035	34%
Income tax expense	798	484	65%
Underlying profit/(loss) for the period	1,924	1,551	24%
Special items		-417
Reported profit/(loss) for the period	1,924	1,134
Of which available for AT 1 capital securities (net of tax)	11
Of which Non-controlling interests	5

Other indicators

	2015	2014
Net interest margin (NIM) (in bps)	146	153
Underlying cost/income ratio	61.8%	60.2%
Underlying cost of risk (in bps)1	19	45
Underlying return on average Equity2	12.0%	10.9%
Underlying earnings per share (in EUR)3	2.03	1.65

	31 December 2015	31 December 2014
Client Assets (in billions)	313.5	302.5
FTEs	22,048	22,215

¹ Annualised impairment charges on Loans and receivables - customers for the period divided by average Loans and receivables - customers.

² Underlying profit for the period attributable to owners of the company divided by the average equity attributable to the owners of the company. 3 Underlying profit for the period attributable to owners of the company divided by the average outstanding and paid-up ordinary shares.

88

Other

The underlying profit for full-year 2015 amounted to EUR 1,924 million, up EUR 373 million compared with the previous year. The increase was due mainly to lower loan impairments and higher operating income, partly offset by regulatory levies and project costs. Income tax expense in 2015 was negatively impacted by the reassessment of our tax position and the tax-exempt provision related to the part of the Securities financing activities discontinued in 2009.

The underlying return on equity (ROE) increased to 12.0% in 2015, compared with 10.9% in 2014.

A number of special items impacted 2014 negatively. As a consequence, the reported net profit of EUR 1,134 million in 2014 was EUR 417 million lower than the underlying net proft (EUR 1,551 million in 2014). The difference between underlying and reported results is shown in the table Reconciliation from underlying to reported results.

Operating income

Operating income grew by 5% compared with 2014 and amounted to EUR 8,455 million in 2015, of which 80% was generated in the Netherlands.

Net interest income rose marginally to EUR 6,076 million in 2015 compared with EUR 6,023 million in 2014. The development of net interest income was impacted by several negative one-offs in 2015 (including a provision for the Euribor mortgages legal claim). In contrast, one-offs with a positive impact were recorded in 2014.

Net interest income on residential mortgages increased compared with 2014 as margin improvements exceeded the decrease in portfolio volumes. Margins improved due to continued gradual repricing at higher margins, in particular mortgages that originated pre-crisis.

Net interest income on consumer loans decreased due to declined average loan volumes and lower margins.

Net interest income on corporate loans increased in 2015 compared to 2014 due to both higher volumes and higher margins. Margin improvements were mainly recorded in Commercial Clients. The increase in average corporate loan volumes was chiefly by volume growth in the ECT Clients loan portfolio (including currency developments). Average corporate loan volumes in Commercial Clients showed a limited decline compared to 2014.

Net interest income was negatively impacted by higher liquidity buffer costs.

In combination with higher average total assets, this resulted in a net interest margin (NIM) of 146bps in 2015.

Net fee and commission income, at EUR 1,829 million in 2015, was EUR 138 million higher than in 2014. The increase was primarily recorded in Private Banking, due to a favourable stock market performance, and in Corporate Banking due to higher transaction volumes at Clearing.

Other operating income amounted to EUR 550 million in 2015, up by EUR 209 million compared with the previous year. The increase was primarily driven by higher CVA/ DVA/FVA results (EUR 76 million positive in 2015 versus EUR 58 million negative in 2014), favourable hedge accounting-related results at Group Functions, and higher tax-exempt results at Equity Participations on the back of improved market conditions. This was partly offset by a one-off tax-exempt provision in Group Functions related to the part of the Securities Financing activities discontinued in 2009 and a provision in Corporate Banking for an identified group of SMEs with possible interest rate derivative-related issues.

Other

Operating expenses

Operating expenses increased by EUR 379 million, or 8%, to EUR 5,228 million in 2015 compared with 2014.

Personnel expenses amounted to EUR 2,492 million in 2015, up EUR 96 million compared with the previous year. Pension expenses were EUR 38 million higher in 2015 due mainly to lower discount rates. In addition, personnel expenses for international activities increased due mainly to growth of the number of FTEs and devaluation of the euro. Personnel expenses in 2014 were positively impacted by releases from the employee benefits provision. Comparable restructuring provisions were included in 2014 and 2015.

Other expenses rose by EUR 283 million to EUR 2,736 million. The increase was driven by EUR 129 million higher regulatory levies. Regulatory levies totalling EUR 220 million in 2015 included EUR 119 million for the National Resolution Fund (NRF), EUR 98 million for the Dutch bank tax and EUR 3 million for the Deposit Guarantee Scheme (DGS). Implementation of the Dutch DGS has been postponed by the national regulator to Q1 2016; therefore, the DGS charge recorded in 2015 was lower than previously communicated. In addition, other expenses increased due to higher project costs related to enhancing client centricity and continuous improvement of products, services and IT processes (including the TOPS 2020 and Retail Digitalisation programmes).

A EUR 55 million settlement with Vestia was included in 2015. These increases were partly offset by a considerable VAT refund recorded in 2015 which was the result of discussions with the tax authorities related to the period 2007-2014.

Operating result

The operating result improved marginally to EUR 3,227 million, up by EUR 21 million compared with 2014, and the underlying cost/income ratio increased by 1.6 percentage points to 61.8% in 2015.

Impairment charges on loans and receivables

Impairment charges on loans and other receivables amounted to EUR 505 million, EUR 666 million lower than in 2014. Lower impairment charges were recorded on all portfolios due to improvements in the risk profile of the portfolios on the back of improved economic conditions. This also led to IBNI releases, which are determined based on recent losses in the portfolio. The decreasing loan loss levels resulted in an IBNI release of EUR 221 million in 2015 compared with an IBNI addition of EUR 22 million in 2014.

The decrease in Impairment charges was recorded in each business segment.

The underlying cost of risk amounted to 19bps in 2015, down from 45bps in 2014.

Balance sheet

Condensed statement of financial position

		31 December 2014
Cash and balances at central banks	26,195	706
Financial assets held for trading	1,706	9,017
Derivatives	19,138	25,285
Financial investments	40,542	41,466
Securities financing	20,062	18,511
Loans and receivables - banks	15,680	21,680
Loans and receivables - customers	259,319	261,910
Other	7,676	8,292
Total assets	390,317	386,867
Financial liabilities held for trading	459	3,759
Derivatives	22,425	30,449
Securities financing	11,372	13,918
Due to banks	14,630	15,744
Due to customers	230,297	216,011
Issued debt	76,207	77,131
Subordinated liabilities	9,708	8,328
Other	7,635	6,652
Total liabilities	372,733	371,990
Equity attributable to the owners of the parent company	16,575	14,865
Capital securities	993
Equity attributable to non-controlling interests	17	12
Total equity	17,584	14,877
Total liabilities and equity	390,317	386,867
Committed credit facilities	21,559	16,164
Guarantees and other commitments	13,868	15,335

Main developments in total assets

Total assets increased by EUR 3.4 billion to EUR 390.3 at 31 December 2015 from EUR 386.9 billion at 31 December 2014, due mainly to higher Cash and balances at central banks, partly offset by Financial assets held for trading, Derivatives and Loan and receivables banks.

Cash and balances at central banks increased by EUR 25.5 billion to EUR 26.2 billion as part of the liquidity buffer. The mandatory reserve deposits held with DNB recorded in Loans and receivables – banks were transferred to overnight deposits accounts.

Financial assets held for trading decreased sharply by EUR 7.3 billion to EUR 1.7 billion at 31 December 2015, driven mainly by the wind-down of activities resulting from the strategic review of Capital Markets Solutions and a decrease in government bonds related to primary dealerships.

Derivatives decreased by EUR 6.1 billion to EUR 19.1 billion (of which EUR 15 billion trading and EUR 4 billion non-trading) on the back of mid- to long-term interest rates and FX rates movements impacting the fair value of derivatives. This is also observed in the derivative liabilities.

Loans and receivables – banks decreased by EUR 6.0 billion to EUR 15.7 billion due mainly to the transfer of mandatory reserves at DNB to overnight deposit accounts, partly

Introduction

91

receivables - banks.

offset by a EUR 2 billion move of ECT Clients trade bills from Loans and receivables – customers to Loans and

Loans and receivables – customers declined by

EUR 2.6 billion. As shown in the following table this decline was primarily the result of lower residential mortgage volume and lower consumer loans. The mortgage portfolio decreased by EUR 1.5 billion to EUR 146.9 billion at 31 December 2015, driven by fierce competition especially towards year-end on longer interest rate periods and redemptions. Redemptions were higher due to increased refinancing, whereas extra repayments in 2015 returned to the same level as previous years. Low interest rates and increased awareness among homeowners of the possibility of residual debt are still incentives for extra repayments. Contractual repayments

are gradually growing, following amended tax regulations. As a result, redemptions exceeded new mortgage production. The market share in new mortgage production was stable at 20% in 2015.

Corporate loans to clients underlying growth was more than offset by a move of ECT Clients trade bills to Loans and receivables - banks and the reallocation of part of the public sector loan portfolio from Corporate Banking to Group Functions (EUR 2.3 billion). This portfolio was reallocated due to the specific expertise required to manage risks other than credit risk associated with these longer dated loans. Corporate Banking will continue to manage client relationships. As a result of this reallocation, the portfolio was reclassified to Loans to professional counterparties.

(in millions)	31 December 2015	31 December 2014
Residential mortgages	146,932	148,402
Consumer loans	15,147	16,052
Corporate loans to clients1	78,195	80,065
Total client loans2	240,274	244,519
Loans to professional counterparties Other loans3	12,194 6,357	9,635 6,777
Total Loans and receivables - customers2	258,825	260,931
Fair value adjustments from hedge accounting Less: loan impairment allowance	4,849 4,355	5,739 4,761
Total Loans and receivables - customers	259,319	261,910

Loans and receivables – customers

¹ Corporate loans excluding loans to professional counterparties.

² Gross carrying amount excluding fair value adjustment from hedge accounting.

³ Other loans consists of loans and receivables to government, official institutions and financial markets parties.

Main developments in total liabilities

Total liabilities increased marginally by EUR 0.7 billion to EUR 372.7 billion at 31 December 2015 compared with EUR 372.0 billion at 31 December 2014. The increase in Due to customers and Subordinated liabilities was largely offset by lower Derivatives and Financial liabilities held for trading.

Financial liabilities held for trading declined by EUR 3.3 billion to EUR 0.5 billion due to lower short positions in bonds mostly related to the primary dealership.

Derivatives decreased by EUR 8.0 billion to EUR 22.4 billion (of which EUR 13 billion trading and EUR 9 billion nontrading) on the back of mid- to long-term interest and FX rates movements impacting the valuation of derivatives. This is also observed in derivative assets.

Strategic Report

Due to customers increased by EUR 14.3 billion to EUR 230.3 billion. Growth was recorded in all business segments and largely in demand deposits at Private Banking and Corporate Banking and savings deposits at Commercial Clients and Retail Banking. The combined market share of 21%1 in retail deposits at Retail Banking and Private banking in the Netherlands at 31 December 2015 was stable compared with 31 December 2014.

Due to customers

(in millions)	31 December 2015	31 December 2014
Retail Banking	98,674	95,915
Private Banking	66,465	62,902
Corporate Banking	62,850	54,740
Group Functions	2,308	2,454
Total Due to customers	230,297	216,011
Demand deposits	119,109	109,753
Saving deposits	92,472	88,655
Time deposits	18,555	17,459
Total deposits	230,136	215,867
Other borrowings	160	144
Total Due to customers	230,297	216,011

Subordinated liabilities increased EUR 1.4 billion to EUR 9.7 billion mainly as a result of two Tier 2 issuances (EUR 1.5 billion and EUR 1.4 billion (USD 1.5 billion)) partly offset by the call of a EUR 1.7 billion Dutch State-held subordinated loan.

Total equity

Total equity rose by EUR 2.7 billion to EUR 17.6 billion at 31 December 2015, due mainly to the reported profit for 2015 and, to a lesser extent, the inaugural launch of EUR 1 billion of capital securities qualifying as Additional Tier 1 capital.

Difference between underlying and reported results

Underlying results are adjusted for special items and divestments. Special items are material, non-recurring items which are not related to normal business activities. A divestment is the sale of all or part of a business to a third party. Adjustments include past results and the related transaction result.

The reported net profit and the underlying net profit for full-year 2015 amounted to EUR 1,924 million as no special items were recognised.

The reported net profit for full-year 2014 amounted to EUR 1,134 million and includes a EUR 288 million charge for the transition to a new pension scheme and a EUR 201 million levy for the nationalisation of SNS Reaal. The following table presents the reconciliation from underlying to reported results.

Reconciliation from underlying to reported results

			2015			2014
(in millions)	Underlying	Special items	Reported	Underlying	Special items	Reported
Net interest income	6,076		6,076	6,023		6,023
Net fee and commission income	1,829		1,829	1,691		1,691
Other operating income	550		550	341		341
Operating income	8,455		8,455	8,055		8,055
Personnel expenses	2,492		2,492	2,396	288	2,684
Other expenses	2,736		2,736	2,453	201	2,654
Operating expenses	5,228		5,228	4,849	489	5,338
Operating result	3,227		3,227	3,206	-489	2,717
Impairment charges on loans and other receivables	505		505	1,171		1,171
Operating profit/(loss) before taxation	2,722		2,722	2,035	-489	1,546
Income tax expense	798		798	484	-72	412
Profit/(loss) for the period	1,924		1,924	1,551	-417	1,134

Impact of special items

(in millions)	2015	2014
Operating income
Total impact on Operating Income
Operating expenses
Pension settlement charge		288
SNS Levy		201
Total impact on Operating expenses		489
Loan impairments
Total impact on Loan impairments
Total impact on Income tax expense		-72
Total impact on result for the period		-417

Retail Banking

Operating results

(in millions)	2015	2014	Change
Net interest income	3,302	3,379	-2%
Net fee and commission income	527	522	1%
Other operating income	25	41	-40%
Operating income	3,853	3,942	-2%
Personnel expenses	487	560	-13%
Other expenses	1,619	1,475	10%
Operating expenses	2,106	2,035	3%
Operating result	1,748	1,907	-8%
Impairment charges on loans and other receivables	99	460	-79%
Operating profit/(loss) before taxation	1,649	1,447	14%
Income tax expense	423	368	15%
Underlying profit/(loss) for the period	1,226	1,079	14%
Special items
Reported profit/(loss) for the period	1,226	1,079	14%

Retail Banking's underlying profit rose by EUR 147 million to EUR 1,226 million in 2015, up 14% compared with 2014, as a result of lower loan impairments partly offset by lower net interest income and higher regulatory levies.

Net interest income, at EUR 3,302 million, declined by EUR 77 million compared with 2014. This was largely driven by provisions related to legal claims (including Euribor mortgages) and inconsistencies in interest calculations between the bank and its business partners with respect to one of the mortgage products in 2015 and positive one-off results in 2014.

Margins on residential mortgages improved as a result of the gradual repricing of the mortgage book. This was partly offset by lower average residential mortgages volumes. Consumer lending volumes and margins decreased in 2015.

Interest income on deposits remained stable. Higher average savings volumes were offset by lower margins as market rates declined at a faster pace than client savings rates.

Personnel expenses decreased by EUR 73 million, or 13%, due mainly to a restructuring provision of EUR 60 million in 2014. Excluding this provision, personnel expenses were EUR 13 million lower due to lower average FTE levels, following a further reduction in branches. This was partly offset by higher pension expenses.

Other expenses were up EUR 144 million to EUR 1,619 million in 2015. The regulatory levies in 2015 were EUR 48 million higher compared with 2014 (EUR 87 million in 2015 versus EUR 39 million in 2014). In addition to higher regulatory levies, other expenses were up due mainly to higher external staffing costs due to increased residential mortgage production and higher project costs related to enhancing client centricity and continuous improvement of products, services and IT processes (including TOPS 2020 and the Retail Digitalisation programmes).

Operating result decreased by EUR 159 million to EUR 1,748 million in 2015. The underlying cost/income ratio increased by 3.0 percentage points to 54.6%.

Introduction

Impairment charges on loans and other receivables fell by EUR 361 million, compared with 2014, to EUR 99 million in 2015. The decline in impairments is visible in both the consumer loan portfolio and the mortgage portfolio. Mortgage impairments decreased on the back of improved conditions in the housing market, and the recovery of the Dutch economy contributed to a lower inflow of mortgages in the impaired portfolio, increased

outflow and an improvement of the portfolio's risk profile. Consumer loans also benefited from improved economic conditions and active risk management of the portfolio of clients in arrears, leading to sharply lower loan impairments. In addition, impairment charges benefited from releases from the IBNI allowances (EUR 85 million in 2015). Included in 2014 were EUR 50 million of IBNI additions.

Other indicators

	2015	2014
Underlying cost/income ratio	54.6%	51.6%
Underlying cost of risk (in bps)1	6	29

	31 December 2015	31 December 2014
Loan-to-Deposit ratio	152%	158%
Loans and receivables - customers (in billions)	154.2	156.0
Due to customers (in billions)	98.7	95.9
Risk-weighted assets (risk exposure amount; in billions)	34.8	36.8
FTEs	5,844	6,258

¹ Annualised impairment charges on Loans and receivables - customers for the period divided by average Loans and receivables - customers.

Loans and receivables – customers decreased by EUR 1.8 billion. Residential mortgages declined by EUR 1.1 billion driven by fierce competition, especially towards year-end, on longer interest rate periods. Redemptions were higher due to increased refinancing, whereas extra repayments in 2015 returned to the same level as previous years. Low interest rates and increased awareness among homeowners of the possibility of residual debt are still incentives for extra repayments. Contractual repayments are gradually growing, following amended tax regulations. As a result, redemptions exceeded new mortgage production.

Consumer lending declined by EUR 0.7 billion.

Due to customers grew by EUR 2.8 billion, due mainly to an increase in deposits at MoneYou (in all active countries).

Private Banking

Operating results

(in millions)	2015	2014	Change
Net interest income	589	597	-1%
Net fee and commission income	619	544	14%
Other operating income	101	51	98%
Operating income	1,310	1,193	10%
Personnel expenses	501	460	9%
Other expenses	549	503	9%
Operating expenses	1,050	964	9%
Operating result	260	229	13%
Impairment charges on loans and other receivables	-4	23
Operating profit/(loss) before taxation	264	206	28%
Income tax expense	49	46	6%
Underlying profit/(loss) for the period	214	160	34%
Special items
Reported profit/(loss) for the period	214	160	34%

Private Banking's underlying net profit rose by

EUR 54 million to EUR 214 million in 2015, up 34% compared with 2014. The increase was mainly driven by higher net fee and commission income and one-off results, partly offset by higher project costs. The acquired German private banking activities of Credit Suisse were consolidated as of 1 September 2014.

Net interest income amounted to EUR 589 million and was nearly stable compared with 2014.

Net fee and commission income increased by EUR 75 million, or 14%, to EUR 619 million in 2015. Net fees increased due to higher average client assets, attributable to the stock market performance and Net new assets. Private Banking also generated additional fee income in 2015 from the full-year contribution of the acquired German activities.

Other operating income in 2015 was EUR 50 million higher than in 2014, due to the sale of premises and increased trading income in 2015 while 2014 included a provision for a legal claim.

Personnel expenses increased by EUR 41 million to EUR 501 million in 2015. The increase in the international entities was mainly attributable to the acquired German activities, a restructuring provision for the announced integration of ABN AMRO Jersey into ABN AMRO Guernsey and FTE growth.

Other expenses grew by EUR 46 million compared with 2014 to EUR 549 million. The increase was primarily due to higher project costs related to enhancing client centricity and client documentation, and continuous improvement of products, services and IT processes. Costs for the acquisition in Germany were included in 2014. The regulatory levies were EUR 7 million higher than in 2014 (EUR 11 million in 2015 versus EUR 4 million in 2014). A goodwill impairment of EUR 25 million was included in 2014.

Operating result went up by 13% to EUR 260 million. The underlying cost/income ratio for Private Banking decreased slightly to 80.2% in 2015.

			Business Report / Financial review / Private Banking
--	--	--	------------------------------------------------------

Impairment charges on loans and other receivables showed a net release of EUR 4 million, compared with EUR 23 million impairment additions in 2014.

The release in impairments is partially explained by a EUR 12 million IBNI release in 2015.

Other indicators

	2015	2014
Underlying cost/income ratio	80.2%	80.8%
Underlying cost of risk (in bps)1	-2	14
Gross margin on client assets (in bps)	65	67
	31 December 2015	31 December 2014
Loan-to-Deposit ratio	25%	26%
Loans and receivables - customers (in billions)	16.6	16.7
Due to customers (in billions)	66.5	62.9
Risk-weighted assets (risk exposure amount; in billions)	8.2	8.3

¹ Annualised impairment charges on Loans and receivables - customers for the period divided by average Loans and receivables - customers.

Loans and receivables – customers were virtually stable at EUR 16.6 billion at 31 December 2015 compared with EUR 16.7 billion at 31 December 2014.

Due to customers increased by EUR 3.5 billion to EUR 66.5 billion at 31 December 2015. Growth was achieved both in the Netherlands and internationally.

Client Assets

(in billions)	2015	2014
Opening balance Client assets	190.6	168.3
Net new assets (excl. sales/acquisitions)	1.5	5.5
Market performance	7.1	8.7
Divestments/acquisitions		8.2
Other (incl. sales/acquisitions)		-0.1
Closing balance Client assets	199.2	190.6
Breakdown by type
Cash	66.5	63.6
Securities	132.8	127.0
- of which custody	35.0	31.3
Breakdown by geography (in %)
The Netherlands	48%	47%
Rest of Europe	44%	44%
Rest of the world	8%	9%

Client assets grew to EUR 199.2 billion at 31 December 2015. This was due mainly to improved market performance.

Net new assets amounted to EUR 1.5 billion in 2015, EUR 4 billion lower than in 2014. This decline was due mainly to the outflow of custody assets of a single client (EUR 3 billion) in 2015.

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Corporate Banking

Operating results

(in millions)	2015	2014	Change
Net interest income	2,142	2,019	6%
Net fee and commission income	751	646	16%
Other operating income	227	173	31%
Operating income	3,120	2,839	10%
Personnel expenses	676	618	9%
Other expenses	1,264	1,116	13%
Operating expenses	1,940	1,734	12%
Operating result	1,180	1,105	7%
Impairment charges on loans and other receivables	419	717	-42%
Operating profit/(loss) before taxation	762	388	96%
Income tax expense	165	91	83%
Underlying profit/(loss) for the period	596	298	100%
Special items
Reported profit/(loss) for the period	596	298	100%

Corporate Banking's underlying net profit increased by EUR 298 million to EUR 596 million in 2015. The key drivers for the improvement were a rise in operating income and a considerable decrease in impairment charges. This was partly offset by increased operating expenses including higher regulatory levies.

Commercial Clients and International Clients contributed EUR 329 million and EUR 292 million respectively to the underlying profit of Corporate Banking. Capital Markets Solutions made an underlying loss of EUR 24 million.

Net interest income increased by EUR 123 million to EUR 2,142 million. The improvement was seen in all of the sub-segments.

Commercial Clients posted a modest rise in net interest income of EUR 30 million to EUR 1,305 million. Margins on loans and average deposit volumes increased, while deposit margins decreased compared with 2014. Average loan volumes decreased partly due to the reallocation of part of the public sector loan portfolio to Group Functions.

Net interest income in International Clients increased by

EUR 61 million to EUR 709 million, benefiting from growth in the ECT Clients loan portfolio which was due partly to the devaluation of the euro. This was partly offset by lower margins on deposits.

Net interest income in Capital Markets Solutions improved by 33% to EUR 127 million, mainly in Clearing on the back of higher average client financing and higher margins, due partly to the depreciation of the euro.

Net fee and commission income increased by EUR 105 million compared with 2014 to EUR 751 million. Fee growth was mainly driven by higher transaction volumes in Capital Markets Solutions resulting from increased volatility in the financial markets and higher fees received from Group Functions related to Securities Financing activities.

Other operating income went up by EUR 54 million to EUR 227 million in 2015. The increase was driven by a EUR 116 million higher CVA/DVA/FVA impact compared with 2014, which included first-time application of the FVA. The total CVA/DVA/FVA impact was EUR 49 million positive in 2015 versus EUR 67 million negative in 2014. Results further improved driven by higher tax-exempt

Business Report

results on the Equity Participations portfolio on the back of improved market conditions. This was partly offset by a provision for an identified group of SMEs with possible interest rate derivative-related issues. Clearing recorded a EUR 40 million gain in 2014 on the partial sale of the share in Holland Clearing House.

Personnel expenses amounted to EUR 676 million in 2015, up by EUR 58 million compared with 2014. Personnel expenses increased due to pension expenses, restructuring provisions and higher personnel expenses for the international activities driven by growth in FTE and the depreciation of the euro.

Other expenses grew by EUR 148 million compared with 2014. The regulatory levies in 2015 were EUR 73 million higher compared with 2014 (EUR 122 million in 2015

versus EUR 49 million in 2014). In addition, there were higher project costs related to enhancing client centricity and continuous improvement of products, services and IT processes (including the TOPS 2020 programme).

Operating result went up by EUR 75 million to EUR 1,180 million in 2015. The underlying cost/income ratio in 2015 increased 1.1 percentage point to 62.2% compared with 2014.

Impairment charges amounted to EUR 419 million, down by EUR 298 million compared with 2014. The decrease in impairment charges at Commercial Clients in 2015 was partly offset by the increase at International Clients. An IBNI release of EUR 125 million was included for Corporate Banking in 2015, compared with a EUR 25 million release in 2014.

Other indicators

	2015	2014
Underlying cost/income ratio	62.2%	61.1%
Underlying cost of risk (in bps)1	46	86

	31 December 2015	31 December 2014
Loan-to-Deposit ratio	121%	143%
Loans and receivables - customers (in billions)	80.6	85.0
Due to customers (in billions)	62.9	54.7
Risk-weighted assets (risk exposure amount; in billions)	55.1	53.5
FTEs	4,959	4,995

¹ Annualised impairment charges on Loans and receivables - customers for the period divided by average Loans and receivables - customers.

Loans and receivables – customers decreased by

EUR 4.4 billion to EUR 80.6 billion at 31 December 2015. The underlying growth, mainly in ECT on the back of the depreciation of the euro, was more than offset by the reallocation of part of the public sector loan portfolio from Corporate Banking to Group Functions and a reclassification from Loans and receivables - customers to Loans and receivable - banks within the ECT Clients portfolio.

Due to customers increased by EUR 8.2 billion to EUR 62.9 billion at 31 December 2015. Commercial Clients, International Clients and Capital Markets Solutions all contributed to this increase.

Business Report / Financial review / Corporate Banking
--------------------------------------------------------	--

Commercial Clients

Operating results

(in millions)	2015	2014	Change
Net interest income	1,305	1,275	2%
Net fee and commission income	205	196	5%
Other operating income	13	30	-56%
Operating income	1,524	1,502	1%
Operating expenses	861	788	9%
Operating result	663	713	-7%
Impairment charges on loans and other receivables	213	605	-65%
Operating profit/(loss) before taxation	450	108
Income tax expense	121	27
Underlying profit/(loss) for the period	329	82
Special items
Reported profit/(loss) for the period	329	82

Other indicators

	2015	2014
Underlying cost/income ratio	56.5%	52.5%
Underlying cost of risk (in bps)1	53	145

	31 December 2015	31 December 2014
Loans and receivables - customers (in billions)	35.3	38.1
Due to customers (in billions)	34.8	31.7
Risk-weighted assets (risk exposure amount; in billions)	21.5	20.8

¹ Annualised impairment charges on Loans and receivables - customers for the period divided by average Loans and receivables - customers.

ABN AMRO Group Annual Report 2015

International Clients

Operating results

(in millions)	2015	2014	Change
Net interest income	709	648	9%
Net fee and commission income	232	217	7%
Other operating income	104	3
Operating income	1,044	868	20%
Operating expenses	522	456	14%
Operating result	522	412	27%
Impairment charges on loans and other receivables	191	113	69%
Operating profit/(loss) before taxation	331	299	11%
Income tax expense	40	67	-41%
Underlying profit/(loss) for the period	292	232	26%
Special items
Reported profit/(loss) for the period	292	232	26%

Other indicators

	2015	2014
Underlying cost/income ratio	50.0%	52.6%
Underlying cost of risk (in bps)1	57	40

	31 December 2015	31 December 2014
Loans and receivables - customers (in billions)	32.2	32.2
Due to customers (in billions)	19.0	16.7
Risk-weighted assets (risk exposure amount; in billions)	22.6	19.9

¹ Annualised impairment charges on Loans and receivables - customers for the period divided by average Loans and receivables - customers.

102

Introduction

Strategic Report

Introduction

Strategic Report

Capital Markets Solutions

Operating results

(in millions)	2015	2014	Change
Net interest income	127	96	33%
Net fee and commission income	314	233	35%
Other operating income	110	140	-21%
Operating income	551	469	18%
Operating expenses	555	489	13%
Operating result	-3	-20	84%
Impairment charges on loans and other receivables	15	-1
Operating profit/(loss) before taxation	-18	-19	6%
Income tax expense	6	-4
Underlying profit/(loss) for the period	-24	-15	-57%
Special items
Reported profit/(loss) for the period	-24	-15	-57%

Other indicators

	2015	2014
Underlying cost/income ratio	100.6%	104.3%
Underlying cost of risk (in bps)1	9	-1

	31 December 2015	31 December 2014
Financial assets held for trading (in billions)	1.7	8.9
Loans and receivables - customers (in billions)	13.1	14.7
Financial liabilities held for trading (in billions)	0.5	3.8
Due to customers (in billions)	9.1	6.3
Risk-weighted assets (risk exposure amount; in billions)	11.0	12.8

¹ Annualised impairment charges on Loans and receivables - customers for the period divided by average Loans and receivables - customers.

Group Functions

Operating results

(in millions)	2015	2014	Change
Net interest income	44	28	56%
Net fee and commission income	-68	-21
Other operating income	197	75
Operating income	172	82	111%
Personnel expenses	828	758	9%
Other expenses	-695	-641	-8%
Operating expenses	133	117	14%
Operating result	39	-35
Impairment charges on loans
and other receivables	-8	-28	71%
Operating profit/(loss)
before taxation	48	-7
Income tax expense	160	-21
Underlying profit/(loss)
for the period	-112	14
Special items		-417
Reported profit/(loss)
for the period	-112	-402	72%

The underlying result of Group Functions was EUR 112 million negative in 2015 compared with a profit of EUR 14 million in 2014. This was impacted by a tax-exempt provision related to the part of the Securities Financing activities discontinued in 2009.

Net interest income increased by EUR 16 million compared with 2014. The increase was mainly driven by lower funding costs due to lower spread levels paid on funding. This was partly offset by higher cash level in the liquidity buffer, higher client funding volumes and a tax-exempt non-recurring provision related to the part of the Securities Financing activities discontinued in 2009.

Net fee and commission income decreased by EUR 47 million, mainly driven by higher fees paid to Capital Markets Solutions related to Securities Financing activities.

Other operating income increased by EUR 122 million compared with 2014. The increase was driven by higher hedge accounting-related results and favourable CVA/DVA adjustments (EUR 27 million positive in 2015 and EUR 9 million positive in 2014). This was partly offset by a tax-exempt provision related to the part of the Securities Financing activities discontinued in 2009.

Personnel expenses, at EUR 828 million in 2015, went up by EUR 70 million compared with 2014. This increase was driven by an increase in the number of FTEs and higher additions to restructuring provisions, and the fact that 2014 was positively impacted by adjustments to employee benefits.

Other expenses decreased by EUR 54 million compared with the same period in 2014. Group Functions had higher project costs related to enhancing client centricity and continuous improvement of products, services and IT processes (including the TOPS 2020 and Retail Digitalisation programmes). This was, however, largely allocated to the commercial segments (as negative

expenses). Other expenses in 2015 were also impacted by a considerable VAT refund, which was the result of discussions with the tax authorities related to the period 2007-2014. This was partly offset by the EUR 55 million settlement with Vestia. Both years were impacted by releases related to the Deposit Guarantee Scheme provision for DSB (EUR 35 million in 2015 compared with EUR 66 million in 2014) and cost savings generated by the TOPS 2020 programme.

Income tax expense in 2015 was negatively impacted by the reassessment of our tax position and the tax-exempt provision related to the part of the Securities financing activities discontinued in 2009.

Other indicators

	31 December 2015	31 December 2014
Securities financing - assets	15.5	14.5
Loans and receivables - customers (in billions)	7.9	4.2
Securities financing - liabilities	10.2	12.6
Due to customers (in billions)	2.3	2.5
Risk-weighted assets (risk exposure amount; in billions)	9.9	11.0
FTEs	7,522	7,362

Loans and receivables – customers increased to

EUR 7.9 billion at 31 December 2015. This was mainly the result of the reallocation of part of the public sector loan portfolio from Corporate Banking to Group Functions to address the specific expertise required to manage the risks, other than credit risk, associated with these longer dated loans. Corporate Banking continues to manage client relationships.

Other

This section sets out the bank's people strategy, what we achieved in 2015 and our plans for the future.

Overview

Our people

In 2015 we invested in further implementing our Top Class Employer strategy. Nearly all our employees in the Netherlands took the Banker's Oath, a logical affirmation of their acknowledgement and acceptance of the rules of conduct for the banking sector. Several nominations recognised our company as a diverse and inclusive top class employer. In order to attract the best people, we started reviewing and optimising our employee value proposition and tailored our approach to the labour market through segmentation.

In pursuing our culture of excellence, we introduced a global HR IT infrastructure promoting continuous learning throughout the organisation. For our managers, we set up a Leadership Impact Framework. We seek to retain our people not only by offering them a challenging and rewarding environment; we also give them the possibility to create their best place to work. The bank reached agreement with the trade unions on a new collective labour agreement.

Our workforce at a glance

Total FTEs per segment

	2015	2014	Change
Retail Banking	5,844	6,258	-7%
Private Banking	3,722	3,599	3%
Corporate Banking	4,959	4,995	-1%
Group Functions	7,522	7,362	2%
Total	22,048	22,215	-1%

Geographic breakdown of FTEs

	2015	2014	Change
Netherlands	17,908	18,250	-2%
Rest of Europe	2,696	2,622	3%
Asia	898	854	5%
USA	413	364	13%
Rest of the world	133	125	7%
Total	22,048	22,215	-1%

Total outflow1

Total outflow consists of natural attrition, reorganisations and other outflow such as outsourcing and leave of absence.

Outflow was caused by attrition (voluntary and pension), restructuring and other factors, including involuntary departures and employees being on temporary contracts. Breakdown of employees by age in the Netherlands 2015 (in %)

We deploy temporary staff and contractors to respond to developments in our environment and to hire people with specific knowledge or skills. The flexible part (temporary staff and contractors) of our total workforce was 16% in 2015 compared with 13% in 2014.

Risk, funding & capital Report

107

Introduction

Strategic Report

Business Report

Business Report

Top Class Employer

Making a difference for our clients now and in the future requires a talented and committed workforce. In 2012 we introduced our Top Class Employer strategy, which consists of three building blocks: providing a meaningful corporate identity, creating a culture of excellence and offering the best place to work. This people strategy is part of the bank's strategic priority 'Invest in our future'. Our Top Class Employer strategy aims to inspire employees to develop continuously and to make their own, unique contribution to the bank's sustainable growth.

Our corporate identity

A meaningful corporate identity that employees are eager to embrace is key to attracting and retaining talent and maximising their potential. We want our employees to be proud of ABN AMRO and to be our brand ambassadors. A meaningful corporate identity also projects a clearly recognisable and distinctive image to clients and other stakeholders.

Our corporate identity reflects our core values - Trusted, Professional and Ambitious - and business principles.

We hold each employee accountable for living up to our business principles, and we incorporated these principles into our performance management cycle for 2015.

The Banker's Oath, which was introduced in the Netherlands in 2014, is a formal commitment to putting clients' interests first. By the end of 2015, 97% of our employees in the Netherlands had taken this oath. While the oath will not change the way we work, it will make us more aware of the choices we make. It ties in with the professional responsibility that our employees are already accustomed to taking in their day-to-day work. By taking the oath, ABN AMRO's employees are helping to restore trust in the Dutch financial industry. It means employees

acknowledge their individual responsibility as an employee of ABN AMRO and accept the rules of conduct for the banking sector.

Culture of excellence

We define a culture of excellence as a culture in which employees strive to excel at all times on behalf of the client and to constantly maximise their performance. We take our responsibility as an employer seriously by setting clear targets for every employee and helping our people get the best out of themselves. A culture that nurtures professionalism, creativity and accountability is the best way to get the most out of our talented and diverse workforce.

Best place to work

Our people are our most valuable asset. We offer them a challenging and rewarding environment in which they do meaningful work and add value for clients. We give employees the freedom they need to personalise their fringe benefits, work schedules and work location - the freedom to create their best place to work.

We evaluate our Top Class Employer strategy on an annual basis by tracking metrics on themes such as corporate identity, leadership, talent management and best place to work. We regularly measure the impact of HR factors and activities in our business through statistical analysis.

Our people strategy, with its three building blocks, is designed to help us attract, develop and retain the best people. The rest of this section describes our most important initiatives and achievements relating to these goals in 2015.

Attract the best people

ABN AMRO can only live up to its pledge to its clients by having a highly talented, committed and diverse workforce. In order to attract the best people, we tailor our recruitment approach to specific groups of potential employees.

Employee value proposition

The demand for highly skilled people in the labour market is growing. This development, combined with everincreasing regulations governing remuneration in the

Creating the bank's future

2x as many

responses to job vacancies during our campaign than usual

Engagement ratio on average during our campaign, compared with other times

1.5% vs 0.8%

The engagement ratio expresses the activity of people on social media based on the number of 'likes', shares, comments and clicks. ABN AMRO wants to be a fully digital bank by 2020, and IT is playing an increasingly important role in helping the bank achieve this aspiration. Our talent and acquisition management has to take account of this development, as innovative professionals want to be challenged in their field.

To recruit this group of staff, we place inspiring and targeted advertisements in social media. By triggering the target group based on their expertise, for example by means of challenges, we received more high-quality job applications in 2015 than in previous years. The result? ABN AMRO was nominated for a Recruitment Tech Award.

As part of our development programme for IT professionals, we set up the IT Academy, a topnotch, intensive learning environment for fintech professionals. We need these professionals, because only with a state-of-the-art, flexible IT landscape can we keep pace with our ever changing environment. Thanks to our way of attracting and developing professionals, we are once again viewed as an IT employer. At the end of 2015, we were nominated as 'IT Employer of the Year' by Computable magazine.

Dutch financial sector, means that we need to come up with a compelling story to attract key talent who will enhance our culture of excellence.

We offer our people an attractive total rewards package, but believe we can do more to market our benefits. Mid-2015 we began the process of reviewing and optimising our employee value proposition. In a dedicated project, we are reassessing and redefining what the bank has to offer staff and aim to clearly differentiate ABN AMRO as a Top Class Employer. One of the project goals scheduled for 2016 is to deliver individual reward

statements for employees, which should increase their knowledge and appreciation of the total compensation they receive.

Building our workforce effectively

ABN AMRO already tailors its approach to the labour market based on defined key target groups and segments. Segmentation helps us achieve our goal faster and gives more meaning to our brand and positioning of ABN AMRO as an employer. By knowing each group's preferences, we can address each target group effectively – not only for recruitment purposes, but also when communicating about education, development and mobility.

In 2015 we aligned our traineeship programme with our Top Class Employer strategy and vision on talent. By doing so, we are anticipating on the changing labour market and the growing importance of personal development. We now focus on six trainee target groups instead of the previously used 27 business-oriented tracks. We also changed the procedure by replacing traditional interviews and external assessments with a personal meet-andmatch day. This will help us hire the best candidates.

During the traineeship programme, trainees have the opportunity to discover ABN AMRO and to focus on their own personal growth. The trainee programme includes at least one client-facing assignment to allow trainees to experience the importance of client centricity.

A diverse and inclusive workforce

A diverse workforce that reflects the communities we serve helps us to create the best solutions and enhance the customer experience while fostering innovation, respect and creativity. We do not view diversity only in terms of gender, but also with respect to cultural background, disability, age and sexual orientation. In 2015 we focused mainly on three areas: gender, cultural background and disability. Diversity and inclusion are about bringing together and making optimum use of the unique talents and experiences of all people, regardless of who they are or where they come from. Diversity is part of our Top Class Employer strategy and plays a pivotal role in our annual Employee Engagement Survey, in the section on fair treatment (81% of employees were positive). The results of this survey help us to determine what activities we need to undertake to maintain or improve the results.

In 2015 ABN AMRO was acknowledged as a best practice company for cultural diversity (Dutch Ministry of Social Affairs and Employment) and gender diversity (Talent to the Top foundation and Dutch Ministry of Education). In 2014 and 2015 ABN AMRO was nominated for two different awards relating to disabled people: the Lucille Werner Foundation Business Walk of Fame and the Okura Award. In addition, our new media campaign, which featured a same-sex couple getting married, was nominated for the Workplace Pride Leadership Awards. All of these nominations acknowledge our efforts in recent years and strengthen our brand as a diverse and inclusive Top Class Employer.

Female representation

(in %)

The Managing Board set new gender diversity targets in 2015: we aim to place women in 30% of senior management positions and in 35% of upper middlemanagement positions by 2020. We are on track to meet these targets: in 2015, 23% of senior management positions and 25% of upper middle-management positions were held by women. In addition to gender diversity, we also focus on hiring more non-Western employees for upper middle-management and senior management positions and on hiring more disabled people.

Develop our people

We live up to our responsibility as an employer by consistently encouraging employees to pursue personal growth and to get the most out of themselves, so that they can make a difference for themselves, our clients and society.

Talent management

In order to pursue a culture of excellence, we need to challenge employees and help them use and continuously develop their talents. We give all of our employees – regardless of age or education – numerous tools and opportunities to develop and grow. We believe everyone has talent. Management development for an exclusive group of staff is no longer sufficient and is not consistent with an inclusive culture.

We believe development is a two-way street: employees are expected to take responsibility for their own growth by stating their ambitions and using their talents. ABN AMRO 110

Business Report

adheres to the 70:20:10 principle to support and facilitate learning where it is most effective: we help our people learn on the job (70%), from their colleagues (20%) and in formal courses (10%). This principle allows us to extend our focus beyond traditional ways of learning to create a culture of continuous development.

In the course of 2015 we introduced a new HR IT tool, Talent2Grow, to promote continuous learning. From training courses and job vacancies to records of personal performance agreements and assessment interviews, Talent2Grow gives ABN AMRO staff and managers around the world access to everything related to personal development and performance in a single system. In 2015 we rolled out the first two modules: Education and the dialogue supported by Performance Management and Reward. The final module, Talent Acquisition and Mobility, will be rolled out in 2016.

Alongside an evolving learning offering for employees, we set up the Leadership Impact Framework for managers to help them develop. This framework consists of a mandatory, high-impact programme for new managers and a series of in-depth modules to help experienced managers develop specific leadership skills. We also carried out voluntary Leadership Qualities e-surveys (360 degrees) in 2015 to measure the effectiveness of our managers' leadership styles.

Retain the best people

Employee engagement at ABN AMRO is high. We not only offer employees a challenging and rewarding environment to keep them engaged; we also give them the autonomy they need to personalise their working conditions and create their best place to work. ABN AMRO is committed to ensuring the safety of the working environment and the health of its people. The new collective labour agreement anticipates developments in sustainable employability.

Engaged employees drive sustainable business performance

Our annual Employee Engagement Survey gives us the information we need to strengthen engagement and consequently improve our performance. With a record response of 83%, the results of the 2015 survey are highly representative. They show that 76% of employees across the organisation feel engaged with their work. This figure is equal to 2014 and higher than the global financial sector (74%).

In the latest survey a total of 9,500 suggestions were given on how to improve the bank. Our response in 2015 to the previous year's improvement suggestions yielded results. Eighty-one per cent of our employees have a favourable view of inclusion at the bank, as reflected in the Fair Treatment Index section of the survey. Our staff also believe we have made progress in putting clients' interests centre stage (from 70 to 77%). Appreciation for collaboration, commitment to vision & direction and our sustainability efforts were rated higher than in 2014. A large majority (65%) of our employees feel they are being encouraged to work more environmentally friendly, an increase of 14% in one year. A project group consisting of representatives from multiple disciplines within ABN AMRO was formed in 2015 to help reduce our employees' transportation footprint (including lease cars, public transport and business travel). The group is exploring ways for the bank to reduce its carbon footprint and aims to switch the bank's lease car fleet from energy label ABC to a carbon emission factor per car. More sustainable alternatives, such as public transport and bicycles, need to be promoted. The project group's first deliverables are planned for 2016.

Personal development and good leadership promote employee engagement. Many of our people (79%) are positive about the training and development opportunities offered by the bank and 80% appreciate their immediate manager. Both scores are high compared with other financial services providers in the Netherlands.

Our focus in 2016 will be on safeguarding the positive results. We still see room for further improvement and will devote extra attention to collaboration across the bank, encouraging managers to 'walk the talk' and promoting efficiency.

Flexible working environment

We encourage employees throughout the organisation to personalise their working conditions and benefits, giving them the autonomy to create their best place to work and the means to achieve a healthy work-life balance.

Other

For the bank's head office in particular, we started rolling out a new workplace concept in 2015 called Yello. The concept is a collaborative product of HR, Facility Management and IT. Yello will help ABN AMRO achieve its Top Class Employer strategy by providing an attractive workplace design that better meets individual needs and supports different forms of collaboration. The concept is designed to encourage knowledge-sharing and innovation by providing shared workspaces, promoting multidisciplinary contact and collaboration. It also allows individual employees to choose how they work and their preferred time, location and type of facility, such as quiet areas where they can concentrate on their work.

The design and materials of Yello are sustainable and the concept allows for efficient use of our buildings. The evaluation of the concept so far shows significant increases in satisfaction with the working environment. In 2016 Yello will be further developed to better support an agile way of working and will be implemented at the head offices in Amsterdam. The bank's international offices are also interested in the concept.

Collective labour agreement and pension

In December 2015 ABN AMRO reached agreement with the trade unions on a new collective labour agreement and a new social plan (redundancy scheme). Both agreements focus more on employability and continuous development of talent. Sustainable employability is part of working at the bank.

The new collective labour agreement (effective from 1 January 2016 to 1 January 2018) includes a freeze on salaries during 2016 and a salary increase of 1.5% on 1 January 2017. The new social plan (effective from 1 January 2016 to 1 January 2020) includes a reduction of the time employees are entitled to spend in the Redeployment Centre from twelve to six months and a reduction of the level of redundancy pay, both effective from 1 January 2017.

Under the collective labour agreement for ABN AMRO employees in the Netherlands (effective from 1 January 2014 to 1 January 2016), the employee pension contribution was lowered to 5.5% as from 2015 (2014: 6.67%), whereas the tax-facilitated pension accrual was limited to 1.875% per year and to pensionable income up to EUR 100,000. All employees that are affected by this cap receive an allowance that is derived from the collective defined contribution (CDC) premium. The allowance amounted to 30% of pensionable salary exceeding EUR 100,000 in 2015. All or part of this allowance can be used in the so-called net pension scheme (DC). ABN AMRO uses the same CDC pension scheme (for pensionable salary up to EUR 100,000) and defined contribution net pension scheme (for pensionable salary above EUR 100,000) for all employees in the Netherlands, including Managing Board and Management Group members.

In addition to the Netherlands, we have collective labour agreements and/or social plans (redundancy schemes) in place in other parts of Europe (Belgium, Luxembourg, France, Germany, UK and Spain), Australia and Japan.

Health & Safety

Healthy, safe and good working conditions enhance job enjoyment and reduce the chance of illness, accidents and injuries. ABN AMRO is committed to creating healthy and safe working conditions and to actively informing staff how best to prevent health risks. As part of our Top Class Employer strategy and our ambition to be the 'best place to work', ABN AMRO has a sound health and safety policy in place and encourages vitality among staff. We perform regular inventories and risk assessments on possible hazards concerning safety, health and welfare.

We offer our employees a range of facilities to support their physical, mental, emotional and spiritual well-being. A key initiative in this respect is our LEEFVitaal! programme in the Netherlands, which promotes awareness of the benefits of a healthy lifestyle. Employees are invited once every three years for a free, comprehensive health check to keep track of their health risks and biological age. If necessary, we coach staff to help them improve their lifestyle. Once every three years, employees receive an online questionnaire, the 'Balansmeter'. Based on the results of this survey, staff who are at risk of sickness absence are identified and offered assistance. Other initiatives include a dedicated intranet site on health and vitality and a personal Sustainable Employability Budget which staff can use to enhance their knowledge and skills related to health and vitality.

Introduction

Absenteeism at ABN AMRO in the Netherlands (in %)

Absenteeism rose only slightly in 2015 to 3.35% (compared with 3.27% in 2014). Despite the small increase, our absenteeism percentage is still below the average of our peers in the financial industry in the Netherlands.

Our plans for the future

With the best people working for the bank, we will continue to make a difference for our clients in 2016 and will concentrate even more on putting our clients' interests centre stage.

In 2016 we will carry out the initiatives and plans set out in this chapter. We will accelerate the implementation of our global HR IT infrastructure. With our global system live, we will have the benefits of a truly global HR approach. As a result, ABN AMRO will have the tools it needs to make the most of the bank's talents worldwide by facilitating global mobility and development. In addition, we will focus on further developing our in-depth leadership capabilities and talent management. Our continuous investment in HR analytics will help us anticipate future developments and clients' needs.

Sustainability

Sustainability

We have introduced a new way of reporting on and communicating our sustainability performance which will help us get the right information across to the right stakeholders. In contrast to last year's Sustainability Report, we are now communicating the information through several channels, targeting specific stakeholder groups. Results on the material topics have been integrated into this Annual Report. In 2015 we translated our material focus areas into metrics, enabling us to report on our progress in a concrete and transparent manner.

Strategy

ABN AMRO strives to be a better bank contributing to a better world. Our sustainability strategy up to 2017 commits us to achieving a positively recognised position on sustainability and transparency. As a foundation of our sustainability strategy, we endorse international standards such as the UN Global Compact.

Banks play a key role in facilitating business and therefore have a responsibility to shape and ensure the sustainable development of business in the future. For ABN AMRO, that means doing business responsibly, putting our clients' interests centre stage and addressing the risks related to climate change, human rights and the shortage of natural resources.

Our sustainability strategy is based on two pillars:

Better bank

• Å We pursue sustainable business operations
• Å We put our clients' interests centre stage and build sustainable relationships

Better world

• Å We use our financial expertise for the benefit of society
• Å We finance and invest for clients in a sustainable manner

Our goal is to accurately measure and report on our progress by means of metrics. We aim to receive assurance on the complete report in the coming years. In this report the material topics relating to our long-term sustainability strategy are discussed in the sections on the business lines. We obtained assurance on a distinct set of quantitative data that are related to most of the material topics. The data that are in the scope of the report are marked as such in the text.

Measuring progress

In 2015, we translated our sustainability strategy into goals and metrics. We make our employees ambassadors of ABN AMRO by giving them a role in increasing transparency and sustainability at the bank. We measure the results of our efforts with our Employee Engagement Survey and strive to score 80% or higher by 2017.

Overall indicator: we aspire to be in the top 15% of the Dow Jones Sustainability Index by 2017

Strategic pillar	Goal	Metrics for 2017
Sustainable business operations	In our efforts to make our own business operations more sustainable and transparent, we act within the letter and spirit of the laws and standards for financial services provision.	Å Carbon emission reduction (to be defined in 2016) Å Gender diversity: women to be placed in 30% of upper middle-management positions and 25% of senior management positions Å A score of >180 points on the Transparency Benchmark
Client centricity and sustainable relationships	We offer clients safe and reliable services by combining highly secure and stable systems with client centricity.	Å Increase the Net Promoter Score by 10% by 2017 compared with 2015 Å Increase the Trust Monitor score by 15% by 2017 compared with 2015
Financial expertise for the benefit of society	We increase our contribution to a sustainable society by putting our expertise to use in practical and systemic issues.	Å Have 40% of our employees volunteer through ABN AMRO Foundation or other social projects Å Increase our social impact on key themes (to be defined in 2016)
Sustainable finance and investment services	We enhance the bank's positive value creation by transparently integrating ESG criteria into our investment advice and lending.	Å ESG/ESE criteria to be integrated into our investment advice and lending (to be defined in 2016) Å To be recognised as a sustainable bank by our clients (to be defined in 2016)

Materiality

In 2014 we performed a materiality analysis that revealed what our internal and external stakeholders consider to be the most material, or relevant, issues. In 2015 we conducted multi-stakeholder dialogues in order to deepen our understanding of, and approach to, these material issues.

We began by asking external stakeholders to rate an extensive list of materiality issues. This was followed by a dialogue with a wide range of participants, including retail and corporate clients, a knowledge institution, a service provider, a financial institution and a trade association. Internal stakeholders were also asked to rank various topics and to explain their choices as part of a dialogue

with senior managers from the different business lines. A full description of this process is available on our website, abnamro.com.

Following up on a decision in 2012 endorsed by the shareholder, it was decided to implement the decision to pay out the statutory temporary fixed allowance to six Managing Board members as from 2015. This resulted in a commotion in March 2015, both within and outside the organisation, after which the relevant Managing Board members decided to waive their entitlement to the allowance. In consideration of the commotion, we will conduct an integrated, bank-wide review of our materiality analysis in 2016.

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Governance: embedding sustainability in the organisation

Sustainability is an integral part of our organisation. Reports on this topic are provided at least once a quarter to the Managing and Supervisory Boards as part of the monitoring of our long-term strategy (more details are provided in the Corporate Governance section). Progress on the implementation of our sustainability strategy is reported bi-monthly to the member of the Managing Board responsible for sustainability. Sustainability experts are employed in most businesses to foster engagement with this theme throughout the bank. We also report specific sustainability results to senior management at the business lines.

ABN AMRO uses several means of communication, aimed at specific stakeholder groups, to report on sustainability. The Annual Report focuses on the material topics and presents results to all stakeholders. The scope of the material topics relates only to the Netherlands, as the majority of our activities take place in the Netherlands. In 2015, there were no major acquisitions or divestments that influenced our reporting on the material topics. In addition to the Annual Report, we issue quarterly newsletters providing in-depth information on our sustainability practices, which can be found on abnamro. com. Each of these newsletters has an explicit focus and hence targets specific stakeholder groups. We have published sustainability guides on specific sectors (Diamond & Jewellery, Fashion, Human Rights and the Circular Economy), sharing our expertise and inviting clients to work with us to promote greater sustainability. ABN AMRO views this way of reporting as complementary, comprehensive and complete.

Human rights

Like any other business, we have a responsibility to respect human rights in line with the UN Guiding Principles on Business and Human Rights (UNGPs). For the first time, we will report on human rights issues in line with this responsibility, using the UN Guiding Principles Reporting Framework. We are the first bank in the world to do so.

In 2015, we published the ABN AMRO and Human Rights guide, 'Our Path Towards Respecting Human Rights'

during our second International Human Rights Conference. In this guide we publicly state our commitment to human rights and explain how we can be connected to human rights impacts through our own activities, our suppliers' activities and our clients' business activities. Our Human Rights Statement states our own commitment to respect human rights and the expectations we have of the businesses we serve and those that serve us.

We need to focus our attention and prioritise our resources on the most severe risks to human rights: our 'salient human rights issues', in the language of the UN Guiding Principles Reporting Framework. In 2015, with support from Shift, the non-profit centre of expertise on the UNGPs, we conducted an initial internal analysis to identify the bank's salient human rights issues. This process is not necessarily the same as a materiality analysis that focuses on risks to the bank, since salient issues focus first and foremost on risks to the 'rightsholder'. However, where risk to people's human rights is the greatest, there is often a strong convergence with risk to the business. It is therefore very likely that at least some of these salient issues also reflect material issues for the bank, e.g. in the case of the right to privacy

We developed a first list of our salient human rights issues during a cross-functional workshop with representatives who work or have experience in various business lines and functions. It was informed by feedback from our various discussions on human rights issues with stakeholders over recent months. The issues that came out of that workshop as likely to be the most salient across all of the different parts of our bank are:

• Å Privacy: 1) abuse of client and employee data, for example the use of private information for advertising purposes; 2) a data security breach, which could put private information in the hands of third parties.
• Å Discrimination: 1) denying clients certain financial products or services on discriminatory grounds; 2) discrimination in labour practices of suppliers and clients; 3) discrimination of ABN AMRO staff in human resources processes (e.g. promotion, salaries).
• Å Labour rights: 1) wages, freedom of association and rights to collective bargaining, health and safety, and working hours of both ABN AMRO's own workforce and those of its clients and suppliers; 2) forced labour and child labour in relation to clients of Corporate

Business Report

Other

Banking, suppliers (deeper down the supply chain), and investee companies on behalf of private clients.

Å Land-related human rights: the rights to water and sanitation, health and an adequate standard of living.

As a first step to test our conclusions with external stakeholders, we surveyed participants of the ABN AMRO International Human Rights Conference on whether they would agree with the issues we had identified as most salient. Of the external respondents, the large majority agreed with our conclusions. Some also shared additional issues for us to consider as salient.

Outlook

Looking ahead, we will continue to implement the performance metrics and targets we have set as we put our sustainability strategy into practice. This will enable us to report on our progress in an increasingly concrete and transparent manner, and consequently help us to restore confidence in the bank.

StartGreen Capital

8

investments in portfolio

Innovation in cleantech (B2C)

Food	Ojah
Telecom/personal devices	Intivation
Solar power	Solesta
Bio-based + biodegradable	Rodenburg

Innovation in cleantech (B2B)

Smart mobility	2Getthere
Sustainable Infrastructure	Fibercore
Sustainable IT	Visionsconnected and Eshgro

ABN AMRO Participaties NPE Fund B.V. is a shareholder in the StartGreen Capital investment funds, through which it finances young, clean-tech companies. Venture capital is a crucial source of funding for entrepreneurs engaged in sustainable innovation, as they can encounter great difficulty in raising capital through other means in the early stages of their development. Since its establishment in 2006, StartGreen has developed a portfolio of 14 investments, several of which have since been successfully exited.

By investing in StartGreen, ABN AMRO creates societal return in two ways: by financing innovation and by stimulating sustainability. A good example of such an investment is FiberCore Europe, a company that designs and constructs bridges and lock gates that are made of composite instead of concrete and steel. FiberCore Europe brings together innovation and sustainability, and pioneers in the use of composite for the construction of major infrastructure projects. The opening of the renewed lock gate of the Wilhelmina Channel, in early 2016, underlines the bright future specialists see for composite in civil engineering.

Responsibility statement

Responsibility statement

Pursuant to section 5:25c sub 2 part c of the Dutch Financial Supervision Act, the members of the Managing Board state that to the best of their knowledge:

• Å the Annual Financial Statements give a true and fair view of the assets, liabilities, financial position and profit or loss of ABN AMRO Group N.V. and the companies included in the consolidation;
• Å the Annual Report gives a true and fair view of the state of affairs on the balance sheet date and the course of business during the financial year 2015 of ABN AMRO Group N.V. and of its affiliated companies, of which data is included in its Annual Financial Statements;
• Å the Annual Report describes the material risks with which ABN AMRO Group N.V. is faced.

Amsterdam, 15 March 2016

The Managing Board

Gerrit Zalm, Chairman Johan van Hall, Vice-Chairman Kees van Dijkhuizen, Member Caroline Princen, Member Wietze Reehoorn, Member Chris Vogelzang, Member Joop Wijn, Member

Introduction

Other

"Recognising and being willing to increase diversity at the bank allows us to connect the wide variety of talents that people bring to the company."

Employee Diversity

Other

Who

Nargis Goldfinger Rasheed, Asset & Liability Management Analyst ABN AMRO

In our team, diversity helps us see things from a different perspective, which adds value to ABN AMRO.

Diversity and inclusion are about bringing together and making the most of the unique talents and experiences of all people, regardless of who they are or where they come from. A diverse workforce that reflects the communities we serve helps us to create the best solutions and enhance the customer experience.

At the same time, it fosters innovation, respect and creativity. At ABN AMRO, our approach to diversity focuses on increasing the number of women and people with a culturally diverse background at the bank. Our business lines also have clear targets for attracting disabled people. We can create synergy by maximising the use of diverse talents within teams.

Beyond our own organisation we focus on creating opportunities, for example with the 'Route 99' initiative, which helps corporations offer suitable employment to disabled people. We realise that fighting inequality starts with raising awareness.

Business Report / Responsibility statement

ABN AMRO Group Annual Report 2015

Other

Risk, funding & capital Report

The Risk, funding & capital Report discloses comprehensive information on risk management, capital adequacy and funding. Some disclosures in the Risk, funding & capital Report contain audited information and are an integral part of the Annual Financial Statements.

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Risk, funding & capital Report

Introduction to risk, funding & capital management

134

Risk, funding & capital management

Risk approach	135
Credit risk management	143
Operational risk management	153
Market risk management	156
Business risk management	160
Liquidity risk management	161
Funding management	163
Capital management	164
Sustainability risk management	165
Management Control Statement	167

170

Risk, funding & capital review

Key developments	171
Balance sheet composition	178
Credit risk	179
Operational risk	224
Market risk	226
Liquidity risk	230
Funding	233
Capital	238

248

Additional risk, funding & capital disclosures

Introduction to risk, funding & capital management

Introduction to risk, funding & capital management

This section provides an introduction to the Risk, funding & capital Report. As the Risk, funding & capital Report includes information according to both EU IFRS and CRD IV/CRR, more information on scope differences and consolidation is provided. This section also includes reference tables for Pillar 3 disclosures, EU IFRS disclosures and EDTF disclosures.

Contents

Risk, funding & capital management

This chapter provides more information on the Group's approach to risk, funding and capital management by describing strategy, policies, governance and measurement approaches.

Risk, funding & capital review

The portfolio composition and developments are described in the Risk, funding & capital review section. This section also describes developments in the Group's major risk types and regulatory capital.

Additional risk, funding & capital disclosures

This chapter provides an overview of additional disclosures required under current regulations.

Regulatory requirements v1

The Risk, funding & capital Report incorporates the disclosures required under the Dutch Financial Supervision Act (Wet op financieel toezicht - Wft), the EU Capital Requirements Regulation (CRR), Title 9 Book 2 of the Dutch civil code and IFRS. Furthermore, ABN AMRO embraces the EDTF principles and recommendations. Reference tables regarding EU IFRS, Pillar 3 and EDTF disclosure requirements and their compliance status are also disclosed in this section.

Pillar 3 disclosures 1

The objective of Pillar 3 disclosures is to inform existing and potential investors in ABN AMRO on how the organisation manages risk and capital adequacy. Pillar 3 disclosures are part of the Basel framework, which is based on the three-pillar concept. Pillar 1 details the minimum capital requirements, Pillar 2 relates to the internal capital adequacy measurement and the supervisory review, and Pillar 3 relates to disclosures on capital and risk to encourage market discipline. ABN AMRO has incorporated the relevant Pillar 3 disclosures in this Annual Report.

The Pillar 3 disclosures are prepared in accordance with the Capital Requirements Regulation (CRR). The following table provides an overview of where information on each Pillar 3 requirement can be found in the Annual Report. Pillar 3 disclosures are labelled as 'Pillar 3' in the respective headings.

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Introduction

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Overview of Pillar 3 requirements 1

Pillar 3 disclosure requirement	Reference	Additional information
Scope of consolidation	Introduction to risk, funding & capital management; page 124	Risk exposure measurement and scope differences, and regulatory reporting scope section
Capital structure	Risk, funding & capital review - Capital; page 238	Capital structure and further information on share capital, dividend and capital instruments section
Capital adequacy	Risk, funding & capital management - Capital management; page 164 Risk, funding & capital review - Capital; page 238	Capital management framework (Capital measurement and allocation) and minimum capital requirement section
Leverage ratio	Risk, funding & capital review - Capital; page 238	Leverage ratio section
Risk management objectives, governance and policies	Risk, funding & capital management; page 134	Risk approach section for all risk types in Risk, funding & capital management (strategy, profile, governance, measurement, mitigation, concentration, management of forborne, past due and impaired loans) and Capital management framework in Capital management section
Credit risk	Risk, funding & capital review - Credit risk; page 179 Additional Risk, funding & capital disclosures; page 248	Overall credit risk exposure in credit risk exposure section with specific focus on overall exposure and concentration (geography and industry). Maturity distribution disclosure in Additional risk, funding & capital disclosures
- Standardised approach	Risk, funding & capital management - Credit risk management; page 143 Risk, funding & capital review - Credit risk; page 179 Additional risk, funding & capital disclosures; page 248	Scope and approach in Regulatory capital in Risk approach section, overall Standardised Approach (SA) in Risk, funding & capital review - Credit risk section and detailed SA approach exposure in Additional risk, funding & capital disclosures
- Internal Ratings-Based approach	Risk, funding & capital management - Credit risk management; page 143 Risk, funding & capital review - Credit risk; page 179 Additional Risk, funding & capital disclosures; page 248	Scope and approach in Regulatory capital in Risk approach section, overall Internal Ratings-Based (IRB) in Risk, funding & capital review - Credit risk section and detailed IRB approach exposure in Additional risk, funding & capital disclosures
- Other approaches	Risk, funding & capital management - Credit risk management; page 134 Risk, funding & capital management - liquidity risk management; page 161 Risk, funding & capital review - Credit risk; page 179 Additional Risk, funding & capital disclosures; page 248	Counterparty scope and approach in Specific counterparty risk in Credit risk management section, counterparty credit risk in Credit risk exposure section in Risk, funding & capital review - Credit risk section with additional details on over-the counter (OTC) derivatives in Additional risk, funding & capital disclosures. Liquidity risk management approach in Liquidity risk management section contains the collateral posting policy by a downgrade of ABN AMRO
Equity positions not in the trading book	Additional Risk, funding & capital disclosures; page 248 Annual Financial Statements - note 7, note 16, note 22	Exposure of equities not held for trading in Additional risk, funding & capital disclosures. Details on equities not held for trading in several notes to the Annual Financial Statements

125

Pillar 3 disclosure

Risk, funding & capital Report / Introduction to risk, funding & capital management

126

requirement	Reference	Additional information
Credit risk mitigation	Risk, funding & capital management - Credit risk management; page 143 Risk, funding & capital review - Credit risk; page 179 Additional Risk, funding & capital disclosures; page 248	Credit risk mitigation policies and processes in Credit risk management section, Overall regulatory credit risk mitigation exposures in Credit risk exposure section in Risk, funding & capital review - Credit risk and additional risk mitigation details on SA and IRB approach in Additional risk, funding & capital disclosures
Credit quality	Risk, funding & capital management - Accounting and risk policies in Management of forborne, past Credit risk management; page 143 due and impaired loans in Credit risk management section. Risk, funding & capital review - Credit risk; Credit quality, past due and impairment disclosures broken page 179 down by geography and industry in Management of forborne, past due and impaired in Risk, funding & capital review - Credit risk section
Market risk	Risk, funding & capital management - Market risk management; page 156 Risk, funding & capital review - Market risk; page 226	Market risk (trading book) approach in Market risk management section and regulatory capital requirements in market risk (trading book) section in Risk, funding & capital review - Market risk section
Operational risk	Risk, funding & capital management - Operational risk management; page 153 Risk, funding & capital review - Operational risk; page 224	Operational risk approach in Operational risk management section and regulatory capital requirements in Risk, funding & capital review - Operational risk section
Interest rate risk not in the trading book	Risk, funding & capital management - Market risk management; page 156 Risk, funding & capital review - Market risk; page 226	Market risk (banking book) approach in Market risk management section and regulatory capital requirements in market risk (banking book) section in Risk, funding & capital review - Market risk section
Securitisations	Annual Financial Statements - note 22; page 408	Note 22 to the Annual Financial Statements, Approach, role and details on securitisation positions in the integral Securitsation section
Remuneration	Governance Report - Remuneration Remuneration policies, principles and quantitative information report; page 312 on remuneration broken down by Idenitied Staff in Annual Financial Statements - note 35; Remuneration report. Remuneration of Managing Board and page 456 Supervisory Board in note 35 to the Annual Financial Statements
Additional Pillar 3 disclosures	Publised on abnamro.com	Capital instruments. Reconciliation IFRS to regulatory balance sheet Own funds Asset encumberance Global Systemically Important Banks indicators

EU IFRS 1

Some disclosures in the Risk, funding & capital Report are an integral part of the Annual Financial Statement (AFS) and contain audited information. The audited parts concern disclosures on financial instrument risk (IFRS 7) and presentation of financial statements (IAS1). Audited information in these sections is labelled as 'audited' in the respective headings.

127 Introduction

Strategic Report

	Reference	Additional information
IAS 1 Financial Statements: Presentation
Further information on selected items presented in the Statement of financial position	Additional risk, funding & capital disclosures; page 248	Maturity analysis of assets and liabilities
	Risk, funding & capital review - capital; page 238	Capital structure, Capital instruments, Minimum capital requirements
	Risk, funding & capital review - funding; page 233	Liability and equity breakdown, Breakdown of customer deposits, Available funding instruments
IFRS 7 Financial Instruments: Disclosures
Information on risk types
Explanation of exposures to risk and how they arise	Risk, funding & capital management - Risk approach; page 135	Selected sections in Risk, funding & capital management
Objectives, policies and process for managing the risk types and the methods to measure the risks	Risk, funding & capital management - Risk approach; page 135	Selected sections in Risk, funding & capital management
Information on credit risk
Credit risk concentration	Risk, funding & capital review - Credit risk - Credit risk concentration; page 185 Additional Risk, funding & capital disclosures - European exposures; page 257	Credit risk concentration, including Geographic concentration and Industry concentration, European government and government guaranteed exposures
Maximum exposure to credit risk	Risk, funding & capital review - Credit risk - Credit risk exposure; page 179 Additional Risk, funding & capital disclosures - Credit risk exposure; page 249	Maximum exposure to credit risk sections in Credit risk and Additional risk, funding & capital disclosures
Credit risk mitigation	Risk, funding & capital review - Credit risk - Credit risk mitigation; page 190	Offsetting, netting, and collateral & guarantees of financial assets and liabilities
Credit quality	Risk, funding & capital review - Credit risk exposure; page 249	Credit quality by exposure class
	Risk, funding & capital review - Credit risk mitigation - Past due exposures page 196	Ageing of past due not classified as impaired
	Risk, funding & capital review - Credit risk mitigation - Impaired exposures page 196 Risk, funding & capital review - Loan impairment charges and allowances; page 196	Coverage and impaired ratio, Coverage ratio, Impaired ratio, Loan impairment charges and allowances
	Risk, funding & capital review - Credit risk mitigation - Forborne exposures; page 196 Additional risk, funding & capital disclosures - Additional disclosures on forborne, past due and impaired loans; page 258	Overview of forborne assets in Risk, funding & capital review. Forbearance credit quality, Forborne assets by geography, Forborne assets by business segment in Additional risk, funding & capital disclosures

Strategic Report

Business Report

Risk, funding & capital information

	Reference	Additional information
Information on liquidity risk
Maturity analysis for non-derivative financial liabilities (including financial guarantees) showing the remaining contractual maturities	Additional Risk, funding & capital disclosures - Maturity analysis of assets and liabilities; page 263	Maturity based on contractual undiscounted cash flows
Maturity analysis for derivative financial liabilities, where essential for understanding the timing of the cash flows	Additional Risk, funding & capital disclosures - Maturity analysis of assets and liabilities; page 263	Maturity based on contractual undiscounted cash flows
Liquidity risk management	Risk, funding & capital management - Liquidity risk management; page 161 Risk, funding & capital review - Liquidity risk - Liquidity risk management; page 230 Risk, funding & capital review - Funding; page 233	Liquidity risk management in Risk, funding & capital management section. Loan-to-Deposit ratio, Liquidity buffer composition, Liquidity buffer currency diversification and liquidity buffer monthly average in Liquidity risk review section. Funding vs balance sheet total, Long-term funding components and Funding issuance in 2015 in funding section.
Information on market risk
Sensitivity analysis for each type of market risk	Risk, funding & capital review - Market risk - Total market risk exposure; page 226	Market risk in the banking book, Internal aggregated diversified and undiversified VaR for all trading positions
Methods and assumptions	Risk, funding & capital management - Market risk management; page 156	Market risk management trading book, Market risk measurement, Market risk in the banking book, Market risk (Foreign exchange risk), Market risk (Pension fund)

Enhanced Disclosure Task Force (EDTF) 1

The Enhanced Disclosure Task Force (EDTF) was formed in 2012 in order to enhance the risk disclosures of banks and other financial institutions. The EDTF is an industry work group with wide geographical representation, including senior executives from leading financial institutions. On 29 October 2012, the EDTF together with the Financial Stability Board (FSB) published a report with 32 recommendations on how to enhance risk disclosures. ABN AMRO embraces the EDTF principles and

recommendations and has implemented the vast majority of the 32 recommendations. For 2015, ABN AMRO reaffirms its commitment to the EDTF report and enhanced its EDTF disclosures, including certain recommendations from the EDTF 2015 progress report. The following table provides an overview of where information on each EDTF recommendation can be found in the Annual Report. EDTF disclosures are labelled as 'EDTF' in the respective headings.

Annual Financial Statements

Governance Report

Overview of EDTF recommendations 1

	Brief description	Reference	Additional information
General
1	Present all related risk information together in any particular report	Risk, funding & capital Report; page 123	All risk information provided in Risk, funding & capital Report; IFRS, Pillar 3 and EDTF. Reference tables for Pillar 3, IFRS and EDTF included
2	Define the bank's risk terminology and risk measures and present key parameter values used	Risk, funding & capital management; page 134	Risk approach section and credit, operational, market, business and liquidity risk management sections. Funding and capital management sections
3	Describe and discuss top and emerging risks	Strategic Report - Key trends; page 18	Described in key trends section in the Strategic Report
4	Once the applicable rules are finalised, outline plans to meet each new key regulatory ratios	Risk, funding & capital management - Liquidity management; page 161 Risk, funding & capital management - Funding management; page 163 Risk, funding & capital management - Capital management; page 164	Capital management strategy, funding management and liquidity strategy in the relevant subsections of Risk, funding & capital management section

Risk governance and risk management strategies/business model

5	Summarise prominently the bank's risk management organisation, processes and key functions	Risk, funding & capital management - Risk approach; page 135	Risk approach in the Risk, funding & capital management section
6	Provide a description of the bank's risk culture, and how procedures and strategies are applied to support the culture	Risk, funding & capital management - Risk approach; page 135	Risk culture in Risk approach section. This includes a reference to the Remuneration Report in the Governance Report
7	Describe the key risks that arise from the bank's business models and activities, the bank's risk appetite in the context of its business models and how the bank manages such risks	Risk, funding & capital management - Risk approach; page 135 Risk, funding & capital review - Key developments; page 171	Risk approach section describes risk taxonomy and key risks and Key developments are described in the Risk, funding & capital review section
8	Describe the use of stress testing within the bank's risk governance and capital frameworks	Risk, funding & capital management - Risk approach; page 135 Risk, funding & capital management - Market risk management; page 156	Stress testing in Risk approach section and Stress testing in Market risk management section

Capital adequacy and RWA (REA)

9	Provide minimum Pillar 1 capital	Risk, funding & capital review -	Minimum capital requirements in the
	requirements	Capital; page 238	Capital section
10	Summarise the composition of capital based on templates adopted by the Basel committee	Risk, funding & capital review - Capital; page 238	Regulatory capital structure in the Capital section

Introduction

129

11	Present a flow statement of movements since the prior reporting date in regulatory capital, including changes in common equity tier 1, tier 1 and tier 2 capital	Risk, funding & capital review - Capital; page 238	Regulatory flow statement and capital ratios developments in the in the Capital section
12	Qualitatively and quantitatively discuss capital planning	Risk, funding & capital management - Capital management; page 164	Capital management strategy addressed in the Capital management section. Further refinement to be addressed in future disclosures
13	Provide granular information to explain how RWA (REA) relate to business activities and related risks	Risk, funding & capital review - Key developments; page 171	Key figures per business segment in the Key developments section
14	Present a table showing the capital requirements for each method used for calculating RWA (REA) for credit risk, for each Basel asset class as well as for major portfolios within those classes	Risk, funding & capital review - Credit risk; page 179 Risk, funding & capital review - Capital; page 238	Overall Exposure at Default (EAD) and RWA (REA) disclosure in Credit risk section describing EAD per methodology and subsequently minimum capital requirement section in Capital section presenting capital requirements per methodology. Further refinement to be addressed in future disclosures
15	Tabulate credit risk in the banking book showing average probability of default (PD) and LGD as well as exposure at default (EAD), total RWA (REA) and RWA (REA) density for Basel asset classes and major portfolios within the Basel asset classes	Risk, funding & capital review - Credit risk; page 179 Additional risk, funding & capital disclosures; page 248	Credit risk exposure in Credit risk section and detailed Internal Ratings-Based (IRB) approach disclosures in Additional risk, funding & capital disclosures. Further refinement to be adressed in future disclosures
16	Present a flow statement that reconciles movements in RWA (REA) for the period for each RWA (REA) risk type	Risk, funding & capital review - Credit risk; page 179 Risk, funding & capital review - Operational risk; page 224 Risk, funding & capital review - Market risk; page 226	RWA (REA) flow statements in Credit risk section, Operational risk section and Market risk section. Regulatory capital in Market risk in the trading book and Regulatory capital in Operational risk section
17	Provide a narrative putting Basel Pillar 3 back-testing requirements into context, including how the bank has assessed model performance and validated its models against default and loss	Risk, funding & capital management - Market risk; page 226	Risk models and model validation section in Credit risk management and Market risk measurement section in Market risk management section
Liquidity
18	Describe how the bank manages its potential liquidity needs and provide a quantitative analysis of the components of the liquidity reserve held to meet these needs	Risk, funding & capital management; page 134	Strategy section and Liquidity risk management approach section in the Liquidity risk management section

Funding

19 Summarise encumbered and

Risk, funding & capital Report / Introduction to risk, funding & capital management

	131

Note 32 Transferred, pledged, encumbered

	unencumbered assets in a tabular format by balance sheet categories	Statements; page 439	and restricted assets. Further refinement to be adressed in future disclosures
20	Tabulate consolidated total assets, liabilities and off-balance sheet commitments by remaining contractual maturity at the balance sheet date.	Additional Risk, funding & capital disclosures; page 248	Contractural maturity of assets and liabilities section
21	Discuss the bank's funding strategy, including key sources and any funding concentrations, to enable effective insight into available funding sources, reliance on wholesale funding, any geographical or currency risks and changes in those sources over time.	Risk, funding & capital management - Funding management; page 163 Risk, funding & capital review - Funding; page 233	Strategy in the Funding management section. Further details of sources and funding concentration in the Funding subsection in the Risk, funding & capital review section
Market risk
22	Provide information that facilitates users' understanding of the linkages between line items in the balance sheet and the income statement with positions included in the traded and non-traded market risk disclosures such as risk factor sensitivities, economic value and earnings scenarios and/or sensitivities	Risk, funding & capital review; Market risk - page 226	Market risk exposure traded and non traded risk in Market risk section
23	Provide further qualitative and quantitative breakdowns of significant trading and non-trading market risk factors beyond interest rates, foreign exchange, commodities and equity measures	Risk, funding & capital management - Market risk management; page 156	Market risk exposure and Regulatory capital in Market risk trading & banking book. Given the materiality of market risk at ABN AMRO this requirement will be further addressed in future disclosures if material
24	Provide qualitative and quantitative disclosures that describe significant market risk measurement model limitations, assumptions, validation procedures, use of proxies, changes in risk measures and models through time and descriptions of the reasons for back-testing exceptions.	Risk, funding & capital management - Market risk management; page 156	Market risk measurement sections in Market risk trading & banking book. Given the materiality of market risk at ABN AMRO this requirement will be further addressed in future disclosures if material

Note 32 to the Annual Financial

further addressed in future disclosures 25 Provide a description of the primary risk management techniques employed by the bank to measure and assess the risk of loss beyond reported risk measures and parameters, such as VaR, earnings or economic value scenario results Risk, funding & capital management - Market risk management; page 156 Market risk measurement sections in Market risk trading & banking book. Given the materiality of market risk at ABN AMRO this requirement will be further addressed in future disclosures if material

Credit risk

26	Provide information that facilitates users' understanding of the bank's credit risk profile, including any significant credit risk concentrations	Risk, funding & capital review - Credit risk; page 179	Credit risk section, including granular exposure breakdowns, off-balance sheet commitments and concentrations of credit risk Accounting & risk policies in Management of forborne, past due and impaired loans sections
27	Describe the policies for identifying impaired or non-performing loans, including how the bank defines impaired or non-performing, restructured and returned-to performing (cured) loans as well as explanations of loan forbearance policies	Risk, funding & capital management - Credit risk management; page 143
28	Provide a reconciliation of the opening and closing balances of non-performing or impaired loans in the period and the allowance for loan losses	Risk, funding & capital review - Credit risk; page 179	To be addressed in future disclosures. Current disclosure in loan impairment charges and allowances in Credit risk section presents opening and closing balance of impairment charges and allowances
29	Provide a quantitative and qualitative analysis of the bank's counterparty credit risk that arises from its derivatives transactions	Risk, funding & capital management - Credit risk management; page 143 Risk, funding & capital review - Credit risk; page 179	Specific counterparty credit risk section describing models used and Counterparty credit risk disclosure in Risk, funding & capital review provides quantitative information
30	Provide qualitative information on credit risk mitigation, including collateral held for all sources of credit risk and quantitative information where meaningful	Risk, funding & capital management - Credit risk management; page 143 Risk, funding & capital review - Credit risk; page 179	Credit risk mitigation section describing mitigation management and quantitative disclosures in the Risk, funding & capital review section
Other risks
31	Describe 'other risk' types based on management's classifications and discuss how each one is identified, governed, measured and managed	Risk, funding & capital management; page 153 and page 160	Operational risk management and Business risk management
32	Discuss publicly known risk events related to other risks, including operational, regulatory compliance and legal risks, where material or potentially material loss events have occurred	Risk, funding & capital review - Operational risk; page 224 Annual Financial Statements; note 33	Information on operational risk events; page 224, Information on contingencies in note 33 to the Annual Financial Statements

Risk exposure measurement and scope differences v

Risk measures differ depending on the purpose for which exposure is calculated: EU IFRS, determination of regulatory capital or economic capital (CRD IV/CRR). EU IFRS is mainly used to measure the bank's financial results and position. Regulatory and economic capital are more suitable for certain risk measurement purposes

because of the following: EU IFRS classifies the financial position by class of product, whereas the objective of Basel reporting is to take a risk-sensitive view on the bank's portfolio and to ensure that sufficient capital buffers for unexpected losses and sufficient liquidity buffers are maintained. In addition, the financial position according to EU IFRS provides a liquidity view instead of a credit view.

132

Introduction

133

Risk, funding & capital Report / Introduction to risk, funding & capital management

EU IFRS reporting scope 1

The consolidation scope of ABN AMRO is determined in accordance with IFRS 10 Consolidated Financial Statements and IFRS 11 Joint arrangements. More information can be found in note 1 to the Annual Financial Statements. In accordance with IAS 28 associates, participations and joint ventures engaged in financial and non-financial activities are accounted for on an equity basis. These investments are recognised at cost and increased or decreased by ABN AMRO's share of the profit or loss of the entity after acquisition. Further details on reconciliation between EU IFRS and Basel exposures are provided in the Risk management section.

Regulatory reporting scope v

The scope of consolidation for the purpose of calculating regulatory and economic capital (based on the CRD IV and CRR) is generally the same as the consolidation scope under EU IFRS and includes subsidiaries directly or indirectly controlled by ABN AMRO that are active in the banking and finance sectors. However, subsidiaries consolidated under EU IFRS that are active in sectors other than banking and finance are excluded from the regulatory scope of consolidation. The table below describes the differences in consolidation for the purpose of calculating regulatory capital requirements and for the purpose of financial reporting under EU IFRS.

ABN AMRO applies CRD IV/CRR for determining its regulatory and economic capital and is subject to the reporting requirements imposed by its joint supervisors, the European Central Bank and the Dutch central bank (DNB). The capital and related reporting requirements in the CRD IV/CRR apply under the following scopes:

• Å ABN AMRO Group N.V. consolidated;
• Å ABN AMRO Bank N.V. solo with its Dutch subsidiaries and foreign branches (solo consolidation);
• Å Sub-consolidated application for ABN AMRO Clearing Bank N.V., Neuflize Vie, Bethmann Bank A.G., ABN AMRO Bank (Luxembourg) S.A.

ABN AMRO has acquired waivers to apply the capital and related reporting requirements on a solo basis to its Dutch credit subsidiaries. These waived subsidiary credit institutions are included in ABN AMRO's solo consolidated scope. Sub-consolidated reporting is not applicable to the credit institution subsidiaries in the Netherlands, with the exception of ABN AMRO Clearing Bank N.V.

The Dutch credit institution subsidiaries are ABN AMRO Bank N.V., ABN AMRO Clearing Bank N.V., ABN AMRO Groenbank B.V., ABN AMRO Hypotheken Groep B.V. and International Card Services B.V.

Entity1	Financial reporting under EU IFRS	Capital treatment under the Capital Requirements Regulation	Main related entities
Insurance companies	Fully consolidated entities engaged in insurance activities.	The required capital is based on the equity investment in insurance entities.	ABN AMRO Captive N.V., White Rock Insurance (Gibraltar) PCC Limited/Cell, ABN AMRO Life Capital Belgium N.V., ABN AMRO Life S.A.
Subsidiairies engaged in non-banking and non-insurance subsidiairies	This category includes entities engaged in non-financial activities, which are consolidated in accordance with IFRS requirements.	The required capital is based on the equity investment in these subsidiaires.	Sumsare N.V., ABN AMRO Arbo Services B.V., Landgoed Duin & Kruidberg B.V.
Associates, participations and joint ventures engaged in non financial activities	Accounted for on an equity basis.	Accounted for on an equity basis.	Delta Lloyd ABN AMRO Verzekeringen Holding B.V. (NC), AACBOF NEBO B.V. (INV), Alma Maritime Ltd., MP Solar B.V. (NC), Aline Holding S.A. (NC) (see note 22 of the Annual Financial Statements for more information).

Differences in scope of consolidation between EU IFRS and regulatory reporting v

¹ The formerly reported Securitisation "Smile Securitisation Company 2007 B.V." was unwound in 2015.

Risk, funding & capital management

Risk, funding & capital management

This section provides an overview of the Group's risk, funding and capital management approach, including strategies, measurement approaches and risk governance framework. Portfolio developments are described in the Risk, funding & capital review section.

Overview

In 2015, we continued to optimise a sector-based credit risk approach throughout the Risk Management organisation, which focuses on enhancing risk knowledge and awareness for individual industry sectors. The approach allows us to better monitor and manage portfolio intake and sector concentration and to add value in credit risk-taking and decision-making.

Moreover, ALM/Treasury risk was further embedded in the risk organisation to strengthen the second line of ALM and Treasury and to ensure that ABN AMRO's risk appetite is in line with the bank's corporate strategy and capital position, taking into consideration the economic outlook and activities of ALM and Treasury.

During the course of 2015, Risk Management & Strategy was closely involved in the preparations for the IPO. With regard to the various risks in the risk taxonomy, all risk departments contributed to the successful IPO.

In 2015, we managed to respond adequately to the growing number of bank-wide regulatory and supervisory changes, including those resulting from the transfer of supervision responsibility to the ECB in November 2014. By means of the ECB DNB Risk and Finance Desk, we ensured adequate management and response to bankwide regulatory and supervisory changes, including additional requirements for disclosure of highly detailed risk information.

The application for the AMA status was submitted to the ECB in the fourth quarter of 2015. In 2014, the bank already implemented the Advanced Measurement Approach (AMA) for internal purposes to calculate the risk exposure for operational risk and to calculate regulatory capital in a parallel run.

We obtained formal approval from the regulator for the use of the IMA approach for calculating regulatory capital in February 2016. This approach was already being used for internal risk management purposes, as well as for the computation of economic capital.

Our clients and society increasingly recognise the importance of sustainability and transparency. ABN AMRO aims to hold a prominent position as a sustainable bank that takes responsibility for its actions. In its various roles, the bank is exposed to sustainability risk. Since sustainability is a key objective in the bank's strategy, sustainability risk management has been integrated into this year's Risk approach section.

Introduction

Strategic Report

Business Report

Risk approach

ABN AMRO is committed to being a well-capitalised bank with sufficient liquidity that focuses on delivering sustainable value to our stakeholders. We are committed to maintaining a moderate risk profile, and we thoroughly evaluate on an ongoing basis the long-term risk and return implications of our operations.

Based on the long-term strategy of ABN AMRO, the bank has defined five key objectives with regard to risk management, which are presented below:

Risk, funding & capital Report / Risk, funding & capital management / Risk approach

Risk management strategy v

Building blocks of our moderate risk profile

Risk profile v27

ABN AMRO is a Netherlands-based bank, with the majority of its activities performed in the domestic market. The bank's lending activities are largely asset-based. We are internationally active in Private Banking, Clearing, Energy, Commodities & Transportation (ECT Clients), Commercial Finance (Factoring), Lease, Diamond & Jewellery Clients and International Card Services. The bank has in-depth knowledge of, and a proven track record in, these specialised activities and serves foreign clients with operations in these specialised areas. In addition, we serve Dutch clients with activities abroad. Trading activities are client-facilitating in nature and have a limited contribution to the bank's overall risk profile.

The risk profile is managed based on an integrated risk management framework. In this framework, all risk type issues, cross-risk type issues and overarching issues are identified to provide one integrated view on the bank's risk profile and on the risk profile of the businesses. By looking at the overall, integrated risk profile, we strive to carefully balance actions that may be required to manage the risk profile within the moderate risk profile.

Senior management continuously monitors the bank's activities based on the risk appetite. The status and outlook are discussed on a monthly basis in the Managing Board by means of the Enterprise Risk Management report. The Managing Board addresses the risk profile and reviews both the individual risk types and the integrated, bank-wide risk profile.

The following sections describes the five building blocks of our moderate risk profile.

Risk taxonomy b

Our risk taxonomy is the classification of risks into risk types to which the bank is, or could be, exposed. It is reviewed and updated on a yearly basis to ensure that all material risks are identified, defined and taken into account in the risk governance framework. The purpose of the risk taxonomy is to support effective and efficient risk management throughout the bank. It creates a common risk vocabulary, provides a checklist of types of risks for use in risk assessments, assists in assuring that all material risks are managed and that roles and responsibilities are identified. Furthermore, it allows for aggregation of risk assessments throughout the bank for structured analysis.

Risk, funding & capital Report / Risk, funding & capital management / Risk approach

ABN AMRO's risk taxonomy is summarised in the following figure.

The main risk types are credit, market, operational, liquidity and business risk. These risks are discussed later in this section. Intersecting risk types, such as reputational risk (including sustainability risk) and model risk, are risk types that emphasise specific aspects applicable to several risk types in the risk taxonomy.

Risk appetite b

The risk appetite determines the level and nature of risk that the bank is willing to take in order to pursue its strategy, taking all relevant risks and stakeholders into consideration. The risks covered in the risk taxonomy are included in the risk appetite.

As part of the risk appetite, we have introduced the 'Key guiding principles for risk appetite'. These principles are a translation of the moderate risk profile statement and consist of ten overall guidelines that provide a qualitative explanation of the boundaries of the moderate risk profile for ABN AMRO.

137

The keywords of these guiding principles are shown in the following figure:

Keywords of the key guiding principles for the risk appetite b

The keywords and key guiding principles are further detailed in risk appetite parameters, among which:

• Å minimum levels for capital ratios;
• Å risk-adjusted return measures;
• Å concentration limits for single counterparties;
• Å concentration limits for countries and industry sectors;
• Å liquidity ratios (Loan-to-Deposit ratio, LCR and NSFR);
• Å market risk ratios;
• Å operational risk ratios.

The bank-wide risk appetite is an integral part of our corporate strategy. Business-line specific risk appetite statements further specify the bank-wide risk appetite at business line level.

The actual and forecasted risk profiles are monitored and discussed on a monthly basis by benchmarking them against the risk appetite. When a risk factor approaches or exceeds its limit, corrective actions are defined and approved at the appropriate decision-making level in accordance with the risk governance charter. The Risk & Capital Committee of the Supervisory Board monitors and discusses the risk appetite on a quarterly basis and the members of the Supervisory Board are informed of the risk profile on a monthly basis.

The risk appetite is reviewed by the Managing Board and approved by the Supervisory Board on an annual basis and serves as input for the budgeting process.

Risk culture 6

The bank aims to continuously increase risk awareness and to make it an integral part of the bank-wide risk culture. The moderate risk profile is embedded in the risk culture by means of communication and training and is monitored through performance assessment.

Employees are expected to be aware of the drivers of our risk profile and to feel accountable for the risks they take. Part of the training curriculum is the Integrated Risk Management course, which is mandatory for all Risk Management employees. The course emphasises the importance of taking a holistic view of risks. We introduced the course to most employees of the International Clients segment in 2015, and it will be rolled out to employees of Commercial Clients in 2016. Furthermore, employees are expected to adhere to the ABN AMRO business principles. These principles are fundamental to everything we do and describe how we act as a bank, how we take decisions, and how we deal with various dilemmas.

We place strong emphasis on sound risk control in our compensation policies. ABN AMRO's remuneration policy is in line with our risk profile. More details are provided in the Remuneration report in the Governance Report.

Risk, funding & capital Report / Risk, funding & capital management / Risk approach

Risk governance bv5

The Risk Governance Charter is based on the risk strategy and appetite, which is embedded in the risk organisation, policies and methods. The framework is in place to safeguard and control the bank's risk profile, support efficient and effective risk management throughout and at all levels of the bank, and manage risk management processes in line with the risk appetite of the bank.

The Risk Management organisation operates under the direct responsibility of the Chief Risk Officer, who is a member of the Managing Board. The Managing Board has overall responsibility for the risks that ABN AMRO takes.

Three lines of defence

The three lines of defence principle provides a clear division of activities and responsibilities in risk management at different levels in the bank and at different stages in the life cycle of risk exposures. It aims to provide clarity for every employee within the bank, with regard to their role and the level of risk awareness that is expected from them.

The three lines of defence principle is summarised in the following figure.

Three lines of defence bv

Executive committees

The Managing Board is ultimately responsible for a balanced assessment between the commercial interests of the bank and the risks to be taken within the boundaries of the risk appetite.

The Managing Board establishes clear lines of responsibility and authority within the bank to ensure sound risk governance. In the risk decision-making framework, the Managing Board is supported by three executive risk committees: Group Risk Committee, Central Credit Committee and Asset & Liability Committee, each of which is (jointly) chaired by a member of the Managing

Board. The other executive committees also decide on risk-related issues, in the presence of Risk Management & Strategy representatives. In addition, the Managing Board itself takes decisions that are of material significance to the risk profile, capital allocation and liquidity of ABN AMRO.

The Supervisory Board is responsible for approving ABN AMRO's risk appetite statements and supervises whether our commercial interests, capital allocation and liquidity requirements in general terms comply with the bank's risk appetite. The Supervisory Board also oversees

Executive committees bv

Group Risk Committee

The Group Risk Committee (GRC) is mandated by the Managing Board to monitor, assess and manage our risk profile in relation to the risk appetite. The GRC is, for example, responsible for establishing a product approval process to ensure we only accept risks that we understand and that serve the interests of clients, and for the adequate functioning of this process. The GRC may delegate specific approval powers to subsidiary risk committees, but remains responsible on behalf of the Managing Board. The terms and conditions of the delegation of authority with respect to risk policies, methodologies and new products are specified in the Risk Governance Charter.

Central Credit Committee

The Central Credit Committee (CCC) is mandated by the Managing Board to decide on credit proposals that have a significant impact on our credit portfolio. In certain cases, the CCC decisions require final approval by the Managing Board.

Asset & Liability Committee

The Asset & Liability Committee (ALCO) is mandated by the Managing Board to decide on our interest profile, liquidity profile and solvency position within the risk appetite. The ALCO is responsible for the management of liquidity, market risk in the banking book and capital.

Business Report

Risk, funding & capital Report / Risk, funding & capital management / Risk approach

Group Disclosure Committee

The Group Disclosure Committee is responsible for advising and supporting the Managing Board in relation to (i) supervision on the accuracy and timeliness of public disclosures by the Group and (ii) integrity with regard to the financial statements and other public disclosures.

Transition Management Committee

The Transition Management Committee (TMC) has been attributed responsibility for, among other things, tactical management of the Group-wide transition programmes.

Regulatory Committee

The Regulatory Committee's responsibilities include (i) ensuring thorough understanding and adequate overview of matters relating to changes in national and international laws and regulations affecting the Group, (ii) regularly informing and consulting the Managing Board about any such matters, and (iii) making strategic choices and taking decisions on such matters.

Risk measurement v2

We develop and use internal models to quantify the risk for most risk types in the risk taxonomy. The models for credit, operational, market, liquidity, and business risk are the most widely used and allow for measuring the level of risk. They support day-to-day decision-making as well as periodic monitoring and reporting on developments in the bank's portfolios and activities. In most cases, models quantify the probability and severity of an event, i.e. the likelihood that an event occurs and the loss the bank may suffer as a consequence of that event. This serves as the basis for ABN AMRO's internal measures of risk (economic capital) and can be key input for the calculation of the minimum regulatory capital requirements according to the Basel framework (regulatory capital).

In the following section we give a brief introduction of the models for the abovementioned risk types and how these models are validated and approved. In subsequent sections, we describe how these measures are used to calculate required regulatory and economic capital.

The modelling departments develop the models in close cooperation with the relevant business and risk experts. In principle, we review the models annually, back-testing the models against historical loss data and, where relevant, benchmarking the calibration of the models with external studies.

The independent Model Validation department validates all internal models. Validation guidelines ensure objectivity, consistency, transparency and continuity. Models are validated according to these principles and reviewed against internal and regulatory requirements.

New models first require formal internal and external approval before implementation and use is allowed. Internal approval for the continued use of a model is obtained from the Methodology Acceptance Group (MAG), a subsidiary committee of the Group Risk Committee. External approval is obtained from the regulator, if required.

Capital

Regulatory capital (CRD IV/CRR) bv

Under the Basel framework banks are required to hold capital to cover the financial risks that a bank faces. For Pillar 1 the capital requirement is based on the aggregated risk weighted assets (RWA) for the three major risk types (credit risk, operational risk and market risk). The capital requirements are stated as a percentage (set by the regulators) of the RWA.

Economic capital

In addition to regulatory required capital, for Pillar 2 we calculate economic capital (EC). Economic capital covers all risk types in our risk taxonomy, for which capital is deemed to be the mitigating instrument to sustain unexpected losses, and is used as the key metric for internal risk measurement and management. Economic capital is the amount of capital we reserve in order to achieve a sufficient level of protection against large unexpected losses that could result from extreme market conditions or events.

For the calculation of economic capital, we make use of internal models. These models calculate the economic capital on a 99.95% confidence level and a one-year time horizon. This implies that the estimated capital figure for the coming year is sufficient to cover a level of loss that will be exceeded in only 0.05% of all possible situations.

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Economic capital is aggregated for all risk types to determine the required capital and to support capital allocation, ex-post performance measurement (RARORAC) and risk-appetite setting such as industry concentration risk limits. Economic capital figures are also used at transactional level in loan-pricing tools. These tools act as a decision-making mechanism for assessing the profitability of a new or existing transaction, in terms of risk-adjusted return on risk-adjusted capital.

Regulatory capital is limited to the risk types credit risk, operational risk and market risk in the trading book; economic capital is, however, calculated for the other material risk types (liquidity risk, business risk) as well.

EC Quality Assessment

The EC models described above form the core of the Internal Capital Adequacy Assessment Process (ICAAP), but may not capture all risk. As part of the ICAAP, we perform an annual EC Quality Assessment (ECQA). For each main risk type the calculated EC figure is evaluated in the following areas:

• Å risk coverage;
• Å responsiveness to internal and external developments;
• Å data quality;
• Å compliance with EC policy;
• Å validity of choices and assumptions.

If considered necessary, an additional capital buffer ('EC add-on') is taken to cover shortfalls in the EC framework.

Stress testing b8

Stress testing is an important risk management instrument used by ABN AMRO. The main objective of stress testing is to ensure that the bank retains a moderate risk profile, to increase risk awareness throughout the bank and to safeguard business continuity by means of proactive risk management and the review of potential future scenarios. Bank-wide stress testing, as applied by ABN AMRO, takes into account the effect of material plausible but unlikely events and developments on the bank. These events may be systemic (e.g. multiyear macroeconomic stress) or ABN AMRO-specific and cover capital as well as liquidity.

Stress testing purposes

The bank applies bank-wide stress testing based on internally defined scenarios for the following purposes:

• Å Risk-appetite setting and monitoring: the outcome of stress testing is used for setting and monitoring risk appetite limits and targets. Limits under stress are set to ensure the moderate risk profile. If the stress test outcome breaches the limits, mitigating actions will be considered to close the shortfall. The impact is taken into account in the capital and funding plan;
• Å Contingency planning: stress testing is used to assess and strengthen the contingency plans' triggers and measures. To this end, reverse stress testing is executed to gain insight into plausible events that could put the continuity of ABN AMRO under heavy pressure.

The Scenario & Stress Test Committee (subsidiary of the Group Risk Committee) and the Managing Board discuss and decide on scenario development, impact and management actions.

In addition to bank-wide stress testing, we perform stress tests by focusing on specific portfolios, business lines or risk types.

Credit risk management

Credit risk is the risk that the value and/or the earnings of the bank decline due to uncertainty in a counterparty's ability or willingness to meet the terms of any financial contract.

Credit risk management within the bank is governed by the bank-wide central credit risk policy and further detailed in underlying specific credit risk policies. The primary responsibility for managing and monitoring credit risk lies with the business as the first line of defence. The business is required to identify, assess and manage, monitor and report potential weaknesses in the credit risk portfolios in line with the credit risk framework. Monitoring takes place on a permanent and ongoing basis to limit credit risk exposures to a level in line with the business line's risk appetite.

In addition, risk in the credit portfolio is measured and monitored at bank-wide level on a monthly basis. Furthermore, we report and perform ad-hoc portfolio analyses on a quarterly basis, with specific attention for risk developments and concentrations.

Credit risk management approach bv

We manage our credit risk either through customised lending to counterparties, whereby the risk assessment takes place on an individual basis, or through standardised products and processes, whereby risk criteria are assigned on a pooled basis.

The credit risk life cycle

The process of credit risk management, the credit risk life cycle, is illustrated in the following figure. A distinction is made between Programme Lending and Non-Programme Lending. Programme Lending is a unique form of managing large portfolios of standardised and typically small homogeneous loan products in an effective and highly transparent manner. Non-Programme Lending is characterised by individual assignments and assessments of counterparties and exposures. Effectively everything that is not defined as Programme Lending is defined as Non-Programme Lending.

Risk, funding & capital Report / Risk, funding & capital management / Credit risk management

Credit risk life cycle b

Planning

Within Programme Lending, the credit cycle starts with a product planning phase in which the product is designed and/or reviewed with the goal to optimise its key drivers of risk and return. The business, the product, the target market, the processes and the credit standards are documented in a Product Programme (PP) which must be reviewed at least annually and approved by the appropriate committee(s).

Credit acceptance

The credit acceptance phase of a credit proposal starts with an assessment of the credit proposal by the business line and Risk Management. All credit risk must be assessed qualitatively and quantitatively in detail prior to approval. Information must be provided on matters such as the purpose, details and structure of the proposed credit facility, information about the obligor and other

counterparties, the industry, management and owners, and a financial and non-financial analysis. The credit decision is based on the independent assessments of both the commercial function and the credit risk function. The authority to approve the acceptance of credit risk is ultimately vested in the Managing Board. The Managing Board has partly delegated this authority to the Central Credit Committee (CCC), to business line-specific credit committees and to authorised persons who are defined in the risk governance charter.

For a credit approval decision within Programme Lending, client-specific aspects and internal/external data are taken into consideration to calculate a credit score (scorecard). The credit decision is based on the outcome of the scorecard and policy rules.

ABN AMRO Group Annual Report 2015

Credit risk monitoring

Consistent and regular monitoring is designed to safeguard the bank's position in relation to all risks associated with the counterparty or portfolio. This allows us to identify, at an early stage, any development in the counterparty or portfolio position that might trigger an increase in the risk profile. The monitoring process consists mainly of credit reviews, monitoring of outstanding positions, early notice of limit excesses and monitoring of collateral. Monitoring starts when the credit facility has been provided and continues throughout the life cycle of the credit facility and the relationship with the counterparty.

Risk, funding & capital Report / Risk, funding & capital management / Credit risk management

A watch status may be assigned to individual counterparties with an increased risk due to political, social, economic, legal, industry or counterparty-specific developments. The watch status allows for more intensive monitoring, early detection of deterioration of the credit portfolio and appropriate follow-up measures.

Restructuring & Recovery

Credit facilities with an identified high risk are transferred to the Financial Restructuring & Recovery department (FR&R). In the event of a default situation, transfer to FR&R is mandatory. Additionally, there can be judgemental triggers that require a transfer to FR&R. If a 'going concern' approach is applicable and return to a performing status is deemed possible, the credit facility will be transferred to Financial Restructuring. Otherwise the credit facility will be transferred to Recovery. For Financial Restructuring clients' credit facilities, FR&R devises a plan for rehabilitation or to increase the likelihood of final repayment.

Programme Lending contracts with an amount past due less than 90 days are treated by dedicated departments on behalf of the first line. When a default status is assigned to a client as a result of having an amount past due more than 90 days or another default trigger, the client will be transferred to restructuring and ultimately, if this is not effective, to internal departments or external parties (such as Lindorff) for debt collection.

If it is likely that a client will be able to meet its future payment obligations and involvement of FR&R is no longer required, the client will be transferred back to the business.

Credit risk measurement bv2

We use internal models to estimate Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD) parameters. These models are embedded in the credit approval and internal reporting processes and are used to measure the credit risk in exposures to individual clients and portfolios.

These models include pure statistical models, as used in Retail Banking and part of Corporate Banking, as well as expert-based models as used in other business segments. These expert-based models are based on quantitative as well as qualitative risk drivers.

The same parameters are used to calculate economic capital and the minimum regulatory capital requirements under the Basel Advanced Internal Ratings-Based (AIRB) approach. The parameters are also input to determine the RARORAC, the risk-adjusted return on risk-adjusted capital, which is the bank's primary performance measure on credits. For the trading book we use counterparty exposure models for internal limit monitoring. However, for regulatory capital these exposures are reported under the Standardised Approach.

The section on the credit risk measurement framework details the different credit risk parameters and their use in the calculation of expected loss, risk weighted assets (RWA), regulatory capital and economic capital.

Credit risk decisions of individual files are based on quantitative information and model output. In addition to this, the practical and conceptual limitations of metrics and models, human judgement and critical analysis are taken into account. For example, for non-retail clients the business and the credit approval authorities may have reasons to apply qualitative adjustments ('overrides') to a rating as calculated by the rating model. If external credit assessment institutions (ECAI) ratings are available for certain counterparties, these are used to benchmark internal rating model outcomes.

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Credit risk measurement framework

The graph below is a simplified representation of the risk management framework for credit risk. Each risk parameter used in this framework is explained.

Risk parameters for calculating expected loss, RWA, regulatory capital and economic capital bv2

Using the input variables, the models calculate the parameters PD, LGD and EAD. The EAD is established on a monthly basis using actual limits and outstanding exposure data. These PD and LGD parameters may be overridden by the business and/or the approval authority and are determined at least annually.

Exposure at Default

Exposure at Default models estimate the expected exposure at the time of a counterparty default. In the event that all or part of a facility is currently undrawn (the outstanding exposure is less than the limit), a percentage of this undrawn amount is added to the exposure to reflect the possibility that the facility is utilised differently in the event of a default situation.

Probability of Default

The internal definition of default is compliant with the definition of default outlined in the Basel framework. In short, the bank considers a default to have occurred when either of the following two events has taken place:

• Å the counterparty is overdue more than 90 days, or;
• Å the bank considers that the obligor is unlikely to meet its contractual obligations.

We assess the probability that a counterparty will default, and translate it into an internal uniform counterparty rating (UCR). The UCRs range from 1 to 8. A probability of default (PD) percentage is attached to each UCR grade, which is the probability that a counterparty will go into default within a one-year time horizon.

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Grade Category	UCR (internal rating)		Low High PD% PD%	Standard & Poor's equivalent		Moody's equivalent		Fitch equivalent
	from	to			from	to	from	to	from	to
Investment grade	UCR 1	UCR 3-	0.000%	0.465%	AAA	BBB-	Aaa	Baa3	AAA	BBB
Sub-investment grade	UCR 4+	UCR 6+	0.465%	100%	BB+	C	Ba1	C	BB+	C
Default without
provision	UCR 6	UCR 6			D	D	D	D	D	D
Default with provision	UCR 7	UCR 7			D	D	D	D	D	D
Default (in liquidation)	UCR 8	UCR 8			D	D	D	D	D	D

Internal rating scale mapped to external ratings bv2

The grade categories Investment grade and Subinvestment grade correspond with the equivalent classifications of these categories by rating agencies. The grade category Default without provision, UCR 6, pertains to exposures that are in default, but for which the bank has not, or has not yet, established an impairment allowance. The grade categories Default with provision, UCR 7 and UCR 8, pertain to provisioned (impaired) exposures. Counterparties are assigned a UCR 8 if they are in liquidation.

Within Programme Lending, Retail Banking and smaller credits that are part of Commercial Clients, products with the same characteristics are pooled and a PD is assigned to each pool.

Loss Given Default

Loss Given Default (LGD) models estimate the economic loss that may result from a credit facility in the event the counterparty defaults. It is expressed as the ratio of the loss on an exposure to the amount outstanding at default. The models use specific facility characteristics and collateral pledged to the bank.

Maturity

The effective Maturity (M) is the remaining time from the estimation or reporting date to the contractual maturity of the financial instrument. Longer maturities result in higher capital figures.

Correlations

The economic capital model uses correlations between different combinations of regions and industry sectors to quantify the relationship of risk between, for instance, two industry sectors. The correlations measured are based on internal data as well as externally obtained equity returns. Higher correlations result in higher capital figures.

Capital for credit risk Regulatory capital

The AIRB approach is used to calculate more than 85% of the RWA. All exposure classes are reported under AIRB. Within these exposure classes, a number of smaller portfolios are temporarily calculated applying the Standardised Approach (SA), as they are subject to a rollout plan and scheduled to be transferred to the AIRB approach at a later stage. For some portfolios a permanent exemption is obtained. These portfolios are reported on SA on a permanent basis.

Economic capital

The economic capital model for credit risk uses a Monte Carlo simulation to determine a full portfolio loss distribution taking into account specific portfolio characteristics and diversification effects. Loan facilities are valued on an economic value (mark-to-market) basis, so that loss estimates can occur not only due to defaults of the obligors, but also due to possible credit migrations and associated changes in the market values of loans.

Specific counterparty credit risk

v2l

Specific calculation methodologies are applied for counterparty credit exposure on over-the-counter (OTC) derivative instruments and for securities lending.

OTC derivative instruments

OTC derivatives are financial instruments used to cover current and/or future financial risks or to achieve additional return on an investment. They consist of transactions concluded between two parties and of which the value is based on a so-called underlying base value (e.g. interest rate swaps or equity options).

Securities financing transactions

Securities financing in the balance sheet refers to securities lending. Securities lending is the market activity whereby securities are temporarily transferred from a lender to a borrower, with the commitment to re-deliver the securities, usually in the short term. The borrower will collateralise the transaction with cash or other securities of equal or greater value than the lent securities in order to protect the lender against counterparty credit risk. As an intermediary between clients and the market, we act both as lender and borrower.

In managing the risk of the securities lending activities, we make a distinction based on the type of collateral:

• Å if the transaction is collateralised with securities, the lender is exposed to the counterparty risk of a potential default of the borrower. The lender is then entitled to close out the position by selling the securities in the market, where the usual risks of liquidity, valuation and volatility apply;
• Å if a transaction is secured by cash provided by the securities borrower, the lender is exposed to reinvestment risk of the cash deposit as well as the risk of rising asset values associated with the asset(s) lent to the borrower.

The bank monitors counterparty credit exposure from securities lending activities and value of collateral on a daily basis and requires additional collateral to be deposited in case of insufficient coverage.

Regulatory and economic exposure calculation for specific counterparty credit risk

The counterparty credit risk exposure calculation of OTC derivative instruments is based on the mark-to-market (MtM, i.e. current exposure) plus an add-on for potential future exposure. The add-on is calculated to cover 95% of the potential positive MtM movement in favour of the bank over the deal tenor. The add-on is determined by several parameters, such as type of derivative product (underlying), deal tenor, currency (pair) and the absence or presence of netting and collateral agreements. Under the bank's policy, add-on tables are updated periodically. The regulatory calculation methodology applied for calculation of the counterparty credit risk exposure value (EAD) for OTC derivative instruments is the mark-to-market method.

For securities lending, the Financial Collateral Comprehensive Method (FCCM) is used in the regulatory calculations. For internal counterparty exposure calculations, the FCCM is applied with additional conservatism.

Wrong-way risk

This risk refers to transactions where counterparty credit exposure arising from OTC or Securities Lending transactions is positively correlated to the counterparty's probability of default. Or, put differently, the credit exposure increases when the credit quality of the counterparty deteriorates.

In general, we do not engage in such specific wrong-way risk transactions. Furthermore, we are prudent in considering transactions where this correlation is less obvious, e.g. transactions where a general wrong-way risk component forms part of the deal, and a counterparty and the underlying issuer are in a similar industry, or in the same country or geographical region.

Credit concentration risk bv

Credit concentration risk is the risk of loss due to the insufficient diversification of risks within a portfolio caused by relatively large concentrations of exposures to positively and highly correlated counterparties. Concentrations are monitored against limits set in the bank's risk appetite. The presence of a number of positively correlated counterparties in a portfolio creates credit concentration risk, resulting in the potential effect of 148

a significant loss due to a failure to pay. Positively correlated counterparties in this case are those counterparties that have a tendency to default under similar circumstances. Limiting excessive concentrations is fundamental to our credit risk strategy. Therefore, the bank aims to keep the credit risk portfolio sufficiently granular and diversified.

To avoid excessive credit risk concentrations, Risk Management aims to diversify credit risk and sets maximum levels for subgroups in each category:

• Å Single clients and groups of related clients (counterparty concentration);
• Å Countries (geographic concentration);
• Å Industry sectors (industry concentration).

Counterparty concentration

Counterparty concentration credit risk is the risk of loss arising from relatively large exposures to counterparties belonging to the same risk group. The total exposure, or One Obligor Exposure (OOE) on a risk group, includes all drawn and undrawn facilities granted, plus all indirect exposure to the relationship, including guarantees and any other recourse claims. A risk group is an interrelated group of counterparties (companies and/or persons) with a high degree of dependency. This interrelationship may be due to direct or indirect majority interests by the same shareholder or group of shareholders, or due to other relevant economic dependencies. Counterparty credit concentration risk is measured by the OOE and the Loss at Default (LAD) per counterparty. The LAD is an estimate of expected loss if a counterparty defaults. The bank limits its counterparty credit risk by setting OOE and LAD limits. Additionally, all credit applications with a LAD or OOE above a certain threshold are reviewed by the Managing Board.

Geographic concentration

The bank has a number of offices located outside the Netherlands and clients who operate internationally. The bank is therefore exposed to country risk; in other words, the risk of credit losses due to country-specific events or circumstances. Management of country risk focuses on cross-border risk, for example the risk of country events impacting upon the creditworthiness of clients and hence their ability to meet their credit commitments to the bank. This also includes the risk that funds, goods or services cannot be transferred out of a risk country as a result of

actions by the authorities of that country or by other events impeding the transfer. These risks are managed by setting country credit limits, based on individual country analysis from economic and country risk experts. Country limits are reviewed at least once a year, with more frequent reviews for higher risk countries with evolving risks. Each country also has an internal credit rating approved twice a year, which is an important factor in managing country concentration risks. Approval of country risk policy and country limits is managed through the bank's senior risk committees, with some authority delegated to risk specialists.

Industry concentration

Industry concentration risk is the risk of loss arising from a relatively large aggregated credit exposure to counterparties active in a single industry. Industry concentration risk arises when deterioration in a specific industry has an effect on all credit exposures relating to that industry. ABN AMRO limits its industry concentrations by setting credit risk economic capital (EC) limits as a percentage of total credit risk EC per industry sector. In addition to these EC limits, EC concentration checkpoints are set to facilitate timely and sufficient management interventions to avoid breaching the limit.

Credit risk mitigation vz

Credit risk mitigation mainly relates to collateral management and guarantees, offsetting financial assets and liabilities, and enforcing master netting agreements or similar instruments.

Collateral management and guarantees

Collateral are assets with material value over which a security right is vested, such as a mortgage, charge, pledge, lien on an asset, or right securing obligations under a credit facility or other exposure which gives the bank priority rights on the proceeds of that asset. Requiring a security right over a clients' collateral is a way to mitigate or reduce credit risk associated with a credit facility or exposure. In addition, when certain predefined eligibility criteria are met, collateral can also provide a reduction in both regulatory capital and economic capital held by the bank.

Collateral is monitored regularly to ensure continued eligibility and a correct administration of the collateral value. The collateral value must be monitored at least on an annual basis. More frequent monitoring is required in case of a considerable decrease in value of the collateral, significant market changes or significant decrease of creditworthiness of the counterparty. For reporting purposes we report net collateral value, the expected recovery value of the collateral in case of a defaulted client. We also use third-party guarantees to mitigate risks. For example from banks, governments and export credit agencies.

The credit quality of guarantors is assessed at origination of the exposure and continuously monitored to ensure the correct valuation of the guarantee for risk mitigation purposes.

Offsetting financial assets and liabilities

Financial assets and liabilities are offset and the net amount is reported on the IFRS balance sheet if there is a legally enforceable right to set off the recognised amounts and there is either an intention to settle on a net basis or an intention to realise the asset and settle the liability simultaneously. The bank applies netting to debtor and creditor balances, such as current accounts and certain types of residential mortgages with clients' savings, where offsetting is justified by formal agreement with the client, provided they meet these criteria.

Enforceable master netting agreements or similar instruments

Enforceable master netting arrangements take into account all agreements with provisions that make offsetting exercisable only in the event of default. In addition, agreements are enforceable when the bank has the right to offset and does not have any ability and/or intention to offset simultaneously. These arrangements include derivative clearing agreements, global master repurchase agreements and global master securities lending agreements.

Forborne, past due and impaired loans bj

Loans at risk are primarily exposures for which signals have been detected indicating that the counterparty may become impaired in the future. Loans at risk are classified into different risk categories for individual counterparties and arrears buckets for groups of aggregated counterparties in order to optimise monitoring and review of these loans.

Forbearance

It is often more beneficial, for the bank as well as for the client, to restructure a loan rather than to recover a loan and take possession of the available collateral. The contracts of such clients are subsequently modified at non-commercial terms to avoid foreclosure. The process of making concessions for clients, with the purpose of keeping them afloat, is referred to as 'forbearance'.

We consider a forborne asset to be a contract under which the counterparty experiences, or is about to face, financial difficulty and for which the terms and conditions of the contract have been modified or the contract has been refinanced by the bank due to these financial difficulties on such terms that we would not have agreed to (concession) if the counterparty had been financially healthy.

The rationale behind forbearance is that we show leniency towards the counterparty by agreeing on modified terms that would not have been agreed if the client had not been in financial difficulty. The objective is to give the counterparty the time and financial flexibility to solve its financial problems, in the expectation that the counterparty in due course will be able to fulfil its financial obligations and, by doing so, to maintain a sustainable relationship between the bank and the counterparty.

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Forbearance measures can be applied to a contract that has defaulted on its obligations as well as to a contract that is still performing. A contract that is in the process of being recovered and for which the client relationship will be discontinued is not considered forborne, irrespective of the application of restructuring measures or a previous forborne status.

A forborne asset will only cease to qualify as forborne once all of the following conditions are met:

• Å the contract is considered performing;
• Å a minimum probation period of two years has passed from the date the forborne contract was considered performing;
• Å regular payments of more than an insignificant amount of principal or interest have been made during at least half of the probation period;
• Å the counterparty does not have any contract that is more than 30 days past due at the end of the probation period.

If a forbearance measure is applied to a performing client, the client stays forborne for at least two years. If a forbearance measure is applied to a non-performing client, the client stays forborne for at least three years. During this period, the asset will continue to be reported as forborne.

Past due credit exposures v

A financial asset is past due if a counterparty has failed to make a payment when contractually due or if it has exceeded an agreed limit. ABN AMRO starts counting days past due from the first day that a counterparty is past due on any financial obligation, regardless of the amount.

Impaired credit exposures v

A loan is impaired if there is objective evidence that the bank will not be able to collect all amounts due in accordance with the contractual terms (principal and interest). The objective evidence indicates that the borrower's credit quality has deteriorated and the estimated future cash flows of the financial assets are negatively impacted. An indication that a loan may be impaired is obtained through ABN AMRO's credit review processes.

Triggers for impairment include, but are not limited to, events such as significant financial difficulty, likeliness that the client will enter bankruptcy or financial reorganisation, negative equity, regular payment problems, improper use of credit lines and legal action by other creditors.

Accounting policy on impairment of loans and receivables b

An indication that a loan may be impaired is obtained through ABN AMRO's credit review processes, which include monitoring customer payments and regular loan reviews depending on the rating of the facility. A loan is impaired if there is objective evidence that the bank will not be able to collect all amounts due in accordance with the contractual terms (principal and interest). The objective evidence indicates that the borrower's credit quality has deteriorated and the estimated future cash flows in the related financial assets are impacted negatively. The amount of impairment loss is the difference between the carrying amount and the present value of estimated future cash flows.

Estimating the timing and amount of future cash flow requires significant judgement. The impact of changes in amounts and timing of expected recovery is recognised in impairment charges on loans and receivables in the income statement. Following impairment, the interest accrual is suspended and all accrued but not collected interest will be reversed during the period of impairment. Three categories of impairment can be identified: Specific impairment losses, Collective impairment losses and Incurred but not Identified.

Where possible, ABN AMRO seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and agreeing on revised loan conditions. Management continuously reviews renegotiated loans to ensure that all revised loan conditions are met and that future payments are likely to be made. The loans continue to be subject to an individual or collective impairment assessment.

ABN AMRO makes a distinction between three types of impairment losses:

• Å Specific impairment losses for individual significant exposures: If significant doubts arise over the client's ability to meet its contractual obligations, management of the relationship is transferred to the Financial Restructuring & Recovery department (FR&R). Reviews of the credit facilities are performed on a continuous basis. Based on these reviews, ABN AMRO recognises specific impairment losses. The amount of the specific impairment loss is based on the discounted value of the best estimate of future cash flow. Recognised specific impairment losses are partly or fully released when the debt is repaid or expected future cash flows of the customer improve due to positive changes in economic or financial circumstances;
• Å Collective impairment losses for individual not significant exposures: Assets with similar credit risk characteristics are clustered in portfolios. These portfolios include personal loans, residential mortgages, credit cards, home improvement loans and small and medium-sized enterprises facilities. The assets in the portfolios are collectively assessed for impairment. In general, when payments (interest or principal) are 90 days past due, the loan is identified as impaired. The impairment assessment is based on historical loss experience adjusted for current economic conditions. Factors that are taken into account are average life, past loss experience and portfolio trends;
• Å Incurred but not identified (IBNI): IBNI impairment losses are recognised for credit exposures in the performing portfolio. The impairment losses have incurred but still have to be identified at the balance sheet date. Specific or collective impairment assessment has therefore not yet taken place. All financial assets that are not yet assessed for impairment are included in the IBNI impairment loss calculation. All related off-balance items such as credit commitments are also included. The IBNI calculation combines the Basel II concept of expected loss on a one-year time horizon adjusted for IFRS elements by applying a loss emergence period (LEP) and a cycle adjustment factor (CAF).

When a loan is deemed no longer collectible, it is written off against the related loan loss allowance. Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off are credited to the income statement line item Impairment charges on loans and other receivables. Assets acquired in exchange for loans to achieve an orderly realisation are reflected in the balance sheet as a disposal of the loan and an acquisition of a new asset, initially recorded at fair value.

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Operational risk management vx

Operational risk arises from the uncertainty inherent in all business undertakings and decisions. Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.

Examples of operational risk are wrongful execution of an order, fraud, litigation for non-compliance with law, natural disasters and terrorism.

ABN AMRO has a framework in place to consistently manage and prevent operational risks.

Framework for operational risk management v

Management Control Statement
Strategic risk assessment
	Operational risk management overview Operational risk appetite Reporting Operational risk capital
Operational risk assessments Business-as-usual (including scenarios) Changes	Monitoring Operational risk events Effectiveness of controls Key Risk Indicators
Mitigation	Operational risk responses Avoidance Transfer Risk acceptance

Operational risk management approach v

All day-to-day operations comprise operational risks. First-line managers are responsible for managing the operational risks in their area of responsibility. Within the bank, they are supported by a professional operational risk management organisation and an effective framework that enables them to respond adequately to the risks they are exposed to.

Over the past few years, ABN AMRO has further strengthened the operational risk management framework using only best practices of the most advanced industry approach to operational risk management, Advanced Measurement Approach (AMA). As a result, management of operational risks is strongly embedded in business processes and departments, control management has been strengthened and operational risk awareness among employees has grown. All employees are expected and encouraged to be alert to and aware of the wide range of

operational risks in their daily work. An important focus was on further integrating the approach into all types of operational risk (convergence). Periodic risk reporting is in place at various levels of the bank, up to the Managing Board and Supervisory Board. The Managing Board systematically monitors the development of the operational risks against the bank's risk appetite.

Operational risk management instruments v2

At the heart of the operational risk management framework, business managers use assessments to identify and assess risks, including scenarios for rare events. Assessments are executed for business-as-usual activities and for new initiatives, such as product introductions or changes to processes and systems. Staff who are involved in daily operations conduct the risk assessments with the support of operational risk managers and other relevant experts. If a risk exceeds

Risk, funding & capital Report / Risk, funding & capital management / Operational risk management

the risk appetite, the business manager takes appropriate action to adequately respond to the risk. Periodically, at least once a year, business managers monitor the effectiveness of the controls in their area of responsibility, looking for potential flaws in the execution. Controls that do not adequately mitigate the identified risks are strengthened. Key Risk Indicators are monitored to signal adverse risk developments. Despite all preventive measures, incidents and operational losses cannot always be avoided. The bank systematically collects and monitors such events in order to make improvements.

Once a year, senior management teams review their strategies and business objectives from a risk perspective. Taking into account the state of control in their organisation, they define and reshape their strategic plans for the upcoming years. Based on this strategic review, senior management signs a Management Control Statement at the end of each year, which is included at the end of this section.

Operational risk responses v

The bank identifies four categories of risk response:

• Å Risk mitigation: in many cases, controls will be strengthened by taking additional measures to mitigate the risk;
• Å Risk avoidance: if mitigating measures are not effective, then the risk can be avoided by closing down operations or not starting operations;
• Å Risk transfer: if the risk cannot be mitigated or avoided, the bank may decide to transfer the risk. For example Group-wide insurance programmes are in place for specific operational risks. The Group Risk Committee reviews the global insurance programmes annually. In line with industry practices, ABN AMRO takes out the following Group-wide insurance policies from thirdparty insurers: fraud and civil liability, directors' and officers' liability, property damage and general liability. In addition, several local insurance policies are taken out for the remaining local or specific risks;
• Å Risk acceptance: there may be situations in which management decides to consciously accept a risk.

Specific operational risk areas v

Stability, availability and security of systems are crucial to the bank. The stability and availability of our digital services, such as online banking, mobile banking, iDeal and abnamro.nl, are an important part of our client offering, given the fact that ABN AMRO has 5.8 million Internet Banking contracts. Clients expect to be able to make payments anytime, anywhere and easily. Any outage of systems immediately affects the bank's operations and the bank's clients.

Information is one of the bank's most valuable assets. The security of the bank's financial transactions is crucial, and is a growing concern to our clients in the digital age. Clients must be able to trust the security of client information and the payment systems. The ability to use payment systems safely is an essential element of our payments strategy. These operational risk areas require specific knowledge. The bank therefore has a dedicated organisation in place that is devoted to information security and business continuity.

Information security

The bank's information infrastructures connect the bank's networks with public networks. As a result, banking processes and their supporting information systems can become vulnerable, threatening the security of client data and services. The bank is faced with a constant threat of cybercrime. Examples of such threats are computerassisted fraud, unauthorised disclosure of confidential information, virus infection, computer hacking and denial of service. Specific examples of cybercrime that clients experience are fake emails (phishing) and malicious software (malware).

In recognition of the importance of protecting the bank's information and its associated assets, such as systems and infrastructure, at all times, we have established a structured information security approach to ensure the confidentiality, integrity and availability of information. This approach defines the organisational framework, management and staff responsibilities, and information security directives that apply to the bank, its vendors and third parties with whom the bank exchanges information.

Risk, funding & capital Report / Risk, funding & capital management / Operational risk management

As part of this approach, the bank continuously monitors cybercrime threats and adjusts the bank's defences where necessary. The bank raises awareness among employees and clients on how to recognise and prevent fraud and cooperates with other major banks, police and justice departments to shield clients and financial transactions from crime.

Business continuity management

Business continuity management ensures organisational resilience at all levels of the bank's organisation and the ability to respond effectively to threats. This safeguards stakeholders' interests and the organisation's reputation, brand and value-creating activities. Business continuity focuses on:

• Å Analysis of threats and business impact of calamities and crises;
• Å Determining strategies and solutions to be taken in the event of a crisis to enable continuity of business operations, such as business recovery, crisis management and IT disaster recovery planning;
• Å Documentation, periodic assessment, and testing of these strategies and solutions.

In the event of a disruption of our digital services, the bank strives to identify solutions as quickly as possible and to communicate transparently. Business continuity management is in place to enable us to act in the event of incidents and crises. This includes procedures to inform relevant stakeholders of any disruptions. ABN AMRO uses various platforms to inform clients: via service messages on Internet Banking and in our Mobile Banking app, our Advice & Service Centres and Webcare team, and tweets and Facebook messages.

Operational risk measurement v2

In line with the Advanced Measurement Approach (AMA), ABN AMRO has in place a model for operational risk capital. The AMA model has a hybrid approach, combining a forward-looking and a backward-looking view of operational risks. Risk control self-assessments and scenario analyses provide a forward-looking view of the operational risk profile for the coming year, taking into account the actual state of the business environment and the internal controls in the business lines. Historical operational loss data of ABN AMRO and industry operational loss data provide a backward-looking view. The model combines the forward-looking data and backward-looking data to produce an aggregated annual loss distribution, from which the annual aggregated expected loss amount can be estimated.

Capital for operational risk Regulatory capital

ABN AMRO currently applies the Standardised Approach (SA) to calculate regulatory capital for operational risk. Over the past few years, the bank has implemented the AMA model. The application for the AMA status was submitted to the ECB in the fourth quarter of 2015. As part of the application process, ECB is reviewing the implemented AMA model. The ECB decision is expected in the second quarter of 2016.

Economic capital

The AMA model is already being used to calculate economic capital for operational risks. The bank applies a 99.95% confidence level to calculate the economic operational risk capital, whereas a 99.9% confidence level will be applied to calculate regulatory operational risk capital.

Market risk management

ABN AMRO is exposed to market risk in its trading book and banking book.

Market risk in the trading book is the risk of losses occurring in the trading book due to market movements. As part of its business strategy, ABN AMRO facilitates client orders, acts as a market maker in key markets and provides liquidity to clients, including institutional investors and private clients. In accordance with the strategy, the Trading Risk Committee annually approves trading mandates, which define the nature and amount of the permitted transactions and risks and the associated constraints. The Trading Risk Committee is a subsidiary committee of the Group Risk Committee.

Market risk in the banking book is the risk that the value or the earnings of the bank decline because of unfavourable market movements. The market risk of the banking book consists predominantly of interest rate risk. Management of this risk is described in greater detail in this section.

Market risk in the trading book

The following market risks are inherent in the trading book:

• Å Interest rate risk: arises where market values are exposed to changes in interest rate risk curves and/or interest rate volatilities;
• Å Credit spread risk: arises where market values are exposed to changes in the term structure of credit spreads and/or from changing credit quality of debt securities or CDS reference entities, which impact default probabilities;
• Å Equity risk: arises where market values are exposed to changes in equity prices, dividends and volatilities;
• Å Commodity risk: arises where market values are exposed to changes in commodity prices;
• Å Foreign exchange risk: arises where market values are exposed to changes in FX spot and forward rates and/or FX volatility.

Market risk management for the trading book bv

ABN AMRO has a detailed risk management framework in place to identify, measure and control market risk in the trading book. The framework provides assurance that the bank's trading activities are consistent with its clientfocused business strategy and moderate risk profile.

The first line is responsible for implementing, executing and monitoring the necessary operational controls and is part of the decision-making quorum in various risk committee meetings. The first line owns the valuation models and is responsible for signing off the daily Profit & Loss (P&L) produced by the second line. It is also responsible for ensuring that actual position management is within the approved risk appetite at all times.

Risk Management is responsible for setting and maintaining the risk framework in which the first line can operate autonomously. Risk control responsibilities are executed through a product and limit approval process, exposure monitoring and reporting against the approved risk appetite.

The second line is also responsible for market reference data as input for daily risk and P&L calculations. Furthermore, Risk Management monitors the execution and effectiveness of the key operational controls. Senior representatives of Risk Management chair the bank's risk committees and are part of the decision-making quorum.

Market risk measurement for the trading book bv2ufg

ABN AMRO measures and manages market risk in the trading book on a daily basis. The key metrics used are economic capital, regulatory capital, Value-at-Risk (VaR), stressed VaR (SVaR) and incremental risk charge (IRC) together with a wide array of stress and scenario tests, sensitivity measures, concentration limits and notional limits. These metrics are measured and monitored with appropriate limits set at global and business levels.

Other

The metrics used to manage the trading book risks are dependent upon the design and assumptions used in the financial models from which they are derived. New models are therefore validated by an independent validation team and approved by duly authorised risk committees. Furthermore, existing risk models are reviewed and re-approved annually. As part of the review, models are assessed as to whether they behave appropriately under current market conditions. If and when required, models are adjusted. Besides the formal validation and review of models, the daily explanation of risk reporting figures, periodic portfolio reviews and regular back testing are important tools to assure the adequacy of the models.

The VaR model measures a one-day 99% VaR using a historical simulation approach and 300 days of historical data. A one-day 99% VaR means that a VaR of EUR 1 million implies a 1% chance of a loss of more than EUR 1 million over the next trading day. The daily VaR is back-tested against the calculated actual mark-to-market changes for each subsequent trading day and the number of outliers is used to assess the reliability of the VaR model. In 2015, the model's back-testing performance was satisfactory.

In addition to daily VaR, ABN AMRO also uses stressed VaR and incremental risk charge (IRC) metrics. Regulatory guidelines require the bank to calculate a stressed VaR measure calibrated to a continuous 12-month period of financial stress relevant to our trading portfolio. The incremental risk charge provides an estimate of the risk arising from credit migrations and default events that are not covered in VaR or SVaR.

Stress and scenario testing is designed to focus specifically on the impact of tail events which are outside the VaR confidence interval. We run daily stress tests for large moves in single risk factors. For specific portfolios, the latter is also combined with shifts in the related volatility risk factors. Scenario tests are also conducted frequently to evaluate the impacts of extreme market events that cover multiple risk factors, and the results of these tests are monitored. These scenarios can either be based on historical or hypothetical events or a combination of both.

For the trading book, we take into account adjustments for credit risk on our customers (CVA, Credit Valuation Adjustment), ABN AMRO funding costs (Funding Valuation Adjustment) and ABN AMRO credit risk (Debt Valuation Adjustment).

Market risk in the banking book b

We use internal models to calculate the risk measures needed for the management of interest rate risk in the banking book and control against the risk appetite. The models are mainly behavioural in nature and are used in the calculation of risk measures, such as duration of equity, NII-at-Risk, Market Value of Equity and economic capital for interest rate risk.

The following market risks are inherent in the banking book:

• Å Interest rate risk: the risk of losses in the economic value of equity or the Bank's net interest income due to unfavourable yield curve developments. Interest rate risk arises from holding assets that have a longer average behavioural maturity than the liabilities. Derivatives are used to steer the interest rate risk position within the bank's risk appetite and strategy. The overall objective of interest rate risk management is to protect and stabilise current and future earnings as well as the economic value of equity;
• Å Credit spread risk: arises as part of the bond portfolio that is held to maintain adequate liquidity for the bank;
• Å Equity risk: arises from equity positions taken in strategic partnerships and joint ventures, positions in private equity and positions where debt held by the bank has been converted to equity as part of a restructuring process;
• Å Property risk: arises primarily from the potential decline in the value of property owned by the bank;
• Å Foreign exchange risk: arises for operational reasons where it is inefficient to hedge exposures as they arise. FX Risk is centrally managed and the principal objective is not to be exposed to FX risk related to open currency exposures in the banking book; the risk is mitigated through match-funding non-euro assets in the same currency or by hedging.

Introduction

Strategic Report

Business Report

Risk, funding & capital Report / Risk, funding & capital management / Market risk management

Interest rate risk in the banking book v

In order to model and measure interest rate risk, assumptions are made about client behaviour, most importantly with respect to the maturity of savings and the prepayment of mortgages. The nature of these assumptions can substantially alter the anticipated interest cash flow pattern. Interest rate risk is therefore continuously managed within the risk appetite as the profile of assets and liabilities on the balance sheet changes and as assumptions made about client behaviour are updated.

The four main sources of interest rate risk are:

• Å Yield curve risk, which arises when unanticipated changes in the shape or level of the yield curve have adverse effects on the expected net interest income or underlying economic value;
• Å Repricing risk, which occurs when interest rates are reset due to maturities or floating rate resets. Through repricing, yield curve risk results in changes in Net Interest Income (NII) and therefore NII at Risk;
• Å Option risk, which arises from the options in assets and liabilities. These options can be either embedded, as in prepayment options on loans, mortgages and deposits, or can be explicit options, such as in derivatives contracts;
• Å Basis risk refers to the impact of relative changes in the term structure of interest rates for financial instruments that are priced using different interest rate reference curves.

Interest rate risk is managed according to the Asset & Liability Management (ALM) framework as approved by the Asset & Liability Committee (ALCO). Funds Transfer Pricing is applied to shift interest rate risk away from commercial business lines, enabling central monitoring and management. The day-to-day management of positions is delegated to ALM, while Treasury performs the execution of interest rate risk steering.

Market risk management for the banking book

ABN AMRO has in place a detailed risk management framework to identify, measure and control market risk in the banking book. The framework provides assurance that the banking book activities remain consistent with the bank's moderate risk profile.

The first line is responsible for implementing, executing and monitoring the necessary operational controls. Furthermore, the first line is part of the decision-making quorum in various risk committee meetings and is also responsible for ensuring that position management stays within the approved risk appetite at all times. Risk Management is responsible for setting and maintaining the risk framework in which the first line can operate autonomously. Risk control responsibilities are executed through a product and limit approval process, exposure monitoring and reporting against the approved risk appetite. The second line is also responsible for market reference data as input for daily risk and P&L calculations. Furthermore, Risk Management monitors the execution and effectiveness of the key operational controls. Senior representatives of Risk Management chair the bank's risk committees and are part of the decision-making quorum. Internal Audit, the third line of defence, performs a risk assurance role.

Risk measurement for interest rate risk v28ufg

The key metrics used are Net Interest Income (NII) at Risk, duration of equity, market value of equity and economic capital. These are complemented with stress testing and scenario analysis.

The metrics used for managing banking book risks are dependent upon the design and assumptions used in the financial models from which they are derived. Models must therefore be validated by an independent validation team and approved by duly authorised risk committees. Models are assessed as to whether they behave appropriately under the current market conditions and, if required, they are adjusted.

Risk, funding & capital Report / Risk, funding & capital management / Market risk management

NII-at-Risk

The Net Interest Income (NII) mainly depends on commercial margin and the results of interest rate risk position management.

NII-at-Risk is defined as the worst outcome of two scenarios: a gradual increase in interest rates and a gradual decline in interest rates by 200bps. A floor on interest rates is assumed in the falling rates scenario.

NII-at-Risk measures the loss of NII over a particular time horizon resulting from interest rate movements. NII-at-Risk is the difference in NII between a base scenario and an alternative scenario. The method used to calculate NII-at-Risk takes into account components of the sensitivity of NII to risk factors, including yield curve risk and the impact of changes in client behaviour. The method used to calculate NII-at-Risk also takes into account components of the sensitivity of NII to risk factors such as yield curve risk and basis risk, as well as the impact of changes in savings balances and rates and prepayment behaviour.

The bank applies limits to NII-at-Risk measures in line with the approved risk appetite requirement for income stabilisation. The current risk appetite for NII-at-Risk is based on the maximum interest mismatch income the bank is willing to lose in a 1-year period, expressed as a percentage of the banks total NII.

Duration of equity

Duration measures value changes due to small parallel shifts of the yield curve. Computation of the duration is based on deriving the change in economic value of a portfolio due to an interest rate increase or decrease compared to a base scenario. In the base scenario, not only the changes in the discount rate are incorporated, but also the interest rate-related changes in the magnitude of the expected cash flows for any instruments containing embedded options. A duration limit puts a maximum on the decrease in the economic value of equity due to small parallel interest rate movements.

Economic value of equity sensitivity to non-parallel yield curve changes

ABN AMRO uses stress testing and scenario analysis to ensure a comprehensive approach to risk management and to identify potential weakness. The set of scenarios in use includes steepening, flattening, bow up and bow down of the yield curve.

Risk measurement for credit spread risk

Credit spread risk for the liquidity portfolio is measured and limited as the impact on economic value of a 1 basis point change in spreads to a swap rate (CS01). This is done across the term structure of exposure as well as for a parallel shift across the curve.

Capital for market risk Regulatory capital

The bank has implemented the Internal Models Approach for calculating market risk capital for the trading book and submitted the application for IMA to the regulator for approval. We obtained formal approval from the regulator for the use of the IMA approach for calculating regulatory capital in February 2016. For external reporting of market risk RWA for the trading book, we use the Standardised Approach.

Economic capital

Market risk economic capital is calculated for both the trading book and the banking book. Calculation of economic capital for market risk in the trading book is based on a daily Value-at-Risk (VaR) market risk measure and historical scenarios simulating stress events such as Black Monday and the financial markets crisis. For market risk in the banking book, we use a VaR model to determine the economic capital needed to absorb losses due to adverse interest rate movements. The model also accounts for the potential impact of client behaviour, such as prepayment on mortgages and withdrawal of deposits and savings balances.

Business risk management

Business risk is the risk that business earnings and franchise value decline and/or deviate from expectations because of unexpected changes in business volume, margins or costs. Business income is affected by various internal and external factors, such as changes in client preferences, competition, economic and geopolitical developments and regulations. We continuosly monitor and respond to these factors.

Key criteria for classifying a risk as a business risk are:

• Å an event that leads to uncertainty in present or future business earnings and/or franchise value;
• Å drivers such as uncertainty in volumes, margins, fee and commission rates and/or business expenses.

The bank mitigates sensitivity to business risk drivers by performing management practices that effectively and timely address developments in these drivers. In addition, business risk is mitigated by a capital buffer.

The bank's strategy and business risk are correlated. The strategy incorporates mitigation of uncertain events and business risk drivers. Annual review of the strategy ensures alignment with business risk developments. To ensure that the bank's strategy is pursued and the strategic goals are met in the long term, our business plans and budgets take into account these strategic goals.

Business risk measurement

To determine business risk, we collect a combination of historical and forward-looking scenarios from experts ineach business line. These scenarios vary from annual revenue growth to revenue drivers, such as macroeconomic variables or industry performance indicators. The scenarios determine the volatility of revenue growth for each business line, and any correlation between them. Based on the individual volatilities, we calculate bank-wide volatility using a variance/covariance methodology.

Economic capital for business risk

Economic capital for business risk is defined as the maximum downward deviation of actual net operating profit from expected net operating profit.

Liquidity risk management

Liquidity risk is the risk that actual and potential payments or collateral posting obligations cannot be met on a timely basis, or only at excessive costs. There are two types of liquidity risk:

• Å Funding liquidity risk is the risk of not being able to meet both expected and unexpected current and future cash outflows and collateral needs because insufficient cash is available. Eventually, this will affect the bank's daily operations or its financial condition;
• Å Market liquidity risk is the risk that the bank cannot sell an asset in a timely manner at a reasonable market price due to insufficient market depth (insufficient supply and demand) or market disruption. Market liquidity risk includes the sensitivity in liquidity value of a portfolio due to changes in the applicable haircuts and market value. It also concerns uncertainty about the time required to realise the liquidity value of the assets.

Strategy 4ia

We have in place a liquidity risk management framework that helps maintain a moderate risk profile and safeguards ABN AMRO's reputation from a liquidity perspective. This framework ensures that even under severely adverse conditions the bank can meet its payment obligations at a reasonable cost. We have formulated a set of liquidity risk metrics and limits to manage the bank's liquidity position and ensure compliance with regulatory requirements at all times. By maintaining a smooth long-term maturity profile, limiting dependence on wholesale funding and holding a solid liquidity buffer, we maintain a prudent liquidity profile.

Liquidity risk management approach bv2i

The natural maturity mismatch between loans and funding requires liquidity risk management. We consider this maturity transformation function an integral part of our business model, which is why we closely monitor our liquidity position and the resulting risks. We diversify our funding sources to ensure market access, and we diversify funding tenors to avoid concentration of outflows. We also hold a portfolio of highly liquid assets that can be converted into cash in the event of unforeseen market disruptions, allowing us to meet payment and collateral obligations at all times.

Liquidity risk is managed centrally. We incorporate liquidity costs into the pricing of our day-to-day business activities.

In managing liquidity risk, a clear distinction is made between going-concern and contingency liquidity risk management.

Going-concern liquidity management

Going-concern liquidity management entails management of the day-to-day liquidity position within specified limits to ensure all obligations can be met on a timely basis. The most important metrics we use are:

• Å Stress testing: We conduct monthly and ad-hoc stress tests in which we evaluate the impact of cash in- and outflows under plausible stress scenarios. Both market-wide and bank-specific stress scenarios are defined and analysed. The goal of stress testing is twofold. Firstly, it helps us review our liquidity risk framework, i.e. the liquidity buffer size, risk appetite and limits. Secondly, it allows us to identify ways to reduce outflows in times of crisis;
• Å Regulatory liquidity requirement: The regulatory liquidity requirement measures the liquidity position in a one-month scenario of severe stress, as defined by the Dutch central bank. The central bank requires the one-month liquidity position to be in excess of the minimum required regulatory level at all times;

Å Survival period: The survival period reflects the period that the bank's liquidity position is expected to remain positive in an internal stress scenario in which wholesale funding markets deteriorate and retail and commercial clients withdraw a proportion of their deposits;

Å Loan-to-Deposit ratio: The Loan-to-Deposit ratio (LtD ratio) measures the relationship between the loan book (Loans and receivables - customers) and deposits from clients (Due to customers). The ratio includes all clientdriven loans and deposits, but excludes loans to and deposits from governments. The LtD ratio gives an indication of our dependence on wholesale funding for financing of client loans. Due to the Dutch mandatory and collective pension savings scheme, mortgage loans outweigh client savings balances in the Netherlands, driving the LtD ratio up above 100%.

Contingency liquidity risk management v

Contingency liquidity risk management aims to ensure that in the event of either a bank-specific or general market stress event, the bank is able to generate sufficient liquidity to withstand a short or long-term liquidity crisis.

• Å Contingency Funding Plan: The Contingency Funding Plan (CFP) sets out the guidelines and responsibilities for addressing possible liquidity shortfalls in emergency situations. This only comes into effect in the event the liquidity position is threatened. The CFP is aligned to the Recovery Plan, as required by the regulators. It enables us to manage our liquidity without unnecessarily jeopardising business lines, while limiting excessive funding costs in severe market circumstances;
• Å Collateral posting in the event of a rating downgrade: In the event that ABN AMRO's credit rating is downgraded, collateral requirements may increase. ABN AMRO monitors these potential additional collateral postings in its liquidity management framework;
• Å Liquidity buffer: ABN AMRO holds a liquidity buffer which accomodates cash outflows during stress. This buffer consists of unencumbered high-quality liquid assets including government bonds, retained RMBS and cash.

Basel III/CRD IV

The Basel III framework includes two liquidity ratios: the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR). The objective of the LCR is to promote the short-term resilience of banks by ensuring sufficient high-quality liquid assets to survive a significant stress scenario lasting 30 calendar days. The objective of the NSFR is to promote resilience over a longer time horizon by creating additional incentives for banks to fund their activities with stable sources of funding on an ongoing basis. Regulatory minimum requirements for both the LCR and NSFR will be 100% under Basel III/CRD IV, both with effect from 2018.

Funding management

Strategy

ABN AMRO's main source of funding consists of deposits from Retail Banking, Private Banking and Corporate Banking clients. The remainder of our funding is raised largely through various long-term wholesale funding instruments.

A substantial portion of Dutch consumer savings is placed in mandatory and collective pension schemes rather than in bank deposits. As a result, many Dutch banks, including ABN AMRO, have a Loan-to-Deposit ratio above 100%.

ABN AMRO's strategy for wholesale funding is derived from the bank's moderate risk profile. This strategy aims to optimise and diversify the bank's funding sources in order to maintain market access and the targeted funding position. We aim to have a balance sheet with a diverse, stable and cost-efficient funding base.

The funding strategy is executed taking into account the following guidelines:

• Å Maintain market access by diversifying funding sources in different funding markets (Europe, the US and the Asia Pacific region);
• Å Optimise funding costs within the targets set for volumes and maturities;
• Å Maintain strong relationships with the investor base through active marketing and issuance;
• Å Optimise balance between private placements and (public) benchmark deals;
• Å Build, maintain and manage credit curves in different funding programmes and currencies;
• Å Continuously monitor attractive funding opportunities for ABN AMRO and investment opportunities for investors;
• Å Optimise planning and execution of funding in different market windows.

Other

Capital measurement and allocation

Capital adequacy is measured and monitored on an ongoing basis against target capital ratios, derived from the bank's overall risk appetite and strategy. Capital projections and stress-test scenarios, both market-wide and bank-specific, are used to ensure that actual and future capital levels remain above the targets.

Capital is allocated to businesses in a way that optimises the long-term value of the bank while serving the bank's strategic objectives. In the capital allocation process both risk-based and non-risk-based return parameters are considered, taking into account economic and regulatory capital requirements. This process ensures that the bank's return targets are met while maintaining a moderate risk profile, in line with the bank's risk appetite.

Contingency capital management

Contingency plans are in place to address capital issues, if any. The Contingency Capital Plan provides a framework to detect capital adequacy stress by setting out various early warning indicators. The Contingency Capital Plan also sets out a range of available actions that could be undertaken based on the level of severity and urgency of the issues.

Capital management

Capital management strategy v4w

The primary objective of the capital management strategy is to ensure that capital adequacy requirements are met at all times and sufficient capital is available to support the bank's strategy. Capital is a necessary resource for doing business and defines the bank's commercial possibilities. The balance between available and required capital is managed centrally, optimising the use of available capital.

The basis of the capital management strategy is the bank's risk appetite and its business plans. Other important factors taken into account while managing the capital position are expectations and requirements of external stakeholders (such as regulators, investors, shareholders, equity analysts, rating agencies and clients), the bank's position in the market, market developments, contingent capital needs and the feasibility of capital management actions.

Although ABN AMRO manages its capital centrally, the group companies are sufficiently capitalised to comply with all local regulatory solvency requirements and to meet any local business needs.

ABN AMRO's banking activities are carried out by legal entities that are part of the Group's tax unit for corporate tax. Apart from prevailing legal and regulatory legislation, there are no specific material impediments to prompt the transfer of the bank's regulatory capital.

Sustainability risk management

Sustainability is a key objective in our strategy. We aim to hold a prominent position as a sustainable bank that takes responsibility for its actions and engagements, as a member of society with its own impact on the environment and on people.

In its various roles as lender, investor, asset manager, service provider, purchaser, operator and employer, the bank is exposed to sustainability risk. As a subcategory of reputational risk in our risk taxonomy, sustainability risk is a transversal risk of increasing importance and is aligned with the bank's moderate risk profile and risk appetite. It supports the bank's mission to bring sustainable solutions to its clients.

Safeguarding human rights, health and safety and the environment in financing and investments is a key topic of sustainability. Our approach to safeguarding human rights is based on the UN Guiding Principles on Business and Human Rights. In line with these principles, we have integrated human rights assessment criteria into both our corporate lending and investment services. To further strengthen our approach to human rights risks, ABN AMRO performs supply-chain analyses to identify human rights risks and mitigating actions in specific industries (e.g. diamonds, cocoa, copper). In addition, ABN AMRO participates in the SHIFT Business Learning Programme.

A total of 160 clients were subject to human rights screening in 2015, compared with 167 clients in 2014. In 2015 this related to client acceptance or review in 95 cases, to corporate lending in 61 cases, to an asset leasing transaction in one case and three Corporate Finance advisory mandates for the acquisition and/or sale of assets.

Policy framework

As part of the bank's 'three lines of defence' model, ABN AMRO has in place a policy framework to manage sustainability risks. The Sustainability Risk Management Policy is the overarching document which covers most of our activities, varying from corporate lending and investment to procurement and product development.

Our sustainability risk policy framework is constantly evolving: we develop new policies or adjust existing ones based on, among other things, feedback and input from stakeholders (e.g. clients, government bodies, NGOs) if any gaps become evident or if new developments take place. To accommodate improvements in our standards, we host stakeholder meetings where we discuss our Environmental, Social and Ethical (ESE) criteria with key stakeholders.

ABN AMRO's sustainability risk management is guided by five sustainability risk principles, as defined in the policy:

• Å sustainability risk management is a driver for quality improvement;
• Å the bank is responsible for its actions and its decision to engage with a client;
• Å the bank strives for an inclusive approach and will enter into a dialogue with its clients;
• Å the bank will not engage in activities that do not meet its ESE standards;
• Å the bank engages actively and openly with its stakeholders regarding sustainability risk.

Client acceptance and management

Client acceptance is crucial to our approach to managing sustainability risks. We have in place instruments to identify potential breaches of sustainability principles and we do not do business with companies that are not willing or able to run their business responsibly. We also refrain from engaging in business activities that are illegal or that we consider substandard or unethical. These activities are specified in the Exclusion List, part of our Sustainability Risk Management Policy, which is available on our corporate website.

An assessment for corporate lending based on our ESE criteria focuses on the compliance, commitment, capacity and track record of our client in managing its sustainability risk. This means that we may decide to accept transactions with a high sustainability risk profile, as long as our client is capable of adequately managing these risks and operates within the limits of our sustainability sector policies and procedures.

they face vary as well. Our Central Sustainability Risk department provides advice regarding clients operating in industries with a higher sustainability risk. The following graphs present a breakdown of the advice given per industry, together with the type of advice and the conclusion of the advice.

Cases of advice provided by the Central Sustainability Risk department increased slightly from 444 in 2014 to a total of 450 in 2015.

Risk, funding & capital Report / Risk, funding & capital management / Sustainability risk management

¹ Provided by the central sustainability risk department.

The types of advice and conclusion of advice are presented below. Of the 450 cases of advice given in 2015, we rejected 8 cases and approved 353 cases.

If our criteria are not met, we explore possibilities for improvement. We do this by conducting an open dialogue with our clients, by addressing and discussing these matters and, where necessary, promoting and negotiating for improvement. In specific cases, we do not provide lending unless our conditions for improvement have been

Sustainability is integrated into both our corporate lending and investment services. Some industries face more sustainability risks than others and the nature of the risks

accepted by the client.

Global advice1

Type of advice

In 86 cases, we approved the request subject to certain conditions. In these cases, we engage with our clients and negotiate for improvement.

Conclusion of advice

Other

Risk, funding & capital Report / Risk, funding & capital management / Management Control Statement

Management Control Statement

Under best practice provisions II.1.4 and II.1.5 of the Dutch Corporate Governance Code, ABN AMRO's Managing Board is requested:

• Å to describe the main risks related to the strategy of ABN AMRO;
• Å to describe internal risk management and control systems for the main risks during the year;
• Å to describe any major shortcomings (if any);
• Å to substantiate the operation of internal risk management and control (related to financial reporting risks) during the year under review, and;
• Å to state its adequacy and effectiveness.

ABN AMRO's internal risk management and control is a process implemented by the Managing Board, management and other personnel. It is designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

• Å effectiveness and efficiency of operations;
• Å reliability of (financial) information;
• Å compliance with laws, regulations and internal policies with respect to the conduct of business;
• Å safeguarding of assets, identification and management of liabilities, and;
• Å strategic goals of ABN AMRO.

Different parts of the Risk & Capital Report elaborate on ABN AMRO's identified risks, such as credit risk, market risk, operational risk, liquidity risk and business risk.

Based on the process regarding internal risk management and control over financial reporting, the Managing Board of ABN AMRO Group N.V. makes the following statement regarding the group's financial reporting risks:

• Å ABN AMRO's internal risk management and control systems provide reasonable assurance that ABN AMRO's consolidated financial statements do not contain any material inaccuracies;
• Å ABN AMRO's internal risk management and control systems functioned properly in 2015;
• Å There are no indications to suggest that ABN AMRO's internal controls will not continue to function properly in 2016.

The internal risk management and control systems provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of ABN AMRO's published financial statements.

During the past years, ABN AMRO has implemented an Operational Risk Management Framework (ORMF) for sound operational risk management, worldwide, in line with the requirements for Advanced Measurement Approach compliance. This ORMF combines the various non-financial risk disciplines into a single converged approach and provides the business with a clear and fair view on their operational risks and the way these are managed. These insights allow senior management to form an opinion on the adequacy of internal and management controls regarding the risks they face while pursuing their business objectives.

Based on risk assessments and monitoring and control activities, the Managing Board of ABN AMRO Group N.V. makes the following statement with regard to risks that may jeopardise ABN AMRO's business objectives for the short term:

• Å Within ABN AMRO internal risk management and control systems are in place to provide reasonable assurance that ABN AMRO will not be hindered in achieving its business objectives or in the orderly and legitimate conduct of its business by circumstances which may reasonably be foreseen;
• Å Based on internal risk management and control systems in place and barring unforeseen adverse external conditions, the Managing Board is of the opinion that there are no material elements within ABN AMRO that could significantly endanger the realisation of its business objectives;
• Å Regarding internal risk management and control systems, the Managing Board has identified dependencies. The following external factors could have an impact on ABN AMRO's current business model:
  • Å Adverse external developments (macroeconomic, geopolitical and monetary), prolonged negative interest rates and intensified competition may have an impact on ABN AMRO's revenues. There is

increased competition from non-bank entities such as insurance companies and pension funds, which had already entered parts of the banking value chain, and new entrants (often less bound by legacy and laws/regulations that are imposed on banks).

• Å Eisting and impending legislation and regulations (e.g. MiFID, Basel IV, Payment Services Directive 2, EU privacy law and Market Abuse Directive) and change of interpretation of existing European and local legislation and regulations may significantly impact the balance sheet, as well as liquidity and capital adequacy. Change in the risk-weighted capital framework is an example of such potential impact.
• Å The following areas of improvement have been identified and agreed upon and are actively managed by senior management:
  • Å The significant number of projects, combined with capacity constraints (budget and people), inherently limit the room for improvement initiatives and innovation of the business model, products, services and technology. Becoming less innovative and agile than competitors and/or new entrants may lead to decreasing returns and a loss of customers/market share within a timeframe of 3-5 years, as well as sub-optimal risk decisions (like missed opportunities).

Improvements to the innovation power are being worked on; for example the introduction of an agile way of working (which requires adaptations in the control framework) and Digital Ambition structures/ programmes/investments

Å The bank's current IT infrastructure is complex. This results in relatively high maintenance costs and unexpected challenges and necessitates manual actions in day-to-day processes, but more importantly, reduces our agility to respond quickly to market trends and new innovations. The bank aims to create a more competitive customer experience in a constantly changing environment, and to deliver agile, seamless and fully web-based customer processes via the internet and by mobile applications.

The bank therefore launched the TOPS 2020 programme in 2013, which aims to re-engineer our IT landscape and simplify our processes. Updating to cloud technology is an important step in the implementation of a more effective and agile IT

architecture, which will enable the Group to support new business initiatives. Furthermore, the bank is continuing its efforts to improve the customer experience through the Retail Digitalisation programme

• Å Regulatory changes that may not be adequately identified, interpreted and/or implemented (due to e.g. late communication, complex organisational structure and human factors) could lead to a risk of non-compliancy with regulatory requirements. The current flow of new regulations and the renewed interpretation of existing regulations has increased the workload significantly. The awareness in our organisation that this has become "the new day-today reality" for ABN AMRO and its people is imminent. In practice, we also notice the risk of a weakened legal position, resulting from the unavailability of crucial information (record-keeping and archiving of both physical and electronic documentation). Continued functioning of the Regulatory Office department and programs like MiFID II, Client File Review and Reliable & Responsible Banking (Vertrouwd & Verantwoord Bankieren) will help to mitigate these risks further
• Å Due to the increase in, and professionality, of external cyber threats, there is a risk that the organisation will not be able to keep up with new security threats, which could result in a major security incident happening, with large financial and/or reputational impact.

The increased cyber threat has several implications for the bank and its clients. Cyber vulnerabilities on the client side may also hit the bank, while, on the other hand, vulnerabilities on the bank's side could also have negative consequences for clients, if clients were to become victims of cyber attacks via the bank's services and/or products. Strengthening of access management, network segmentation, vulnerability management and the Security Operations Centre is ongoing in order to

Å New laws and regulations are often accompanied by more strict (behavioural) regulatory oversight. Suboptimal awareness regarding integrity, transparency and duty of care, combined with inadequate tooling and lower tolerance levels, may have an impact on the bank (in the form of fines or reputational damage).

further mitigate these risks;

Business Report

Risk, funding & capital information

Governance Report

Annual Financial Statements

Other

Introduction

169

Remuneration limitations, reduced career opportunities and decreased employer attractiveness may lead to an unwanted decline in the quality and quantity of our labour force. In order to mitigate this risk, compliance-related programmes are being organised, a robust policy framework is being set and the internal reward structure is being revised. Furthermore it is being investigated how ABN AMRO can remain successful in attracting top talent.

The evaluation of the adequacy of internal risk management and control systems has regularly been discussed with the Audit Committee and the Risk & Capital Committee and has subsequently been submitted to the Supervisory Board. Due to its inherent limitations, ABN AMRO's internal risk management and control systems do not provide complete assurance on the realisation of business objectives, and cannot at all times prevent inaccuracies, fraud and non-compliance with rules and regulations.

Risk, funding & capital Report / Risk, funding & capital review

Risk, funding & capital review

Risk, funding & capital review

The following section provides a comprehensive overview of the different risks across business segments and portfolios. Information on capital developments is also provided. More information about the Group's risk management strategy, framework, governance and policies is provided in the Risk, funding & capital Management section. Additional mandatory disclosures are provided in the Additional risk, funding & capital disclosures.

Overview

The Dutch economy grew by 1.9% in 2015, double the growth percentage recorded for 2014. This improvement was entirely driven by accelerating consumption and investment. For the first time in years, their joint contribution to growth was greater than that of exports. The revival of investments was partly driven by an improvement of manufacturing capacity utilisation. Growth in consumption is being fuelled by a rise in the real disposable income of family households, which is due to the fact that wages are rising faster than inflation.

The improvement of the Dutch economy and Dutch housing market combined with strict credit monitoring is reflected in a decrease in loan impairments across all portfolios and in overall improved risk indicators.

170

Key developments

Key figures

(in millions)	31 December 2015	31 December 2014	31 December 2013
Total assets	390,317	386,867	372,022
- of which Residential mortgages	150,009	151,998	153,439
- of which Consumer loans	14,587	15,398	15,629
- of which Corporate loans	88,367	87,866	85,268
On-balance sheet maximum exposure to credit risk	383,522	375,007	358,480
Total Exposure at Default1	369,169	350,762	349,235
Total risk weighted assets (REA)/total Exposure at Default1	29.3%	31.3%	31.2%
RWA (REA)1
Total RWA (REA)	108,001	109,647	109,012
- of which Credit risk2	86,063	87,667	86,201
- of which Operational risk	16,227	16,168	16,415
- of which Market risk	5,710	5,811	6,396
Fully-loaded CET1 ratio	15.5%	14.1%	12.2%
Fully-loaded leverage ratio	3.8%	3.7%	3.2%
Credit quality indicators
Forbearance ratio3	3.5%	3.5%	3.6%
Past due ratio3	1.9%	2.3%	2.9%
Impaired ratio3	2.7%	2.9%	3.0%
Coverage ratio3	55.8%	53.6%	55.2%
Cost of risk (in bps) - reported4, 5	19	45	37
Cost of risk (in bps) - underlying4	19	45	63
Liquidity and funding indicators
Loan-to-Deposit ratio	108.9%	116.5%	120.6%
LCR	>100%	>100%	100%
NSFR	>100%	>100%	>100%

¹ 2013 figures are reported under Basel II and the 2015 and 2014 figures are reported using the Basel III (CRD IV/CRR) framework. Under Basel III 2013 pro-forma figures are: EAD EUR 353,856 million; total RWA (REA) EUR 115,442 million; credit risk RWA (REA) EUR 92,631 million. No RWA (REA) impact from CRD IV/CRR on market and operational risk.

² RWA (REA) for credit value adjustment (CVA) and default fund contribution (DFC) are included in credit risk. In 2015 CVA amounted to EUR 1.1 billion (2014: EUR 1.3 billion; 2013:

EUR 1.5 billion) and DFC amounted to EUR 0.3 billion. ³ Ratios calculated on Loans and receivables - customers only.

⁴ Annualised impairment charges on Loans and receivables - customers for the period divided by average Loans and receivables - customers.

⁵ 2013 includes a release of EUR 432 million following the sale of the remaining Greek government-guaranteed corporate exposures. Additionally, 2013 includes a release of EUR 252 million following the sale of collateral related to the Madoff files (these special items are related to Group functions).

The continued improvement of the Dutch economy is reflected in the gradual decline of the impaired portfolio and in a significant drop in impairment charges. Total impairment charges on loans and other receivables amounted to EUR 505 million, EUR 666 million lower than in 2014. Lower impairment charges were recorded in all portfolios due to the improvement of the risk profile of

the portfolios on the back of improved economic conditions and strict credit monitoring. This also led to IBNI releases, which are determined based on recent losses in the portfolio. The decreasing loss levels resulted in an IBNI release of EUR 221 million in 2015 compared with an IBNI addition of EUR 22 million in 2014.

171

Business Report

Introduction

172

Other

As a result of the significant decline in the total impairment charges, the cost of risk improved to 19bps in 2015, compared with 45bps in 2014.

The Residential mortgage portfolio declined by EUR 2.0 billion compared with year-end 2014, as a result of repayments on existing mortgage loans exceeding new production of mortgage loans. The Consumer loan portfolio decreased by EUR 0.8 billion in 2015. The Corporate loan portfolio increased by EUR 0.5 billion. The increase was mainly driven by higher volumes in term loans.

All credit indicators improved further, reflecting the improved risk profile of the loan portfolio.

The bank's liquidity position remained strong. The Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR) both remained above 100% during 2015. This is in line with the bank's targeted early compliance with future regulatory requirements. In addition, an increase in client deposits improved the Loan-to-Deposit (LtD) ratio. This is reflected in the increase of the cash position throughout 2015. The higher cash position was used to further strengthen the liquidity buffer.

During 2015, ABN AMRO raised EUR 14.3 billion in long-term funding (including EUR 2.8 billion in subordinated debt). The average remaining maturity of long-term wholesale funding increased during 2015 from 4.3 to 4.6 years, mainly due to the issuance of long-term secured funding in the third quarter of 2015.

Key figures per business segment 7e

	31 December 2015
(in millions)	Retail Banking	Private Banking	Corporate Banking	Group Functions	Total
Total assets	155,797	24,171	117,355	92,994	390,317
On-balance sheet maximum exposure to credit risk	155,282	20,834	115,803	91,603	383,522
Total Exposure at Default1	174,229	22,105	103,443	69,392	369,169
RWA (REA)
Credit risk1	28,896	6,852	45,867	4,447	86,063
Operational risk	5,875	1,373	3,537	5,441	16,227
Market risk			5,710		5,710
Total RWA (REA)	34,771	8,226	55,115	9,888	108,001
Total RWA (REA)/Total Exposure at Default	20.0%	37.2%	53.3%	14.3%	29.3%
					2015
Average RWA (REA)	36,109	8,500	57,191	10,851	112,651
Cost of risk (in bps) - reported2	6	-2	46		19
Cost of risk (in bps) - underlying2	6	-2	46		19

¹ RWA (REA) for credit value adjustment (CVA) and default fund contribution (DFC) are included in credit risk. In 2015 CVA amounted to EUR 1.1 billion and DFC amounted to EUR 0.3 billion.

² Annualised impairment charges on Loans and receivables - customers for the period divided by average Loans and receivables - customers.

Key figures per business segment 7e

					31 December 2014
(in millions)	Retail Banking	Private Banking	Corporate Banking	Group Functions	Total
Total assets	157,614	22,935	133,579	72,739	386,867
On-balance sheet maximum exposure to credit risk	157,047	19,597	127,187	71,176	375,007
Total Exposure at Default1	175,460	21,137	103,619	50,546	350,762
RWA (REA)
Credit risk1	31,291	6,754	43,939	5,683	87,667
Operational risk	5,550	1,558	3,712	5,348	16,168
Market risk			5,811		5,811
Total RWA (REA)	36,841	8,312	53,462	11,031	109,647
Total RWA (REA)/Total Exposure at Default	21.0%	39.3%	51.6%	21.8%	31.3%
					2014
Cost of risk (in bps) - reported2	29	14	86		45
Cost of risk (in bps) - underlying2	29	14	86		45

¹ RWA (REA) for credit value adjustment (CVA) and default fund contribution (DFC) are included in credit risk. In 2014 CVA amounted to EUR 1.3 billion and DFC amounted to EUR 0.9 billion.

² Annualised impairment charges on Loans and receivables - customers for the period divided by average Loans and receivables - customers.

					31 December 2013
(in millions)	Retail Banking	Private Banking	Corporate Banking	Group Functions	Total
Total assets1	160,630	20,617	117,809	72,966	372,022
On-balance sheet maximum exposure to credit risk	160,139	17,736	109,870	70,735	358,480
Total Exposure at Default1	175,844	21,198	95,145	57,048	349,235
RWA (REA)
Credit risk	28,772	7,247	45,610	4,572	86,201
Operational risk	5,512	1,555	4,025	5,323	16,415
Market risk			6,396		6,396
Total RWA (REA)	34,284	8,802	56,031	9,895	109,012
Total RWA (REA)/Total Exposure at Default	19.5%	41.5%	58.9%	17.3%	31.2%
					2013
Cost of risk (in bps) - reported2, 3	42	89	105		37
Cost of risk (in bps) - underlying3	42	89	105		63

¹ The 2013 figures are reported using the Basel II (CRD IV/CRR) framework. Under Basel III 2013 pro-forma figures are: EAD EUR 353,856 million; total RWA (REA) EUR 115,442 million; credit risk REA EUR 92,631 million. No RWA (REA) impact from CRD IV/CRR on market and operational risk.

² 2013 includes a release of EUR 432 million following the sale of the remaining Greek government-guaranteed corporate exposures. Additionally, 2013 includes a release of EUR 252 million following the sale of collateral related to the Madoff files (these special items are related to Group functions).

³ Annualised impairment charges on Loans and receivables - customers for the period divided by average Loans and receivables - customers.

Total Exposure at Default increased by EUR 18.4 billion, arriving at EUR 369.2 billion at 31 December 2015, compared with EUR 350.8 billion at 31 December 2014. The increase was mainly attributable to Group Functions as result of a rise in deposits at central banks. Other movements were noted for Retail Banking, which decreased by EUR 1.2 billion mainly as result of lower business volume in the Residential mortgage portfolio, due to redemptions exceeding the new production volume. The decrease of EAD in Retail Banking was partly compensated as a result of a change in the method used for the EAD calculation for Residential mortgages. The EAD of Private Banking decreased by EUR 1.0 billion and the EAD of Corporate Banking remained fairly stable in 2015.

Total RWA (REA) decreased to EUR 108.0 billion at 31 December 2015, compared with EUR 109.7 billion at 31 December 2014. This change was mainly related to credit risk. The decline in RWA (REA) was mainly the result of a decrease of EUR 2.4 billion in Retail Banking due to lower business volume and an improved grade quality of our clients. Other movements were noted in Corporate Banking, where RWA (REA) increased by EUR 1.9 billion, and Group Functions, where RWA (REA) decreased by EUR 1.4 billion at 31 December 2015.

Reporting scope risk

	31 December 2015			31 December 2014			31 December 2013
(in millions)	Gross carrying amount	Loan impairment allowance	Carrying amount	Gross carrying amount	Loan impairment allowance	Carrying amount	Gross carrying amount	Loan impairment allowance	Carrying amount
Loans and receivables - banks	15,682	2	15,680	21,680		21,680	23,967		23,967
Residential mortgages	150,333	324	150,009	152,536	538	151,998	154,024	585	153,439
Less: Fair value adjustment from hedge accounting on residential mortgages	3,401		3,401	4,134		4,134	3,531		3,531
Residential mortgages,
excluding fair value adjustments	146,932	324	146,608 148,402		538	147,864	150,493		585 149,908
Consumer loans	15,147	561	14,587	16,052	654	15,398	16,241	613	15,629
Corporate loans	86,312	3,380	82,932	86,299	3,439	82,860	84,353	3,672	80,681
Less: Fair value adjustment from hedge accounting on corporate loans	1,448		1,448	1,605		1,605	891		891
Corporate loans, excluding fair value adjustments	84,864	3,380	81,484	84,694	3,439	81,255	83,462	3,672	79,790
Other loans and receivables - customers1	11,882	90	11,792	11,783	129	11,654	7,384	105	7,279
Less: Fair value adjustment from hedge accounting on other loans and receivables - customers	1		1	-16		-16	-23		-23
Other loans and receivables -
customers, excluding fair value adjustments1	11,881	90	11,791	11,799	129	11,669	7,407	105	7,302
Total loans and receivables - customers, excluding fair value adjustments	258,824	4,355	254,469 260,947			4,761 256,186	257,603		4,975 252,629
Fair value adjustments on Loans and receivables - customers	4,850		4,850	5,724		5,724	4,399		4,399
Total loans and receivables - customers	263,674	4,355	259,319 266,670			4,761 261,910	262,002	4,975	257,028
Other			130,998			124,958			114,994
Total assets			390,317			386,867			372,022

¹ Other loans and receivables - customers consists of Government and official institutions, Financial lease receivables and Factoring.

The previous table gives an overview of the figures reported in the consolidated balance sheet (net) and the figures reported in the Risk management section (gross) and excluding fair value ajdustments. Fair value adjustments were set out of scope as of year-end 2014 for the tables in the Risk section. As a result of the change in the reporting scope, the definition of the cost of risk also changed.

Risk, funding & capital Report / Risk, funding & capital review / Key developments

Economic and regulatory capital 7e

(in millions)	Retail Banking	Private Banking	Corporate Banking	Group Functions	Total
31 December 2015
Credit risk	2,312	548	3,669	356	6,885
Operational risk	470	110	283	435	1,298
Market risk			457		457
Regulatory capital1	2,782	658	4,409	791	8,640
Credit risk	2,915	504	4,347	987	8,752
Operational risk	301	206	538	214	1,259
Market risk			145		145
Business risk	353	322	514	7	1,195
Other risk types2	275	156	97	4,117	4,643
Economic capital	3,843	1,187	5,640	5,324	15,995
31 December 2014
Credit risk	2,503	540	3,515	455	7,013
Operational risk	444	125	297	428	1,293
Market risk			465		465
Regulatory capital1	2,947	665	4,277	882	8,772
Credit risk	4,298	450	4,069	889	9,706
Operational risk	294	199	808	285	1,586
Market risk			111		111
Business risk	381	298	455	9	1,143
Other risk types2	239	199	69	4,664	5,171
Economic capital	5,212	1,146	5,512	5,847	17,717
31 December 2013
Credit risk	2,302	580	3,649	366	6,896
Operational risk	441	124	322	426	1,313
Market risk			512		512
Regulatory capital1	2,743	704	4,482	792	8,721
Credit risk	3,921	769	5,644	478	10,812
Operational risk	374	272	698	439	1,783
Market risk			116		116
Business risk	206	248	554	12	1,020
Other risk types2)	322	191	93	4,073	4,679
Economic capital	4,823	1,480	7,105	5,002	18,410

¹ Minimum regulatory capital (8% of total risk exposure amount), representing the absolute minimum amount of capital required by a bank to cover three major risk types a bank faces. However available total capital ratios are substantially higher, as explained in the capital section.

² Other risk types include market risk banking book (including interest rate risk) and pension risk.

176

In 2015, total economic capital (EC) decreased by EUR 1.7 billion to EUR 16.0 billion compared with year-end 2014. The decline in EC was driven mainly by credit risk (EUR 1.0 billion) and operational risk (EUR 0.3 billion).

Credit risk EC decreased by EUR 1.0 billion to EUR 8.8 billion at year-end 2015 compared with year-end 2014. This decline was largely caused by improved credit risk drivers (average Exposure at Default, Probability of Default and Loss Given Default). The decrease was partly offset by an increase in Corporate Banking, mainly related to International Clients and Commercial Clients.

Operational risk EC decreased by EUR 0.3 billion, as the Advanced Measurement Approach (AMA) has been implemented at most entities. During AMA implementation, control monitoring and testing was strengthened further throughout the bank, which contributed to the decline of EC. Please note that the use of the AMA model for the calculation of regulatory capital (RC) is pending the formal approval of the ECB.

177

Balance sheet composition

Other

ABN AMRO is mainly active in the Dutch market and in The balance sheet composition reflects the bank's

moderate risk profile.

Balance sheet composition at 31 December 2015

international operations where we have specific expertise and hold leading market positions in selected activities.

• Å Approximately two-thirds of the bank's assets consist of lending to (mainly Dutch) clients and banks;
• Å The bank's lending activities are largely asset-based;
• Å The loan portfolio is matched by client deposits, long-term debt & subordinated liabilities, and equity with limited reliance on short-term debt;
• Å Securities financing is a fully collateralised activity, e.g. repo transactions and stock borrowing & lending activities;
• Å The bank has limited market risk and trading portfolios;
• Å The financial investments for liquidity management purposes consist mainly of high-quality liquid instruments.

Credit risk

Credit risk exposure

Credit risk overview b

(in millions)	31 December 2015	31 December 2014	31 December 2013
Total assets	390,317	386,867	372,022
Less: items that are not subject to credit risk exposure1	6,795	11,860	13,542
On-balance sheet maximum exposure to credit risk	383,522	375,007	358,480
Off-balance sheet
Committed credit facilities	21,559	16,164	13,764
Guarantees and other commitments	13,868	15,335	16,103
Revocable credit facilities	82,865	78,508	71,657
Total Off-balance sheet credit facilities and guarantees	118,292	110,007	101,524
Maximum exposure to credit risk	501,814	485,014	460,004
Adjustments on assets2	-5,968	-9,852	-7,659
Valuation adjustments3	-7,615	-11,563	-5,141
Offsetting and netting	-26,442	-23,508	-17,115
Off-balance sheet credit facilities and guarantees	-118,292	-110,007	-101,524
Off-balance sheet exposure fraction expected to be drawn prior to default
(Credit Conversion Factors)	25,672	20,677	20,670
Total Exposure at Default	369,169	350,762	349,235
Credit risk RWA (REA)/Total Exposure at Default	23.3%	25.0%	24.7%

¹ Items that are not subject to credit risk: more details are provided in Additional risk, funding & capital disclosure, table 'Maximum exposure to credit risk EU IFRS'.

² Main adjustments on assets are equity instruments, selected financial assets held for trading and fair value adjustments from hedge accounting.

³ Adjustments on valuation include loan impairment allowances.

The table above shows maximum exposure to credit risk and reconciliaton to the total Exposure at Default.

Overall credit risk EAD and RWA vrt

	31 December 2015
(in millions)	Original Exposure at Default	Netting/ Exposure at Default mitigation3)	Exposure at Default	Average Exposure at Default	RWA (REA)	RWA (REA)/ Exposure at Default
Credit risk IRB
Central governments and central banks	55,459	-3,433	58,892	50,582	978	1.7%
Institutions1	19,099	4,922	14,177	19,438	2,887	20.4%
Corporates	196,468	97,340	99,128	99,765	40,592	40.9%
Retail	179,737	5,608	174,129	174,878	26,631	15.3%
- of which secured by immovable property	159,573		159,573	160,366	20,269	12.7%
- of which qualifying revolving exposures	6,796		6,796	6,905	3,005	44.2%
- of which other retail	13,368	5,608	7,760	7,608	3,357	43.3%
Credit valuation adjustment					1,105
Securitisation positions	1,125		1,125	1,268	84	7.5%
Subtotal	451,889	104,437	347,452	345,931	72,277	20.8%
Equities not held for trading	1,208		1,208	1,229	5,185	429.2%
Other2	1,286		1,286	1,299	1,491	115.9%
Total IRB	454,383	104,437	349,946	348,459	78,953	22.6%
Credit risk SA
Central governments and central banks	2,978	20	2,958	2,849	132	4.5%
Institutions1)	4,485	92	4,393	7,416	153	3.5%
Corporates	6,953	2,991	3,962	4,733	3,535	89.2%
Retail	5,617	4,259	1,358	2,076	793	58.4%
Covered bonds
Secured by mortgages on immovable property	2,858	26	2,832	3,033	510	18.0%
Exposures in default	668	603	65	78	88	134.9%
Subtotal	23,558	7,990	15,568	20,185	5,211	33.5%
Other2	4,654	999	3,655	3,475	1,900	52.0%
Total SA	28,213	8,990	19,223	23,661	7,110	37.0%
Total	482,595	113,427	369,169	372,120	86,063	23.3%

¹ Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.

² Other includes non-credit obligation assets.

³ Consists mainly of netting, secured funding trades, guarantees, credit conversion factors, and impairments under the Standardised Approach.

Overall credit risk EAD and RWA vrt

	31 December 2014
(in millions)	Original Exposure at Default	Netting/ Exposure at Default mitigation4	Exposure at Default	Average Exposure at Default	RWA (REA)	RWA (REA)/ Exposure at Default
Credit risk IRB
Central governments and central banks	37,753	-4,332	42,085	40,154	2,020	4.8%
Institutions1	22,307	4,016	18,291	18,644	4,972	27.2%
Corporates	198,495	108,644	89,851	85,236	36,586	40.7%
Retail	179,884	6,273	173,611	164,309	28,646	16.5%
- of which secured by immovable property	156,386	-1,198	157,584	147,580	21,521	13.7%
- of which qualifying revolving exposures	13,125	5,990	7,135	7,081	3,702	51.9%
- of which other retail	10,373	1,481	8,892	9,648	3,423	38.5%
Credit valuation adjustment					1,264
Securitisation positions	3,297	863	2,434	11,059	237	9.7%
Subtotal	441,736	115,463	326,273	319,402	73,726	22.6%
Equities not held for trading	1,124		1,124	955	5,009	445.6%
Other2	1,326		1,326	1,390	1,099	82.8%
Total IRB	444,186	115,463	328,723	321,746	79,833	24.3%
Credit risk SA
Central governments and central banks	2,606		2,606	1,472	154	5.9%
Institutions1	6,288	2	6,286	6,239	344	5.5%
Corporates	6,973	2,367	4,606	11,333	3,758	81.6%
Retail	7,216	4,726	2,490	2,586	974	39.1%
Covered bonds
Secured by mortgages on immovable property	2,728	22	2,706	1,836	541	20.0%
Exposures in default	690	573	117	83	156	134.1%
Subtotal3	26,501	7,690	18,811	23,548	5,927	31.5%
Other2, 3	3,228		3,228	5,033	1,907	59.1%
Total SA	29,729	7,690	22,039	28,581	7,834	35.5%
Total	473,915	123,153	350,762	350,327	87,667	25.0%

¹ Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.

² Other includes non-credit obligation assets.

³ Average EAD Other has been restated to the line Other after subtotal.

⁴ Consists mainly of netting, secured funding trades, guarantees, credit conversion factors, and impairments under the Standardised Approach.

(in millions)	Original Exposure at Default	Netting/ Exposure at Default mitigation4	Exposure at Default	Average Exposure at Default	RWA (REA)	RWA (REA)/ Exposure at Default
Credit risk IRB
Central governments and central banks	46,474	1,454	45,020	43,480	528	1.2%
Institutions1	21,228	2,646	18,582	19,023	4,201	22.6%
Corporates	193,470	105,991	87,479	86,836	39,020	44.6%
Retail	182,255	8,057	174,198	174,007	27,212	15.6%
- of which retail mortgages	157,649	-254	157,903	157,589	19,326	12.2%
- of which qualifying revolving exposures	13,149	5,875	7,274	7,153	3,700	50.9%
- of which other retail	11,457	2,436	9,021	9,264	4,186	46.4%
Securitisation positions	2,511		2,511	2,642	286	11.4%
Subtotal	445,938	118,148	327,790	325,988	71,247	21.7%
Equities not held for trading	951		951	834	2,733	287.4%
Other2	1,452		1,452	1,473	1,490	102.6%
Total IRB3, 4	448,341	118,148	330,193	328,295	75,470	22.9%
Credit risk SA
Central governments and central banks	303	-37	340	391	80	23.5%
Institutions1	2,116		2,116	2,008	425	20.1%
Corporates	10,249	3,611	6,638	11,512	5,930	89.3%
Retail	8,847	5,198	3,649	3,882	1,364	37.4%
- of which Retail mortgages	2,313	51	2,262	2,188	497	22.0%
- of which Other retail	6,534	5,147	1,387	1,694	867	62.5%
Subtotal	21,515	8,772	12,743	17,793	7,799	61.2%
Other2, 3	6,299		6,299	5,576	2,932	46.5%
Total SA	27,814	8,772	19,042	23,369	10,731	56.4%
Total	476,155	126,920	349,235	351,664	86,201	24.7%

¹ Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.

² Other includes non-credit obligation assets.

³ Average EAD Other has been restated to the line Other after subtotal.

⁴ Consists mainly of netting, secured funding trades, guarantees, credit conversion factors, and impairments under the Standardised Approach.

182

EDTF 16

Total Exposure at Default arrived at EUR 369.2 billion at 31 December 2015 compared with EUR 350.8 billion at year-end 2014, an increase of EUR 18.4 billion.

The IRB portfolio rose by EUR 21.2 billion to 349.9 billion, mainly as a result of an increase in Central government and central banks due to a rise in deposits at central banks. To a lesser extent, the rise was caused by an increase in exposure class Corporates, mainly due to increases in higher business volume and changes due to model updates. The abovementioned increases were partly offset by a decline in Institutions which was mainly related to a change in EaD calculation. Exposure class

RWA (REA) flow statement credit risk

(in millions)

Retail increased as a result of a change in the method used for the EAD calculation, despite the fact that mortgage redemptions exceeded new production volume. The RWA (REA) for the residential mortgage portfolio decreased as a result of a decline in the number of clients in arrears and a rise in housing prices.

The Standardised EAD portfolio decreased by EUR 2.8 billion to EUR 19.2 billion at 31 December 2015, compared with EUR 22.0 billion at 31 December 2014, mainly due to a policy change on collateral for interest rate swaps.

RWA (REA) decreased by EUR 1.6 billion as a result of decreasing business volumes in Group Functions and Retail

Banking. RWA (REA) increased due to model updates for

Retail and Corporate Banking. RWA (REA) decreased as a result of a decline in the number of clients in arrears and a rise in housing prices (this is in the category Other).

Credit quality by exposure class bv

					31 December 2015
(in millions, Exposure at Default)	Investment grade	Sub-investment grade	Default without provision	Default with provision	Total
Central governments and central banks	58,769	123			58,892
Institutions1	13,804	351	11	10	14,177
Corporates	37,131	56,787	961	4,250	99,128
Retail	140,275	31,295		2,559	174,129
- of which secured by immovable
property	134,265	23,555		1,486	159,306
- of which qualifying revolving
exposures	2,662	3,831		285	6,778
- of which other retail	3,348	3,909		788	8,045
Securitisation positions	1,125				1,125
Total IRB2	251,105	88,556	972	6,819	347,452
Total SA3					15,568
Total					363,020

					31 December 2014
		Sub-investment	Default without	Default with
	Investment grade	grade	provision	provision	Total
Central governments and central banks	41,815	270			42,085
Institutions1	17,867	418	7		18,291
Corporates	33,899	50,658	1,070	4,224	89,851
Retail	135,157	35,258		3,196	173,611
- of which secured by immovable
property	129,370	25,931		2,284	157,585
- of which qualifying revolving
exposures	2,483	4,310		341	7,134
- of which other retail	3,304	5,017		571	8,892
Securitisation positions	2,434				2,434
Total IRB2	231,172	86,604	1,077	7,420	326,273
Total SA3					18,811
Total					345,084

					31 December 2013
		Sub-investment	Default without	Default with
	Investment grade	grade	provision	provision	Total
Central governments and central banks	44,998	22			45,020
Institutions1	17,811	763		8	18,582
Corporates	28,999	52,775	1,290	4,415	87,479
Retail	135,764	35,202		3,232	174,198
- of which retail mortgages	130,112	25,444		2,347	157,903
- of which qualifying revolving
exposures	2,322	4,687		265	7,274
- of which other retail	3,330	5,071		620	9,021
Securitisation positions	2,511				2,511
Total IRB2	230,083	88,762	1,290	7,655	327,790
Total SA3					12,743
Total					340,533

¹ Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.

² Exposure at Default does not include EAD calculated for equities not held for trading and other non-credit obligations.

³ Exposure at Default does not include EAD calculated for other non-credit obligations.

The investment grade portfolio increased to 72% of the IRB portfolio, compared with 71% at year-end 2014. The sub-investment portfolio remained relatively stable. The total default portfolio decreased in line with the improvement of the Dutch economy.

Counterparty credit risk Counterparty risk by exposure class vl vl

	31 December 2015 31 December 2014			31 December 2013
	Total		of which:	Total		of which:	Total		of which:
(in millions, Exposure at Default)		Deriva tives	Securities financing transac tions		Derivatives	Securities financing transac tions		Derivatives	Securities financing transac tions
Credit risk
Central governments
and central banks	58,892	334	98	42,085	455	119	45,020	303	48
Institutions1	14,177	2,114	1,710	18,291	6,099	1,412	18,582	4,802	1,797
Corporates	99,128	3,148	1,756	89,851	4,704	968	87,479	3,748	635
Retail	174,129			173,611			174,198
- of which secured by immovable property/ retail mortgages	159,306			157,585			157,903
- of which qualifying
revolving exposures	6,778			7,134			7,274
- of which other retail	8,045			8,892			9,021
Securitisation positions	1,125			2,434			2,511
Total IRB2	347,452	5,596	3,564	326,273	11,258	2,499	327,790	8,853	2,480
Total SA3	15,568	1,417	2,156	18,811	2,244	3,589	12,743	149	1,260
Total	363,020	7,012	5,720	345,084	13,502	6,088	340,533	9,002	3,740

¹ Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.

² Exposure at Default does not include EAD calculated for equities not held for trading and other non-credit obligations.

³ Exposure at Default does not include EAD calculated for other non-credit obligations.

The EAD for derivatives declined, mainly due to a policy change on collateral for interest rate swaps.

Credit risk concentration bv

Geographic concentration

The consolidated exposures in the table are allocated to the geographical regions where clients are domiciled. The bank monitors and manages country risk based on the country of risk. The country of ultimate risk may be different from the country of domicile, e.g. when financing a project in another country than where the borrower is domiciled.

Other

Geographic concentration by EAD bv

	31 December 2015
(in millions, Exposure at Default)	The Netherlands	Rest of Europe	USA	Asia	Rest of the world	Total
Central governments and central banks	31,530	19,894	4,160	2,822	486	58,892
Institutions1	1,897	7,035	2,041	2,604	600	14,177
Corporates	52,876	21,719	5,175	8,157	11,201	99,128
Retail	173,273	651	44	87	74	174,129
- of which secured by immovable property	158,756	395	37	71	47	159,306
- of which qualifying revolving exposures	6,689	73	3	4	9	6,778
- of which other retail	7,828	183	4	12	18	8,045
Securitisation positions	1,125					1,125
Total IRB2	260,702	49,299	11,420	13,670	12,361	347,452
Total SA3	5,490	8,511	1,077	95	395	15,568
Total	266,192	57,810	12,497	13,765	12,756	363,020
Percentage of total	73.3%	15.9%	3.4%	3.8%	3.5%	100.0%

						31 December 2014
	The Netherlands	Rest of Europe	USA	Asia	Rest of the world	Total
Central governments and central banks	19,348	18,172	1,959	2,309	297	42,085
Institutions1	5,795	6,273	2,230	3,590	403	18,291
Corporates	50,534	19,983	3,487	6,713	9,134	89,851
Retail	172,700	710	50	79	72	173,611
- of which secured by immovable property	156,990	448	42	60	45	157,585
- of which qualifying revolving exposures	7,043	75	3	4	9	7,134
- of which other retail	8,667	187	5	15	18	8,892
Securitisation positions	2,434					2,434
Total IRB2	250,811	45,138	7,726	12,691	9,906	326,273
Total SA3	9,168	7,701	1,177	284	481	18,811
Total	259,979	52,839	8,903	12,975	10,387	345,084
Percentage of total	75.3%	15.3%	2.6%	3.8%	3.0%	100.0%

						31 December 2013
	The Netherlands	Rest of Europe	USA	Asia	Rest of the world	Total
Central governments and central banks	27,796	14,929	1,494	685	116	45,020
Institutions1	4,418	8,906	1,169	3,348	741	18,582
Corporates	55,033	17,910	1,980	5,721	6,835	87,479
Retail	174,198					174,198
- of which retail mortgages	157,903					157,903
- of which qualifying revolving exposures	7,274					7,274
- of which other retail	9,021					9,021
Securitisation positions	2,511					2,511
Total IRB2	263,956	41,745	4,643	9,754	7,692	327,790
Total SA3	7,746	3,240	1,195	330	232	12,743
Total	271,702	44,985	5,838	10,084	7,924	340,533
Percentage of total	79.8%	13.2%	1.7%	3.0%	2.3%	100.0%

¹ Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.

² Total Exposure at Default does not include EAD calculated for equities not held for trading and other non-credit obligations.

³ Exposure at Default does not include EAD calculated for other non-credit obligations.

186

The geographical concentrations reflect the bank's business profile, with a large portfolio concentrated in the Netherlands (73.3%). Businesses outside the Netherlands are primarily located in neighbouring countries in Europe. Specialised activities, such as Energy, Commodities & Transportation Clients (ECT Clients), Clearing, Asset Based Financing, Securities Financing and Private Banking International, are also located outside of Europe.

The Exposure at Default in the Netherlands increased by EUR 6.2 billion at year-end 2015 to EUR 266.2 billion compared with year-end 2014. This increase was mainly related to an increase in Central governments and central banks, as a result of a rise in deposits at central banks, partly offset by a decrease in Institutions. Rest of Europe increased to EUR 57.8 billion at year-end 2015, rising by EUR 5.0 billion compared with year-end 2014. This is the result of an increase in Central government and central banks and an increase in Corporates, both by EUR 1.7 billion.

USA exposure grew by EUR 3.6 billion to EUR 12.5 billion at year-end 2015 compared with year-end 2014. The increase was mainly related to Central government and central banks and, to a lesser extent, an increase of EUR 1.7 billion within Corporates due to new client lending related to ABN AMRO Clearing and ECT clients.

The increase of EUR 2.4 billion in Rest of the world was mainly concentrated within Corporates due to new client lending for several clients, mainly ECT Clients.

The Asia region exposure grew by EUR 0.8 billion at 31 December 2015 compared with year-end 2014. This slight increase was the result of higher business volume within the exposure class Corporates and Central government and central banks, partly offset by a decrease of EUR 1 billion in Institutions related to lower business volume.

Industry concentration

ABN AMRO applies industry concentration limits following the Industry Classification Benchmark (ICB). In the exposure table, non-material industry clusters are aggregated under Other. Industry concentration limits are established in the bank risk appetite. In the risk appetite, thresholds for concentrations are based on relative risk, importance of the industry to the Dutch economy and expert opinion.

Industry concentration is presented both in terms of original obligor and in terms of resultant obligor. Original obligor refers to the counterparty with whom ABN AMRO originally has the contractual relationship, often referred to as the borrower. The resultant obligor is the counterparty to which ABN AMRO has the ultimate credit risk, often referred to as the guarantor. The industry view, based on original obligor and resultant obligor, differs significantly for the industries real estate, healthcare and public administration. The government-guaranteed exposures are included in the original obligor view under the applicable industry sector. However, in the resultant obligor view these exposures are included in the public administration industry sector, as they concern government-related exposures.

The bank manages industry concentrations within the Risk Appetite by setting credit risk economic capital (EC) limits as a percentage of total credit risk EC per industry sector. The bank does not manage concentration based on EAD per industry sector.

Industry concentration by EAD bv

		31 December 2015
(in millions, Exposure at Default)	Exposure at Default (original obligor)	Percentage of total	Exposure at Default (resultant obligor)	Percentage of total
Industry sector
Banks	16,230	4.5%	15,101	4.2%
Financial services1)	14,982	4.1%	13,326	3.7%
Industrial goods and services	22,148	6.1%	21,932	6.0%
Real estate	13,244	3.6%	12,021	3.3%
Oil and gas	12,119	3.3%	12,011	3.3%
Food and beverage	13,924	3.8%	13,810	3.8%
Retail	5,132	1.4%	5,059	1.4%
Basic resources	4,378	1.2%	4,347	1.2%
Healthcare	4,871	1.3%	4,725	1.3%
Construction and materials	3,559	1.0%	3,460	1.0%
Other2)	16,927	4.7%	17,583	4.8%
Subtotal Industry Classification Benchmark	127,514	35.1%	123,375	34.0%
Private individuals (non-Industry Classification Benchmark)	178,105	49.1%	178,276	49.1%
Public administration (non-Industry Classification Benchmark)	57,401	15.8%	61,369	16.9%
Subtotal non-Industry Classification Benchmark	235,506	64.9%	239,645	66.0%
Exposure at Default3)	363,020	100.0%	363,020	100.0%

¹ Financial services include asset managers, credit card companies and providers of personal financial services and securities and brokers.

² Other includes travel and leisure, utilities, personal and household goods, media, technology, automobile and parts, chemicals, telecommunication and insurance, in addition to unclassified.

³ Exposure at Default does not include EAD calculated for equities not held for trading and other non-credit obligations.

Industry concentration by EAD bv

				31 December 2014
(in millions, Exposure at Default)	Exposure at Default (original obligor)	Percentage of total	Exposure at Default (resultant obligor)	Percentage of total
Industry sector
Banks	16,459	4.8%	14,453	4.2%
Financial services1)	9,480	2.7%	9,497	2.8%
Industrial goods and services	18,747	5.4%	18,407	5.3%
Real estate	14,480	4.2%	11,221	3.3%
Oil and gas	10,529	3.1%	10,404	3.0%
Food and beverage	10,910	3.2%	10,823	3.1%
Retail	4,418	1.3%	4,304	1.2%
Basic resources	4,005	1.2%	3,992	1.2%
Healthcare	5,276	1.5%	5,126	1.5%
Construction and materials	2,922	0.8%	2,739	0.8%
Other2)	23,915	6.9%	26,278	7.6%
Subtotal Industry Classification Benchmark	121,141	35.1%	117,244	34.0%
Private individuals (non-Industry Classification Benchmark)	186,704	54.1%	186,836	54.1%
Public administration (non-Industry Classification Benchmark)	37,239	10.8%	41,004	11.9%
Subtotal non-Industry Classification Benchmark	223,943	64.9%	227,840	66.0%
Exposure at Default3)	345,084	100.0%	345,084	100.0%

¹ Financial services include asset managers, credit card companies and providers of personal financial services and securities and brokers.

² Other includes travel and leisure, utilities, personal and household goods, media, technology, automobile and parts, chemicals, telecommunication and insurance, in addition to unclassified.

³ Exposure at Default does not include EAD calculated for equities not held for trading and other non-credit obligations.

189

Industry concentration by EAD bv

				31 December 2013
(in millions, Exposure at Default)	Exposure at Default (original obligor)	Percentage of total	Exposure at Default (resultant obligor)	Percentage of total
Industry sector
Banks	16,990	5.0%	16,983	5.0%
Financial services1	7,935	2.3%	7,949	2.4%
Industrial goods and services	18,024	5.3%	17,869	5.3%
Real estate	14,068	4.1%	12,326	3.6%
Oil and gas	7,581	2.2%	7,576	2.2%
Food and beverage	8,575	2.5%	8,508	2.5%
Retail	7,302	2.2%	7,181	2.1%
Basic resources	4,498	1.3%	4,486	1.3%
Healthcare	4,221	1.3%	4,046	1.2%
Construction and materials	3,196	0.9%	3,100	0.9%
Other2	45,831	13.5%	45,437	13.3%
Subtotal Industry Classification Benchmark	138,221	40.6%	135,461	39.8%
Private individuals (non-Industry Classification Benchmark)	181,011	53.1%	182,209	53.5%
Public administration (non-Industry Classification Benchmark)	21,301	6.3%	22,863	6.7%
Subtotal non-Industry Classification Benchmark	202,312	59.4%	205,072	60.2%
Exposure at Default3	340,533	100.0%	340,533	100.0%

¹ Financial services include asset managers, credit card companies and providers of personal financial services and securities and brokers.

² Other includes travel and leisure, utilities, personal and household goods, media, technology, automobile and parts, chemicals, telecommunication and insurance, in addition to unclassified.

³ Exposure at Default does not include EAD calculated for equities not held for trading and other non-credit obligations.

The industry concentration consists largely (49%) of credit risk exposures to private individuals (non-Industry Classification Benchmark), which is mainly related to residential mortgage loans and, to a lesser extent, consumer loans. Private individuals decreased by EUR 8.6 billion to EUR 178.1 billion in the resultant obligor view. This decrease relates to a changed methodology in the EAD calculation for the residential mortgage portfolio, partly ofsset by lower business volumes. Public administration increased largely due to a rise in deposits at central banks. The highest industry sector concentration is in industrial goods and services.

The biggest movements in the industry concentration were noted in the sectors financial services, industrial goods and services, and food and beverage as a result of higher business volume.

Due to a better allocation of exposures, the category Other decreased by EUR 7.0 billion to EUR 16.9 billion at year-end 2015.

Credit risk mitigation bz

Offsetting, netting, collateral and guarantees bz

Starting with the year-end figures for 2015, we are reporting the value of collateral based on the Net Collateral Value (NCV). NCV expresses the value of collateral in the event of a forced sale and is equal to the expected recovery value of the collateral pledged to the bank.

A surplus for guarantees will no longer be included as collateral after 31 December 2015, as the debtor can only be liable for the maximum debt.

Introduction

190

Financial assets: offsetting, netting and collateral & guarantees bz

										31 December 2015
			Offset in the statement of financial position					Not offset in the statement of financial position		Net exposure8
(in millions)	Carrying amount before balance sheet netting	Balance sheet netting with gross liabilities	Carrying amount	Master netting agree ment6	Financial instru ments collater al	Property & equip ment	Other collat eral and guaran tees	Total risk mitigation	Surplus collat eral7
Financial assets held for trading	1,687		1,687							1,687
Derivatives held for trading1 Non-trading derivative	14,735		14,735	10,529				10,529		4,206
assets1	4,403		4,403	4,378				4,378		25
Derivatives	19,138		19,138	14,907				14,907		4,231
Securities financing	23,405	3,343	20,062	361	21,859			22,219	2,358	201
Interest-bearing deposits Loans and advances	5,283	453	4,831	7	1,668			1,675	1,332	4,488
Other	8,114 2,735		8,114 2,735	7,275	74		4	7,349 4		765 2,732
Total loans and
receivables - banks2	16,133	453	15,680	7,282	1,742		4	9,027	1,332	7,984
Loans and receivables - customers
Residential mortgages3	155,089	8,481	146,608		160	180,455	7,812	188,427	56,291	14,472
Consumer loans	14,902	316	14,587		6,474	5,462	53	11,990	4,583	7,180
Corporate loans3, 4 Other loans and receivables	98,690	17,206	81,484	3,920	29,721	42,638	13,006	89,284	24,931	17,131
- customers5 Fair value adjustment from hedge accounting	11,956 4,850	165	11,791 4,850	748	2,590	3,006	1,406	7,750	842	4,883 4,850
Total Loans and receivables - customers2	285,487	26,168	259,319	4,668	38,944	231,561	22,277	297,450	86,647	48,515
Other assets	1,899		1,899				161	161		1,737
Total on-balance sheet subject to netting and pledged agreements	347,748	29,964	317,784	27,217	62,545	231,561	22,442	343,765	90,336	64,355
Assets not subject to netting and pledged agreements	72,533		72,533							72,533
Total assets	420,281	29,964	390,317	27,217	62,545	231,561	22,442	343,765	90,336	136,888
Total off-balance sheet	118,292		118,292		5,226	5,710	1,643	12,578	5,435	111,149
Total on- and off balance sheet	538,573	29,964	508,609	27,217	67,771	237,270	24,085	356,343	95,771	248,037

¹ In 2015 ABN AMRO entered into a revised rulebook with LCH Swapclear for its centrally cleared Interest Rate Swaps. After the legal amendment the payment and receipt of cash variation margin associated with these Interest Rate Swaps are legally considered settlement of the fair value on a daily basis. In previous reporting periods, payment and receipt of cash variation margin were legally considered to be separate postings of collateral. Positions in cash collateral paid or received with LCH Swapclear were accounted for as separate financial instruments under IAS 39, but were offset with the Interest Rate Swap exposures. As a result of the legal amendments in 2015, the carrying amount before balance sheet netting already includes the effect of settlement of the derivative positions with variation margin. Besides, application of offsetting is no longer possible or needed.

² As of year-end 2015, a refined methodology for collateral reporting has been applied. The 2014 and 2013 figures have not been adjusted,

³ Carrying amount includes Loan impairment allowances.

⁴ As of 2014, a refined methodology for reporting of surplus collateral has been applied for ABN AMRO Clearing. This refinement has no impact on the net exposure amount. The historical information is adjusted for comparison purposes.

⁵ Other loans and receivables - customers consists of Government and official institutions, Financial lease receivables and Factoring. ⁶ Collateral in the column Master netting agreement is mainly markets related and consists of Master netting agreements which also includes cash collateral as part of these agreements.

Cash collateral not part of Master netting agreements has been reported under Financial instruments. ⁷ Surplus collateral is the amount of over-collateralisation, calculated on an individual basis.

⁸ Net exposure represents the portfolio corrected for the surplus amount and gives a view on the potential shortfall in collateral on the total portfolio.

Strategic Report Business Report

Introduction

Financial assets: offsetting, netting and collateral & guarantees bz

								31 December 2014
		Offset in the statement	of financial position	Not offset in the statement of financial position						Net exposure7
(in millions)	Carrying amount before balance sheet netting	Balance sheet netting with gross liabilities	Carrying amount	Master netting agree ment5)	Financial instru ments collateral	Property & equip ment	Other collater al and guaran tees	Total risk mitigation	Surplus collateral6
Financial assets held for trading	4,071		4,071				136	136		3,935
Derivatives held for trading Non-trading derivative	45,646	25,916	19,730	13,946				13,946		5,784
assets	8,642	3,087	5,555	5,533				5,533		22
Derivatives	54,288	29,003	25,285	19,479				19,479		5,806
Securities financing	22,054	3,543	18,511	59	19,831			19,890	1,829	449
Interest-bearing deposits	4,051	491	3,560	37				37		3,523
Loans and advances	13,178	1,796	11,382	9,813				9,813		1,569
Other	6,750	11	6,739							6,739
Total loans and
receivables - banks1	23,979	2,298	21,680	9,850				9,850		11,830
Loans and receivables - customers
Residential mortgages2	155,816	7,952	147,864	25	98	205,730	5,072	210,925	71,635	8,574
Consumer loans	15,936	538	15,398	139	4,361	5,260	48	9,807	1,422	7,013
Corporate loans2, 3	107,148	25,893	81,255	3,121	26,146	30,749	8,434	68,450	18,083	30,888
Other loans and receivables - customers4	12,697	1,027	11,669	1,585	4,008	2,866	2,488	10,946	2,287	3,010
Fair value adjustment from hedge accounting	5,724		5,724							5,724
Total Loans and receivables
- customers1	297,321	35,411	261,910	4,870	34,613	244,605	16,041	300,129	93,427	55,208
Other assets	1,926		1,926		2		52	54		1,872
Total on-balance sheet subject to netting and pledged agreements	403,639	70,255	333,383	34,258	54,446	244,605	16,229	349,538	95,256	79,101
Assets not subject to netting and pledged agreements	53,484		53,484							53,484
Total assets	457,123	70,255	386,867	34,258	54,446	244,605	16,229	349,538	95,256	132,585
Total off-balance sheet	110,007		110,007	152	2,429	3,250	1,795	7,625	829	103,211
Total on- and off balance sheet	567,130	70,255	496,874	34,410	56,875	247,854	18,024	357,163	96,085	235,796

¹ As of year-end 2015, a refined methodology for collateral reporting has been applied. The 2014 and 2013 figures have not been adjusted,

² Carrying amount includes Loan impairment allowances.

³ As of 2014, a refined methodology for reporting of surplus collateral has been applied for ABN AMRO Clearing. This refinement has no impact on the net exposure amount.

The historical information is adjusted for comparison purposes.

⁴ Other loans and receivables - customers consists of Government and official institutions, Financial lease receivables and Factoring.

⁵ Collateral in the column Master netting agreement is mainly markets related and consists of Master netting agreements which also includes cash collateral as part of these agreements. Cash collateral not part of Master netting agreements has been reported under Financial instruments.

⁶ Surplus collateral is the amount of over-collateralisation, calculated on an individual basis.

⁷ Net exposure represents the portfolio corrected for the surplus amount and gives a view on the potential shortfall in collateral on the total portfolio.

192

Financial assets: offsetting, netting and collateral & guarantees bz

	31 December 2013
		Offset in the statement	of financial position			Not offset in the statement of financial position				Net exposure7
(in millions)	Carrying amount before balance sheet netting	Balance sheet netting with gross liabilities	Carrying amount	Master netting agree ment5)	Financial instru ments collateral	Property & equip ment	Other collater al and guaran tees	Total risk mitigation	Surplus collateral6
Financial assets held
for trading	5,548		5,548							5,548
Derivatives held for trading Non-trading derivative	24,210	12,362	11,848	7,670				7,670		4,178
assets	2,423		2,423	1,359				1,359		1,064
Derivatives	26,633	12,362	14,271	9,029				9,029		5,242
Securities financing	21,129	2,767	18,362	593	20,806			21,399	3,712	675
Interest-bearing deposits	16,477	507	15,970	18				18		15,952
Loans and advances	7,621		7,621	6,714				6,714	126	1,033
Other	856	480	376							376
Total loans and receivables - banks1	24,954	987	23,967	6,732				6,732	126	17,361
Loans and receivables - customers
Residential mortgages2	157,361	7,453	149,908		212	208,018	5,410	213,640	73,178	9,446
Consumer loans	16,774	1,146	15,628		1,889	5,989	77	7,955	235	7,908
Corporate loans2, 3	120,750	40,959	79,791	1,574	20,008	28,921	9,086	59,589	10,900	31,102
Other loans and receivables - customers4	11,093	3,791	7,302	360	3,440	2,714	159	6,673	2,028	2,657
Fair value adjustment from hedge accounting	4,399		4,399							4,399
Total Loans and
receivables - customers1	310,377	53,349	257,028	1,934	25,549	245,642	14,732	287,857	86,341	55,512
Other assets	2,182		2,182		2		33	35		2,147
Total on-balance sheet subject to netting and pledged agreements	390,823	69,465	321,358	18,288	46,357	245,642	14,765	325,052	90,179	86,485
Assets not subject to netting and pledged agreements	50,664		50,664							50,664
Total assets	441,487	69,465	372,022	18,288	46,357	245,642	14,765	325,052	90,179	137,149
Total off-balance sheet	101,524		101,524		247	1,898	2,173	4,318	306	97,512
Total on- and off balance sheet	543,011	69,465	473,546	18,288	46,604	247,540	16,938	329,370	90,485	234,661

¹ As of year-end 2015, a refined methodology for collateral reporting has been applied. The 2014 and 2013 figures have not been adjusted,

² Carrying amount includes Loan impairment allowances.

³ As of 2014, a refined methodology for reporting of surplus collateral has been applied for ABN AMRO Clearing. This refinement has no impact on the net exposure amount. The historical information is adjusted for comparison purposes.

⁴ Other loans and receivables - customers consists of Government and official institutions, Financial lease receivables and Factoring.

⁵ Collateral in the column Master netting agreement is mainly markets related and consists of Master netting agreements which also includes cash collateral as part of these agreements. Cash collateral not part of Master netting agreements has been reported under Financial instruments.

⁶ Surplus collateral is the amount of over-collateralisation, calculated on an individual basis.

⁷ Net exposure represents the portfolio corrected for the surplus amount and gives a view on the potential shortfall in collateral on the total portfolio.

193

Total net exposure of Total Loans and receivables customers decreased by EUR 6.7 billion to EUR 48.5 billion at 31 December 2015 compared with EUR 55.2 billion at 31 December 2014. This decrease was mainly the result of improved collateral reporting offset by the implementation of the NCV valuation method. Furthermore, the carrying amount decreased by EUR 2.6 billion in this period.

Total risk mitigation for Residential mortgages decreased to EUR 188.4 billion at 31 December 2015, down by EUR 22.5 billion from EUR 210.9 billion at 31 December 2014. This decrease was mainly the result of the implementation of the NCV valuation method. The net exposure increased by EUR 5.9 billion to EUR 14.5 billion. The effect of the NCV valuation method was most

noticeable for existing surplus collateral. Surplus collateral is over-collateralisation, serving as additional security in case the collateral value declines.

Total risk mitigation within Corporate loans rose by EUR 20.8 billion compared with 31 December 2014, arriving at EUR 89.3 billion at 31 December 2015. The rise was attributable to the effect of a number of improvement projects for collateral reporting offset by the implementation of the NCV valuation method.

The impact of the NCV valuation method on Other loans and receivables - customers is visible, as net exposure increased by EUR 1.9 billion to EUR 4.9 billion at 31 December 2015 compared with year-end 2014.

Financial liabilities: offsetting, netting and collateral & guarantees b

	31 December 2015
			Offset in the statement of financial position		Not offset in the statement of financial position	Net exposure
(in millions)	Carrying amount before balance sheet netting	Balance sheet netting with gross assets	Carrying amount	Master netting agree ment1)	Financial instru ments collateral	Surplus collateral	Total risk mitigation
Financial liabilities held for trading	459		459					459
Derivatives held for trading	12,958		12,958	10,318			10,318	2,640
Non-trading derivative liabilities	9,466		9,466	9,436			9,436	31
Derivatives	22,425		22,425	19,754			19,754	2,671
Securities financing	14,715	3,343	11,372	131	13,682	3,718	17,532	1,277
Deposits	15,053	449	14,604	3,849			3,849	10,756
Other	26		26					26
Due to banks	15,079	449	14,630	3,849			3,849	10,781
Deposits	256,308	26,172	230,136	3,483			3,483	226,653
Other borrowings	160		160					160
Due to customers	256,468	26,172	230,297	3,483			3,483	226,813
Other liabilities	5,729		5,729					5,729
Total liabilities subject to netting arrangements	314,876	29,964	284,912	27,217	13,682	3,718	44,617	247,730
Remaining liabilities not subject to netting	87,821		87,821					87,821
Total liabilities	402,697	29,964	372,733	27,217	13,682	3,718	44,617	335,551

¹ Collateral in the column Master netting agreement is mainly markets related and consists of Master netting agreements which also includes cash collateral as part of these agreements. Cash collateral not part of Master netting agreements has been reported under Financial instruments.

Financial liabilities: offsetting, netting and collateral & guarantees b

								31 December 2014
		Offset in the statement of financial	position	Not offset in the statement of financial position	Net exposure
(in millions)	Carrying amount before balance sheet netting	Balance sheet netting with gross assets	Carrying amount	Master netting agree ment1)	Financial instru ments collateral	Surplus collateral	Total risk mitigation
Financial liabilities held for trading	3,759		3,759					3,759
Derivatives held for trading	45,754	27,551	18,203	15,155			15,155	3,048
Non-trading derivative liabilities	13,698	1,452	12,246	12,238			12,238	8
Derivatives	59,452	29,003	30,449	27,393			27,393	3,056
Securities financing	17,461	3,543	13,918	56	10,972	2,684	13,712	5,574
Deposits	16,261	562	15,699	3,786			3,786	11,913
Other	45		45					45
Due to banks	16,306	562	15,744	3,786			3,786	11,958
Deposits	253,017	37,151	215,867	3,176			3,176	212,690
Other borrowings	144		144					144
Due to customers	253,161	37,151	216,011	3,176			3,176	212,834
Other liabilities	5,470	-4	5,473					5,473
Total liabilities subject to netting arrangements	355,609	70,255	285,353	34,410	10,972	2,684	48,067	242,655
Remaining liabilities not subject to netting	86,637		86,637					86,637
Total liabilities	442,246	70,255	371,990	34,410	10,972	2,684	48,067	329,292

¹ Collateral in the column Master netting agreement is mainly markets related and consists of Master netting agreements which also includes cash collateral as part of these agreements. Cash collateral not part of Master netting agreements has been reported under Financial instruments.

Strategic Report

Financial liabilities: offsetting, netting and collateral & guarantees b

	31 December 2013
		Offset in the statement of financial	position	Not offset in the statement of financial position	Net exposure
(in millions)	Carrying amount before balance sheet netting	Balance sheet netting with gross assets	Carrying amount	Master netting agree ment1)	Financial instru ments collateral	Surplus collateral	Total risk mitigation
Financial liabilities held for trading	4,399		4,399					4,399
Derivatives held for trading	22,211	12,362	9,849	7,113			7,113	2,736
Non-trading derivative liabilities	7,378		7,378	7,323			7,323	55
Derivatives	29,589	12,362	17,227	14,436			14,436	2,791
Securities financing	15,033	2,767	12,266	594	13,919	2,299	16,812	52
Deposits	12,720	1,143	11,577	1,782			1,782	9,795
Other	49		49					49
Due to banks	12,769	1,143	11,626	1,782			1,782	9,844
Deposits	260,415	53,178	207,237	1,476			1,476	205,761
Other borrowings	347		347					347
Due to customers	260,762	53,178	207,584	1,476			1,476	206,108
Other liabilities	7,128	15	7,113					7,113
Total liabilities subject to netting arrangements	329,680	69,465	260,215	18,288	13,919	2,299	34,506	230,307
Remaining liabilities not subject to netting	98,239		98,239					98,239
Total liabilities	427,919	69,465	358,454	18,288	13,919	2,299	34,506	328,546

¹ Collateral in the column Master netting agreement is mainly markets related and consists of Master netting agreements which also includes cash collateral as part of these agreements. Cash collateral not part of Master netting agreements has been reported under Financial instruments.

Management of forborne, past due and impaired loans

Forborne exposures b

The following table provides an overview of forborne assets, broken down into performing and non-performing assets, specified by type of forbearance measure.

Clients in (or potentially in) financial difficulty, where contract amendments have been made since 1 January 2012 which are considered to be a concession made by the bank, have been identified as forborne assets. A contract that is in a recovery phase at the reporting date is not considered forborne.

Overview of forborne assets b

								31 December 2015
		Performing assets		Total		Non-performing assets	Total
(in millions)	Gross carrying amount	Tempo rary modifi cation	Perma nent modifi cation	Refi nancing	perform ing forborne assets	Tempo rary modifi cation	Perma nent modifi cation	Refi nancing	non-per forming forborne assets	Total forborne assets	For bear ance ratio
Loans and receivables - banks	15,682										0.0%
Loans and receivables - customers
Residential
mortgages1	146,932	1,122	23	204	1,349	354	14	39	408	1,757	1.2%
Consumer loans	15,147	174	77	174	426	105	72	47	223	648	4.3%
Corporate loans1	84,864	1,368	1,330	1,244	3,941	594	839	902	2,335	6,276	7.4%
Other loans and receivables - customers2	11,881	110	39		148	109	124	2	235	383	3.2%
Total Loans and receivables - customers	258,824	2,775	1,468	1,622	5,865	1,162	1,049	990	3,201	9,065	3.5%
Total	274,506	2,775	1,468	1,622	5,865	1,162	1,049	990	3,201	9,065	3.3%

¹ Gross carrying amount excludes fair value adjustments from hedge accounting.

² Other loans and receivables - customers consists of Government and official institutions, Financial lease receivables and Factoring.

Overview of forborne assets b

										31 December 2014
				Performing assets			Non-performing assets
(in millions)	Gross carrying amount	Tempo rary modifi cation	Perma nent modifi cation	Refi nancing	Total perform ing forborne assets	Tempo rary modifi cation	Perma nent modifi cation	Refi nancing	Total non-per forming forborne assets	Total forborne assets	For bear ance ratio
Loans and receivables - banks	21,680										0.0%
Loans and receivables - customers
Residential
mortgages1	148,402	1,027	28	122	1,177	606	3	29	638	1,814	1.2%
Consumer loans	16,052	92	68	126	286	99	32	52	184	470	2.9%
Corporate loans1	84,694	1,215	872	1,823	3,910	729	878	1,181	2,788	6,698	7.9%
Other loans and receivables - customers2	11,799	23			24	64	4		68	92	0.8%
Total Loans and receivables - customers	260,947	2,358	968	2,071	5,397	1,498	917	1,262	3,677	9,074	3.5%
Total	282,627	2,358	968	2,071	5,397	1,498	917	1,262	3,677	9,074	3.2%

¹ Gross carrying amount excludes fair value adjustments from hedge accounting.

² Other loans and receivables - customers consists of Government and official institutions, Financial lease receivables and Factoring.

197

Overview of forborne assets b

										31 December 2013
		Performing assets			Total	Non-performing assets			Total
(in millions)	Gross carrying amount	Tempo rary modifi cation	Perma nent modifi cation	Refi nancing	perform ing forborne assets	Tempo rary modifi cation	Perma nent modifi cation	Refi nancing	non-per forming forborne assets	Total forborne assets	For bear ance ratio
Loans and receivables - banks	23,967										0.0%
Loans and receivables - customers
Residential mortgages1	150,493	961	8	15	984	1,373	4	60	1,437	2,421	1.6%
Consumer loans	16,241	45	61	107	213	60	7	57	124	337	2.1%
Corporate loans1	83,462	789	710	2,542	4,041	356	673	1,203	2,232	6,273	7.5%
Other loans and receivables - customers2	7,408	40	36	15	91			69	69	160	2.2%
Total Loans and receivables - customers	257,604	1,835	815	2,679	5,329	1,789	684	1,389	3,862	9,191	3.6%
Total	281,571	1,835	815	2,679	5,329	1,789	684	1,389	3,862	9,191	3.3%

¹ Gross carrying amount excludes fair value adjustments from hedge accounting.

² Other loans and receivables - customers consists of Government and official institutions, Financial lease receivables and Factoring.

Total forborne assets remained stable at year-end 2015 compared with year-end 2014.

Total forborne Residential mortgages remained fairly stable compared with year-end 2014 and was mainly related to temporary modifications within the performing portfolio. The performing forborne portfolio within Residential mortgages increased by EUR 0.2 billion to EUR 1.3 billion compared with year-end 2014, which was mainly due to non-performing forborne contracts returning to the performing portfolio.

Forborne Consumer loans increased to EUR 0.6 billion at 31 December 2015, compared with EUR 0.5 billion at 31 December 2014. This increase was mainly related to temporary modifications within the performing portfolio, which resulted from an inflow of new forborne clients.

Total forborne Corporate loans decreased by EUR 0.4 billion to EUR 6.3 billion at 31 December 2015 from EUR 6.7 billion at year-end 2014. This decline was mainly the result of debt repayments on existing forborne contracts with refinancing measures in the performing

portfolio, primarily related to one single client in the real estate sector. Refinanced forborne exposure also declined within the non-performing portfolio, which was mainly due to an outflow of forborne exposure. This outflow was observed primarily within the construction and materials industry.

Reductions in forborne assets within Corporate loans were partly offset by an increase in the performing forborne portfolio with permanent modification. Total performing forborne assets with permanent measures within Corporate loans increased to EUR 1.3 billion at year-end 2015 compared with EUR 0.9 billion at year-end 2014. This increase was mainly the result of an inflow of new forborne clients related to the industrial goods and services sector.

Forborne Other loans and receivables - customers increased to EUR 0.4 billion at 31 December 2015, compared with EUR 0.1 billion at year-end 2014. This increase was distributed equally between the performing and non-performing portfolio and was the result of an inflow of new forborne clients.

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Past due exposures b

When a counterparty is past due or exceeds its credit limit, all loans and receivables (total gross carrying amount) in the related credit arrangement are considered past due.

Ageing of past due not classified as impaired b

	Carrying amount		Days past due
(in millions)	Gross	Assets not classified as impaired	<= 30	> 30 & <= 60	> 60 & <= 90	>90	Total past due but not impaired	Past due ratio
Securities financing	20,073	20,062						0.0%
Loans and receivables - banks	15,682	15,680						0.0%
Loans and receivables - customers
Residential mortgage1	146,932	145,900	2,354	322	70	30	2,776	1.9%
Consumer loans2	15,147	14,287	306	122	30	149	607	4.0%
Corporate loans1	84,864	79,992	610	134	9	323	1,076	1.3%
Other loans and receivables - customers1, 3	11,881	11,671	187	36	17	160	400	3.4%
Total Loans and receivables - customers	258,824	251,852	3,457	614	126	662	4,858	1.9%
Other assets	1,903	1,894	180	33	20	11	245	12.9%
Total	296,482	289,488	3,637	647	146	673	5,103	1.7%

¹ Gross carrying amount excludes fair value adjustments from hedge accounting.

² Consumer loans in the programme lending portfolio that are more than 90 days past due are immediately impaired.

³ Other loans and receivables - customers consists of Government and official institutions, Financial lease receivables and Factoring.

31 December 2015

Business Report

Strategic Report

Introduction

Ageing of past due not classified as impaired b

								31 December 2014
	Carrying amount					Days past due
(in millions)	Gross	Assets not classified as impaired	<= 30	> 30 & <= 60	> 60 & <= 90	>90	Total past due but not impaired	Past due ratio
Securities financing	18,521	18,511						0.0%
Loans and receivables - banks	21,680	21,680						0.0%
Loans and receivables - customers
Residential mortgage1	148,402	146,924	3,057	463	118		3,639	2.5%
Consumer loans2	16,052	15,184	335	135	38	125	633	3.9%
Corporate loans1	84,694	79,704	924	182	51	590	1,747	2.1%
Other loans and receivables - customers1, 3	11,799	11,533	72	8	3	12	94	0.8%
Total Loans and receivables - customers	260,947	253,346	4,388	788	210	727	6,114	2.3%
Other assets	1,932	1,920	202	19	8	24	253	13.1%
Total	303,080	295,458	4,590	807	218	750	6,366	2.1%

¹ Gross carrying amount excludes fair value adjustments from hedge accounting.

² Consumer loans in the programme lending portfolio that are more than 90 days past due are immediately impaired.

³ Other loans and receivables - customers consists of Government and official institutions, Financial lease receivables and Factoring.

Ageing of past due not classified as impaired b

								31 December 2013
	Carrying amount			Days past due
(in millions)	Gross	Assets not classified as impaired	<= 30	> 30 & <= 60	> 60 & <= 90	>90	Total past due but not impaired	Past due ratio
Securities financing	18,386	18,363						0.0%
Loans and receivables - banks	23,967	23,967						0.0%
Loans and receivables - customers
Residential mortgage1)	150,493	148,754	3,444	519	145		4,108	2.7%
Consumer loans2)	16,241	15,354	461	115	78	231	885	5.4%
Corporate loans1)	83,462	78,424	1,426	219	140	565	2,350	2.8%
Other loans and receivables - customers1), 3)	7,408	7,271	31	2	1	2	36	0.5%
Total Loans and receivables - customers	257,604	249,803	5,362	855	364	798	7,379	2.9%
Other assets	2,187	2,174	48	25	7	9	89	4.1%
Total	302,144	294,307	5,410	880	371	807	7,468	2.5%

¹ Gross carrying amount excludes fair value adjustments from hedge accounting.

² Consumer loans in the programme lending portfolio that are more than 90 days past due are immediately impaired.

³ Other loans and receivables - customers consists of Government and official institutions, Financial lease receivables and Factoring.

200

Total past due but not impaired for total loans and receivables continued its downward trend, arriving at EUR 4.9 billion at 31 December 2015 compared with EUR 6.1 billion at year-end 2014. This was mainly the result of effective credit monitoring and the improved Dutch economy.

Residential mortgages past due declined by EUR 0.9 billion to EUR 2.8 billion at 31 December 2015, as a result of improved economic conditions and successful active management of the portfolio in arrears, coaching of clients that have a higher risk of running into arrears.

Corporate loans past due declined by EUR 0.7 billion to EUR 1.1 billion at 31 December 2015, as a result of a combination of the upturn of the economy and effective credit monitoring.

Other loans and receivables – customers grew by EUR 0.3 billion to EUR 0.4 billion at 31 December 2015. This increase was mainly due to the fact that we aligned the reporting view for lease contracts with a bank-wide view on past due.

Impaired exposures b

Coverage and impaired ratio b

31 December 2015 (in millions) Gross carrying amount Impaired exposures Allowances for Impairments for identified credit risk Coverage ratio Impaired ratio Securities financing 20,073 11 -11 100.0% 0.1% Loans and receivables - banks 15,682 2 -2 100.0% 0.0% Loans and receivables customers Residential mortgages1 146,932 1,031 -245 23.8% 0.7% Consumer loans 15,147 860 -471 54.8% 5.7% Corporate loans1, 2 84,864 4,872 -3,098 63.6% 5.7% Other loans and receivables customers1, 3 11,881 210 -78 37.4% 1.8% Total Loans and receivables - customers 258,824 6,973 -3,892 55.8% 2.7% Other assets 1,903 9 -4 47.7% 0.5% Total on-balance sheet 296,482 6,994 -3,908 55.9% 2.4% Total off-balance sheet 118,300 22 0.4% 0.0% Total4) 414,782 7,016 -3,909 55.7% 1.7%

¹ Gross carrying amount excludes fair value adjustments from hedge accounting.

² Includes impaired exposures on Madoff.

³ Other loans and receivables - customers consists of Government and official institutions, Financial lease receivables and Factoring.

⁴ Amounts excluding Incurred But Not Identified (IBNI).

Business Report

Strategic Report

Introduction

Coverage and impaired ratio b

					31 December 2014
(in millions)	Gross carrying amount	Impaired exposures	Allowances for Impairments for identified credit risk	Coverage ratio	Impaired ratio
Securities financing	18,521	10	-10	100.0%	0.1%
Loans and receivables - banks	21,680
Loans and receivables - customers
Residential mortgages1)	148,402	1,478	-408	27.6%	1.0%
Consumer loans	16,052	868	-533	61.4%	5.4%
Corporate loans1), 2)	84,694	4,989	-3,017	60.5%	5.9%
Other loans and receivables - customers1), 3)	11,799	265	-115	43.2%	2.2%
Total Loans and receivables - customers	260,947	7,601	-4,073	53.6%	2.9%
Other assets	1,932	12	-5	43.7%	0.6%
Total on-balance sheet	303,080	7,622	-4,088	53.6%	2.5%
Total off-balance sheet	110,011	9		0.0%	0.0%
Total4)	413,092	7,632	-4,089	53.6%	1.8%

¹ Gross carrying amount excludes fair value adjustments from hedge accounting.

² Includes releases on Madoff and Greek government-guaranteed corporate exposures.

³ Other loans and receivables - customers consists of Government and official institutions, Financial lease receivables and Factoring.

⁴ Amounts excluding Incurred But Not Identified (IBNI).

Coverage and impaired ratio b

					31 December 2013
(in millions)	Gross carrying amount	Impaired exposures	Allowances for Impairments for identified credit risk	Coverage ratio	Impaired ratio
Securities financing	18,386	23	-23	100.0%	0.1%
Loans and receivables - banks	23,967
Loans and receivables - customers
Residential mortgages1	150,493	1,739	-472	27.1%	1.2%
Consumer loans	16,241	887	-512	57.7%	5.5%
Corporate loans1, 2	83,462	5,038	-3,237	64.3%	6.0%
Other loans and receivables - customers1, 3	7,408	137	-86	62.8%	1.8%
Total Loans and receivables
- customers	257,604	7,801	-4,307	55.2%	3.0%
Other assets	2,187	13	-5	38.5%	0.6%
Total on-balance sheet	302,144	7,837	-4,335	55.3%	2.6%
Total off-balance sheet	101,525	8			0.0%
Total4)	403,669	7,845	-4,335	55.3%	1.9%

¹ Gross carrying amount excludes fair value adjustments from hedge accounting.

² Includes releases on Madoff and Greek government-guaranteed corporate exposures.

³ Other loans and receivables - customers consists of Government and official institutions, Financial lease receivables and Factoring.

⁴ Amounts excluding Incurred But Not Identified (IBNI).

Audited

Audited

Consumer loans (in %) 61.4 57.7

Consumer loans (in %)

Consumer loans (in %)

60

75

54.8

Corporate loans (in %) 63.6 60.5 64.3

Corporate loans (in %)

Corporate loans (in %)

60

75

Coverage ratio

Coverage ratio

Residential mortgages (in %)

75

Impaired exposures decreased by EUR 0.6 billion to EUR 7.0 billion at 31 December 2015 and Allowances for impairments decreased by EUR 0.2 billion to EUR 3.9 billion at 31 December 2015, compared with 31 December 2014.

The outflow of loans managed in the restructuring portfolio back to the regular portfolio is gradually increasing in line with the improving Dutch economy. Nevertheless, some sectors still face issues of a more permanent nature, for example certain agri-sectors and the retail industry. The inflow into the non-performing portfolio is declining.

The coverage ratio for Total loans and receivables – customers increased to 55.8% at 31 December 2015 compared with 53.6% year-end 2014. The impaired ratio improved to 2.7% at 31 December 2015 compared with 2.9% at year-end 2014.

At portfolio level, the coverage ratio for residential mortgages decreased to 23.8% at 31 December 2015 from 27.6% at 31 December 2014. Allowances for impairments decreased even more steeply than the impaired exposures; as a result, the coverage ratio declined. The allowances decreased mainly due to the upswing in the housing market and continued improved economic circumstances, which led to a lower average loss on foreclosures. The impaired exposure dropped, as there was lower inflow into and higher outflow out of the impaired portfolio. The impaired ratio improved to 0.7% at year-end 2015 compared with 1.0% at year-end 2014, mainly as a result of the decreased impaired portfolio.

In 2015, Allowances for impairments for Consumer loans dropped by 11.6% compared with year-end 2014, thanks to the improved economy. The impaired exposure for the Consumer loan portfolio remained relatively stable in this period, where the gross carrying amount declined. These developments resulted in a higher impaired ratio of 5.7% 203

at year-end 2015, compared with 5.4% at year-end 2014, and the Coverage ratio declined to 54.8% at 31 December 2015 compared with 61.4% at year-end 2014.

The coverage ratio for Corporate loans increased to 63.6% at 31 December 2015 compared with 60.5% at

31 December 2014, as result of the gradually declining impaired portfolio, while Allowances for impairments rose slightly as a result of a few new files and an increase of allowances for impairments for existing clients.

Loan impairment charges and allowances Loan impairment charges and allowances b bvk

(in millions)	Securities financing	Banks	Corporate loans	Residential mortgages	Consumer loans	Other loans	Total
Balance at 1 January 2015	11		3,439	538	654	129	4,771
Impairment charges for the period		1	1,096	137	160		1,394
Reversal of impairment allowances no longer required			-643	-99	-76		-818
Recoveries of amounts previously written-off			-7	-25	-42		-74
Total impairment charges on loans and other receivables			446	14	43		502
Amount recorded in interest income from unwinding of discounting			-45	-50	-10		-105
Currency translation differences	1		79			2	82
Amounts written-off (net)			-629	-174	-150		-953
Reserve for unearned interest accrued on impaired loans			59		12		71
Other adjustments		2	123	-5	12	-131
Balance at 31 December 2015	11	2	3,470	324	561	1	4,368
Total reported on-balance impairment charges on loans and other receivables			446	14	43		502
Total underlying on-balance impairment charges on loans and
other receivables			446	14	43		502

Individual and collective loan impairment allowances b

							31 December 2015
(in millions)	Securities financing	Banks	Corporate loans	Residential mortgages	Consumer loans	Other loans	Total
Individual impairment	11	2	2,860	16	197		3,085
Collective impairment		1	610	307	364	1	1,283
Balance at 31 December 2015	11	2	3,470	324	561	1	4,368
Carrying amount of loans, individually determined to be impaired, before deducting any individually assessed impairment allowance	11	2	4,872	1,031	860	210	6,985

204

Loan impairment charges and allowances bvk

(in millions)	Securities financing	Banks	Corporate loans1)	Residential mortgages	Consumer loans	Other loans	Total
Balance at 1 January 2014	24		3,672	585	612	106	4,999
Impairment charges for the period	1		1,289	436	340	70	2,135
Reversal of impairment allowances no longer required	-16		-562	-228	-81	-21	-908
Recoveries of amounts previously written off			-13	-11	-36		-60
Total impairment charges on loans and other receivables	-15		714	197	223	49	1,168
Amount recorded in interest income from unwinding of discounting			-47	-66	-11		-125
Currency translation differences	2		67			2	71
Amounts written off (net)			-984	-196	-182	-27	-1,389
Reserve for unearned interest accrued on impaired loans			37	39	-10		65
Other adjustments			-19	-20	22		-17
Balance at 31 December 2014	11		3,439	538	654	129	4,771
Total reported on-balance impairment charges on loans and other receivables	-15		714	197	223	49	1,168
Total underlying on-balance impairment charges on loans and other receivables	-15		714	197	223	49	1,168

Individual and collective loan impairment allowances b

							31 December 2014
(in millions)	Securities financing	Banks	Corporate loans	Residential mortgages	Consumer loans	Other loans	Total
Individual impairment	10		2,733	26	223	114	3,106
Collective impairment	1		705	512	431	16	1,665
Balance at 31 December 2014	11		3,439	538	654	129	4,771
Carrying amount of loans, individually determined to be impaired, before deducting any individually assessed impairment allowance	10		4,989	1,478	868	265	7,611

Introduction

Strategic Report

Business Report

Risk, funding & capital information

Loan impairment charges and allowances bvk

(in millions)	Securities financing	Banks	Corporate loans1)	Residential mortgages	Consumer loans	Other loans	Total
Balance at 1 January 2013	28		4,594	370	445	103	5,540
Impairment charges for the period			1,547	496	462	41	2,546
Reversal of impairment allowances no longer required	-4		-1,230	-135	-130	-15	-1,514
Recoveries of amounts previously written off			-6	-5	-39		-50
Total impairment charges on loans and other receivables	-4		311	356	293	26	982
Amount recorded in interest income from unwinding of discounting			-30	-14	-9		-53
Currency translation differences			-32				-32
Amounts written off (net)			-1,259	-165	-152	-22	-1,598
Reserve for unearned interest accrued on impaired loans			84	31	35		150
Other adjustments			4	7		-1	10
Balance as at 31 December 2012	24		3,672	585	612	106	4,999
Total reported on-balance impairment charges on loans and
other receivables	-4		311	356	293	26	982
Greek releases			432				432
Madoff releases			252				252
Total underlying on-balance impairment charges on loans and other receivables	-4		995	356	293	26	1,666

¹ Corporate loans includes a release for the Greek government-guaranteed corporate exposures and a a release for Madoff-related collateral.

Individual and collective loan impairment allowances b

							31 December 2013
(in millions)	Securities financing	Banks	Corporate loans	Residential mortgages	Consumer loans	Other loans	Total
Individual impairment	23		2,911	78	228	85	3,325
Collective impairment	1		761	507	384	21	1,674
Balance at 31 December 2013	24		3,672	585	612	106	4,999
Carrying amount of loans, individually determined to be impaired, before deducting any individually assessed impairment allowance	23		5,038	1,739	887	137	7,824

Loan impairment charges on- and off-balance sheet b

(in millions)	2015	2014	2013
On-balance sheet	502	1,168	982
Off-balance sheet	3	3	1
Total impairment charges on loans and other receivables	505	1,171	983

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Business Report

The on-balance sheet impairment charges in 2015 declined by EUR 666 million, coming to EUR 502 million at 31 December 2015, compared with EUR 1,168 million at 31 December 2014. Lower impairment charges were noted across all of the portfolios and were partly due to IBNI releases. ABN AMRO bases its IBNI levels on recent losses in the portfolio. Decreasing loss levels resulted in an IBNI release of EUR 221 million in 2015, representing around a third of the decline in impairment charges.

Impairment charges for the Corporate loans portfolio dropped by EUR 268 million, totalling EUR 446 million in 2015, compared with EUR 714 million in 2014. This decline was due mainly to a decrease in impairment charges in the Commercial Clients portfolio, which was the result of a combination of a continued upturn of the economy, strict credit monitoring, and a well-balanced portfolio intake. The decline was partly offset by an increase in the International Clients segment. Impairment charges for the Corporate loans portfolio included an IBNI release of EUR 138 million.

Other adjustments within Corporate loans increased as a result of a restatement from Other loans related to ABN AMRO Lease and Factoring.

Impairment charges for the Residential mortgages portfolio dropped by EUR 183 million in 2015, coming to EUR 14 million at 31 December 2015. This material decrease was due to improvements in the housing market and the Dutch economy, which resulted in a lower impaired volume. The impairment charges for the Residential mortgage portfolio included an IBNI release of EUR 52 million.

Impairment charges for Consumer loans declined to EUR 43 million in 2015, compared with EUR 223 million in 2014. The decline was also the result of the upward trend of the Dutch economy and an IBNI release of EUR 31 million.

Forborne, past due and impaired loans split by geography and industry v

Forborne, past due and impaired loans split by geography v

					31 December 2015
(in millions)	Forborne exposure	Exposures past due, but not impaired	Impaired exposures	Allowances for impairments	Impairment charges for the period
The Netherlands	7,853	4,557	5,451	-2,804	582
Rest of Europe	500	497	626	-377	61
USA	72		56	-49	5
Asia	189	1	80	-67	38
Rest of the world	451	48	781	-612	42
Total On-balance	9,065	5,103	6,994	-3,908	728
Off-balance			22
Total1)	9,065	5,103	7,016	-3,909	728

31 December 2014

	Forborne exposure	Exposures past due, but not impaired	Impaired exposures	Allowances for impairments	Impairment charges for the period
The Netherlands	8,120	5,791	6,252	-3,074	1,036
Rest of Europe	518	449	646	-416	100
USA	17	3	60	-47	21
Asia	104	36	54	-29	-3
Rest of the world	314	87	611	-522	-3
Total On-balance	9,074	6,366	7,622	-4,088	1,151
Off-balance			9
Total1)	9,074	6,366	7,632	-4,089	1,151

					31 December 2013
	Forborne exposure	Exposures past due, but not impaired	Impaired exposures	Allowances for impairments	Impairment charges for the period
The Netherlands	8,165	6,376	6,375	-3,224	1,362
Rest of Europe	648	857	672	-457	-366
USA	15	12	95	-90	-244
Asia	46	90	104	-63	52
Rest of the world	317	133	591	-501	3
Total On-balance	9,191	7,468	7,837	-4,335	807
Off-balance			8
Total1)	9,191	7,468	7,845	-4,335	807

¹ Amounts excluding Incurred But not Identified (IBNI)

The largest decline in forborne exposure was observed in the Netherlands, which came to EUR 7.9 billion at 31 December 2015 compared with EUR 8.1 billion at 31 December 2014. This decline was mainly the result of a decrease in the Corporate loans portfolio within the Netherlands, which was primarily due to debt repayments on existing forborne contracts.

The decline in past due but not impaired exposure was mainly visible in the Netherlands. This was driven by the decline in past due exposure for Dutch residential mortgages due to improved economic conditions.

Impaired loans decreased mainly in the Netherlands, partly due to the decline in impaired residential mortgages.

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Strategic Report

Impaired loans in the Rest of the world increased due to a few new files and the appreciation of the US dollar against the euro.

Forborne, past due and impaired loans split by industry v

	31 December 2015
				Exposures past due,				Allowances for impairments for	Impair ment charges
(in millions)	Exposure at Default	Forborne exposures	Forborne ratio (EAD)	but not impaired	Past due ratio (EAD)	Impaired exposures	Impaired ratio (EAD)	identified credit risk	for the period
Industry sector
Banks	16,230		0.0%		0.0%	12	0.1%	-12
Financial services1)	14,982	99	0.7%	105	0.7%	808	5.4%	-696	14
Industrial goods and services	22,148	1,990	9.0%	395	1.8%	1,136	5.1%	-608	78
Real estate	13,244	798	6.0%	319	2.4%	656	5.0%	-324	13
Oil and gas	12,119	674	5.6%	9	0.1%	170	1.4%	-73	13
Food and beverage	13,924	1,042	7.5%	238	1.7%	492	3.5%	-246	52
Retail	5,132	543	10.6%	111	2.2%	449	8.7%	-282	93
Basic resources	4,378	295	6.7%	40	0.9%	293	6.7%	-223	57
Healthcare	4,871	307	6.3%	34	0.7%	207	4.3%	-167	102
Construction and
materials	3,559	381	10.7%	50	1.4%	408	11.5%	-285	80
Other2)	16,927	599	3.5%	422	2.5%	520	3.1%	-295	71
Subtotal Industry Classification Benchmark	127,514	6,728	5.3%	1,723	1.4%	5,152	4.0%	-3,210	574
Private individuals (non-Industry Classification Benchmark)	178,105	2,325	1.3%	3,371	1.9%	1,864	1.0%	-698	154
Public administration (non-Industry Classification Benchmark)	57,401	12	0.0%	9	0.0%		0.0%
Subtotal non-Industry Classification Benchmark	235,506	2,337	1.0%	3,381	1.4%	1,864	0.8%	-698	154
Total3), 4)	363,020	9,065	2.5%	5,103	1.4%	7,016	1.9%	-3,909	728

¹ Financial services include asset managers, credit card companies and providers of personal financial services and securities and brokers.

² Other includes, personal and household goods, media, technology, automobiles and parts, chemicals, telecommunication and insurance, in addition to unclassified.

³ Amounts excluding Incurred But Not Identified (IBNI).

⁴ Exposure at Default does not include EAD calculated for equities not held for trading and other non-credit obligations.

209

Forborne, past due and impaired loans split by industry v

									31 December 2014
								Allowances
				Exposures				for impairments
	Exposure	Forborne	Forborne	past due, but not	Past due	Impaired	Impaired	for identified	Impairment charges for
(in millions)	at Default	exposures	ratio (EAD)	impaired	ratio (EAD)	exposures	ratio (EAD)	credit risk	the year
Industry sector
Banks	16,459		0.0%		0.0%	10	0.1%	-10	-15
Financial services1)	9,480	127	1.3%	164	1.7%	813	8.6%	-693	-22
Industrial goods and
services	18,747	1,838	9.8%	550	2.9%	1,328	7.1%	-703	289
Real estate	14,480	1,265	8.7%	234	1.6%	793	5.5%	-390	68
Oil and gas	10,529	467	4.4%	8	0.1%	119	1.1%	-76	27
Food and beverage	10,910	918	8.4%	400	3.7%	544	5.0%	-245	59
Retail	4,418	633	14.3%	184	4.2%	630	14.3%	-355	172
Basic resources	4,005	132	3.3%	37	0.9%	212	5.3%	-152	38
Healthcare	5,276	405	7.7%	16	0.3%	65	1.2%	-39	6
Construction and
materials	2,922	448	15.3%	73	2.5%	371	12.7%	-254	43
Other2)	23,915	614	2.6%	417	1.7%	422	1.8%	-255	77
Subtotal Industry
Classification Benchmark	121,141	6,845	5.7%	2,084	1.7%	5,308	4.4%	-3,170	742
Private individuals
(non-Industry Classification
Benchmark)	186,704	2,211	1.2%	4,282	2.3%	2,324	1.2%	-918	409
Public administration
(non-Industry
Classification
Benchmark)	37,239	18	0.0%		0.0%		0.0%
Subtotal non-Industry Classification
Benchmark	223,943	2,228	1.0%	4,282	1.9%	2,324	1.0%	-918	409
Total3), 4)	345,084	9,074	2.6%	6,366	1.8%	7,632	2.2%	-4,089	1,151

¹ Financial services include asset managers, credit card companies and providers of personal financial services and securities and brokers.

² Other includes, personal and household goods, media, technology, automobiles and parts, chemicals, telecommunication and insurance, in addition to unclassified.

³ Amounts excluding Incurred But Not Identified (IBNI).

⁴ Exposure at Default does not include EAD calculated for equities not held for trading and other non-credit obligations.

Forborne, past due and impaired loans split by industry v

								31 December 2013
(in millions)	Exposure at Default	Forborne exposures	Forborne ratio (EAD)	Exposures past due, but not impaired	Past due ratio (EAD)	Impaired exposures	Impaired ratio (EAD)	Allowances for impair ments for identified credit risk	Impairment charges for the year
Industry sector
Banks	16,990		0.0%		0.0%	23	0.1%	-23	-1
Financial services1)	7,935	105	1.3%	110	1.4%	720	9.1%	-674	-149
Industrial goods and services	18,024	2,018	11.2%	414	2.3%	1,374	7.6%	-721	-104
Real estate	14,068	1,231	8.8%	442	3.1%	819	5.8%	-520	119
Oil and gas	7,581	357	4.7%	224	3.0%	105	1.4%	-104	26
Food and beverage	8,575	888	10.4%	392	4.6%	421	4.9%	-250	94
Retail	7,302	596	8.2%	235	3.2%	517	7.1%	-292	144
Basic resources	4,498	189	4.2%	185	4.1%	208	4.6%	-121	7
Healthcare	4,221	116	2.7%	21	0.5%	48	1.1%	-25	11
Construction and materials	3,196	344	10.8%	116	3.6%	381	11.9%	-271	76
Other2)	45,831	850	1.9%	343	0.7%	652	1.4%	-413	18
Subtotal Industry Classification Benchmark	138,221	6,694	4.8%	2,482	1.8%	5,268	3.8%	-3,414	241
Private individuals (non-Industry Classification Benchmark)	181,011	2,482	1.4%	4,986	2.8%	2,577	1.4%	-921	566
Public administration (non-Industry Classification Benchmark)	21,301	15	0.1%		0.0%		0.0%
Subtotal non-Industry Classification Benchmark	202,312	2,497	1.2%	4,986	2.5%	2,577	1.3%	-921	566
Total3), 4)	340,533	9,191	2.7%	7,468	2.2%	7,845	2.3%	-4,335	807

¹ Financial services include asset managers, credit card companies and providers of personal financial services and securities and brokers.

² Other includes, personal and household goods, media, technology, automobiles and parts, chemicals, telecommunication and insurance, in addition to unclassified.

³ Amounts excluding Incurred But Not Identified (IBNI).

⁴ Exposure at Default does not include EAD calculated for equities not held for trading and other non-credit obligations.

Forborne loans in the real estate sector decreased to EUR 0.8 billion at 31 December 2015 compared with EUR 1.3 billion at year-end 2014. This decline was mainly the result of large repayments on existing forborne contracts. Within the healthcare sector, forborne exposures also declined as a result of debt repayments. The largest increase in forborne assets was observed within the oil and gas industry, which was the result of an inflow of a few new forborne clients.

Total past due exposures decreased by EUR 1.3 billion to EUR 5.1 billion at year-end 2015 from EUR 6.4 billion at year-end 2014. The main contributors to this reduction were Private individuals (non-Industry Classification Benchmark) and the sectors industrial goods and services (EUR 155 million) and food and beverage (EUR 163 million). Other

Business Report

Introduction

212

Risk, funding & capital Report / Risk, funding & capital review / Credit risk

The decrease of EUR 911 million in Private individuals, mainly related to the residential mortgage portfolio, was a result of improved economic conditions, successful active management of the portfolio in arrears and coaching of clients that run a higher risk of running into arrears. The decline of EUR 155 million in industrial goods and services as well as the decline of EUR 162 million in the food and beverages sector was a result of the upturn of the economy and effective credit monitoring.

In 2015, the main decline in impaired exposure was related to Private individuals as a result of the improved economic conditions. Other major declines in impaired exposure at industry level were noted for industrial goods and services, retail, real estate, food and beverages, partly offset by increases in the healthcare, basic resources, and oil and gas sectors.

Impaired exposure of industrial goods and services decreased by EUR 192 million, which was the combination of write-offs and a few releases following a successful restructuring. Retail is a volatile industry in which several files were recovered, resulting in a decline in the impaired portfolio. The decrease in retail was partly offset by a few new files.

Impaired exposures for real estate decreased as a result of write-offs of several files. Furthermore, due to successful restructuring of impaired files, releases were noted in Allowances for impairments. Impaired exposures for the food and beverages sector was impacted by the finalisation of restructuring of impaired files, which resulted in write-offs. In addition, Allowances for impairments in this sector were raised for existing impaired files.

Impaired exposures for basic resources increased as a result of a few new impaired ECT Clients. Impaired exposures for oil and gas also rose due to some ECT impaired exposures. Impaired exposures in the healthcare sector increased due to a single large file.

Furthermore, a number of smaller amounts were reclassified to other industry sectors in the course of 2015.

Developments in specific portfolios

The following section provides a more detailed overview of the developments in specific portfolios and products.

Residential mortgages

The housing market continued to develop favourably throughout 2015. The housing price index of Statistics Netherlands (CBS) increased by 2.8% compared with 2014. According to CBS, the number of houses sold was up by 16% compared with 2014. The upswing applied to all regions of the Netherlands and in all price categories. The increase in housing transactions is based on house sales to both first time buyers as well as existing homeowners.

The maximum amount for government-guaranteed loans (NHG) has been set at EUR 245,000 since 1 July 2015 and is scheduled to be reduced to EUR 225,000 on 1 July 2016. The government has further restricted home financing by reducing the maximum Loan-to-Market Value (LtMV) of a mortgage loan from 103% in 2015 and 102% in 2016 ultimately to 100% in 2018. Since 2013, new mortgages must be redeemed fully during the term of the loan based on an annuity or linear scheme in order to be eligible for tax deductibility. Mortgage loans dating from prior to 31 December 2012 are not affected by this new legislation.

For all mortgage loans, new and existing, tax deductibility will be gradually reduced in the next 27 years from a maximum of 52% to 38%. In 2016, the maximum bracket for deduction interest will be lowered to 50.5% (2015: 51.0%). In the improved economy, the housing market had no problem absorbing the restrictions.

ABN AMRO was the market leader in new mortgage production in 2015, holding a market share of 20.3%.1 ABN AMRO's production of new mortgages in 2015

was EUR 11.6 billion, considerably higher than EUR 8.7 billion for the previous year. The NHG proportion of new mortgage production in 2015 was 39% in 2015 (2014: 50%). The percentage of NHG of total new production dropped considerably to 25% in the fourth quarter. The lower NHG contribution can be explained by the lower NHG limit of EUR 245,000 since 1 July 2015.

Redemptions for 2015 amounted to EUR 12.3 billion compared with EUR 10.2 billion in 2014. The number of full redemptions rose due to increased relocation and refinancing. Extra repayments were at the same levels as in previous years after an exceptionally high fourth quarter of 2014. Contractual repayments are gradually starting to grow, following modified tax regulations.

Residential mortgage indicators

(in millions)	31 December 2015	31 December 2014	31 December 2013
Gross carrying amount excluding fair value adjustment from hedge
accounting	146,932	148,402	150,493
- of which Nationale Hypotheek Garantie (NHG)	38,872	37,540	35,603
Fair value adjustment from hedge accounting	3,401	4,134	3,531
Gross carrying amount	150,333	152,536	154,024
Exposure at Default1)	162,405	160,291	160,165
RWA (REA)1)	20,779	22,062	19,823
Total RWA (REA)/Exposure at Default	12.8%	13.8%	12.4%
Forbearance ratio	1.2%	1.2%	1.6%
Past due but not impaired	2,776	3,639	4,108
Past due ratio	1.9%	2.5%	2.7%
Impaired ratio	0.7%	1.0%	1.2%
Coverage ratio	23.8%	27.6%	27.1%
Cost of risk (year to date, in bps)	1	13	23
Average LtMV (indexed)	80%	83%	84%
Average LtMV - excluding NHG (indexed)	76%	79%	80%
Total risk mitigation	188,427	210,925	213,640
Total risk mitigation/carrying amount	125.3%	138.3%	138.7%

¹ 2013 figures are reported under Basel II; 2015 and 2014 figures are reported using the Basel III (CRD IV/CRR) framework. Under Basel III 2013 pro-forma figures are: EAD EUR 157,902 million; RWA (REA) EUR 18,840 million.

The gross carrying amount of the residential mortgage portfolio amounted to EUR 146.9 billion at 31 December 2015, decreasing by 1% compared with EUR 148.4 billion at 31 December 2014. NHG-guaranteed loans account for 26% of the residential mortgage portfolio at 31 December 2015.

The Exposure at Default increased to EUR 162.0 billion compared with EUR 160.3 billion at year-end 2014. This was the result of a change in the method used for the EAD calculation. The RWA (REA) for the residential mortgage portfolio decreased considerably by EUR 1.3 billion, coming to EUR 20.8 billion at 31 December 2015 as a result of a decline in the number of clients in arrears and a rise in housing prices. The forbearance ratio remained stable compared with 31 December 2014, at 1.2%.The number of clients that went into arrears was considerably lower and more clients were able to recover from arrears.

The mortgage portfolio in arrears (past due up to 90 days) decreased to EUR 2.8 billion at 31 December 2015 from EUR 3.6 billion at 31 December 2014. The decrease of the portfolio in arrears is the result of a combination of improving economic conditions, extensive portfolio management of the portfolio in arrears, and a programme aimed at creating awareness among our clients of situations that could increase the risk of getting into arrears. 213

Business Report

Total risk mitigation for residential mortgages decreased to EUR 188.4 billion at 31 December 2015, down by EUR 22.5 billion from EUR 210.9 billion at 31 December 2014. This decrease was mainly the result of the implementation of the NCV valuation method. As of 31 December 2015 we are reporting the value of collateral based on the Net Collateral Value (NCV). NCV expresses the value of collateral in the event of a forced sale and is equal to the expected recovery value of the collateral pledged to the bank.

The coverage ratio of the residential mortgage portfolio stood at 23.8% on 31 December 2015, down from 27.6% at 31 December 2014. Allowances for impairments decreased more than the impaired exposures. The allowances decreased mainly due to the upswing in the housing market and continued improved economic conditions, which led to lower loss levels on foreclosures.

Impaired exposures declined, as there was lower inflow into, and higher outflow out of, the impaired portfolio. The impaired ratio improved to 0.7% at year-end 2015 compared with 1.0% at year-end 2014. This was due mainly to the decrease of the impaired portfolio to EUR 1.0 billion at 31 December 2015 compared with EUR 1.5 billion at year-end 2015.

Cost of risk over 2015 improved to 1bp compared with 13bps in 2014. This improvement is attributable to the steep decline of total impairment charges, which in turn is the result of a lower impaired portfolio. This was the result of the improved housing market and improved economic conditions.

The risk profile of our residential mortgage portfolio has further improved in recent years. The improvement that set in in 2014 continued in 2015. Measures taken by the Dutch government had a positive effect and improved economic conditions resulted in fewer clients having financial difficulties.

The increase in house prices, combined with extra repayments on mortgage loans, contractual repayments and restrictions on the maximum Loan-to-Market Value (LtMV) for new residential mortgages, resulted in a strong improvement of the average LtMV. The LtMV of the mortgage portfolio improved to 80% at 31 December 2015, compared with 83% at 31 December 2014. Excluding NHG, the average LtMV improved to 76% from 79% at the end of 2014.

The rise in Dutch house prices was particularly strong in the densely populated 'Randstad1 ' area, where more than 50% of the houses financed by ABN AMRO are situated.

		31 December 2015 31 December 2014			31 December 2013
(in millions)	Gross carrying amount	Percentage of total	Gross carrying amount	Percentage of total	Gross carrying amount	Percentage of total
Interest only (partially)	47,943	33%	48,936	33%	50,521	34%
Interest only (100%)	32,076	22%	34,081	23%	36,387	24%
Redeeming mortgages (annuity/linear)	18,569	13%	11,956	8%	7,020	5%
Savings	21,735	15%	23,243	16%	24,674	16%
Life (investment)	17,787	12%	20,279	14%	22,248	15%
Other1)	8,822	6%	9,908	7%	9,643	6%
Total	146,932	100%	148,402	100%	150,493	100%

Breakdown of residential mortgage portfolio by loan type

¹ Other includes hybrid, other and unclassified mortgage types. The hybrid portfolio consists of a combination of savings and investment mortgages.

The shift in new production to redeeming mortgages is also reflected in the composition of the mortgage portfolio. Interest-only mortgages (full and partial)

decreased to EUR 80.0 billion (55%) at year-end 2015 compared with EUR 83.0 billion (56%) at year-end 2014. 'Redeeming mortgages' increased to 13% of the

¹ Urbanised area in the west of the Netherlands.

mortgage portfolio at year-end 2015, up from 8% at year-end 2014. 'Redeeming mortgages' is the only category that grew in volume.

Breakdown of residential mortgage portfolio by year of last modification1 (in millions)

1 Includes the new mortgage production and all mortgages with a modification date.

2 Other includes universal life, life investment, hybrid, other and unclassified mortgage types. The hybrid portfolio consists of a combination of savings and investment mortgages.

Under Dutch tax regulations implemented on 1 January 2013, mortgage interest for new mortgages is only deductible for redeeming mortgage loans. In 2015, mortgage loan type origination (defined as new production and mortgages with a loan type modification) breaks down into 31% interest-only mortgages (2012: 45%), 61% redeeming mortgages (2012: 10%) and 3% savings mortgages (2012: 42%). Interest-only and savings mortgages can still be produced if clients refinance loans that were originated before 2013.

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Residential mortgages to indexed market value

				31 December 2015
	Gross carrying amount	Percentage of total
(in millions)			- of which guaranteed	- of which unguaranteed
Loan-to-Market Value category1
<50%	24,768	16.9%	1.8%	15.1%
50% - 80%	39,755	27.1%	5.0%	22.1%
80% - 90%	18,218	12.4%	3.6%	8.8%
90% - 100%	24,943	17.0%	6.9%	10.1%
100% - 110%	18,928	12.9%	5.0%	7.9%
110% - 120%	12,648	8.6%	2.9%	5.7%
>120%	5,721	3.9%	1.3%	2.5%
Unclassified	1,951	1.3%
Total	146,932	100%
				31 December 2014
<50%	23,707	16.0%	1.7%	14.3%
50% - 80%	36,927	24.9%	4.2%	20.7%
80% - 90%	16,488	11.1%	2.8%	8.3%
90% - 100%	20,396	13.7%	4.5%	9.2%
100% - 110%	21,455	14.5%	5.8%	8.7%
110% - 120%	16,280	11.0%	3.8%	7.2%
>120%	10,885	7.3%	2.5%	4.8%
Unclassified	2,264	1.5%
Total	148,402	100%
				31 December 2013
<50%	23,726	15.8%	1.6%	14.2%
50% - 80%	36,175	24.0%	3.7%	20.3%
80% - 90%	15,583	10.3%	2.4%	8.0%
90% - 100%	18,842	12.5%	3.3%	9.2%
100% - 110%	21,346	14.2%	5.0%	9.2%
110% - 120%
>120%	32,598	21.7%	7.7%	14.0%
Unclassified	2,223	1.5%
Total	150,493	100%

¹ Loan-to-Market Value is calculated using the indexation of the CBS (Central Bureau of Statistics).

Our residential mortgage portfolio volume with an LtMV higher than 100% decreased considerably to 25.4% on 31 December 2015 from 32.8% on 31 December 2014. The gross carrying amount of residential mortgages categories with an LtMV above 110% shows an even stronger decrease, besides the higher market values, as there was no new inflow into these categories since amended mortgage regulations maximised the LtMV of new production in 2015 to 103%.

Note that LtMVs of more than 100% are not necessarily an indicator that these clients are in financial difficulties.

Introduction

Residential mortgages to indexed market value for 100% interest-only

	31 December 2015 31 December 2014		31 December 2013
	Percentage of total	Percentage of total	Percentage of total
Loan-to-Market Value category1)
<50%	9%	9%	9%
50% - 70%	6%	7%	7%
70% - 100%	6%	6%	6%
>100%	1%	1%	2%
Total2)	22%	23%	24%

¹ Loan-to-Market Value is calculated using the indexation of the CBS (Central Bureau of Statistics).

² Percentages of the total mortgage portfolio.

The table above shows the breakdown of the LtMV for the 100% interest-only part of the mortgage portfolio. On 31 December 0.8% of the total mortgage portfolio had an LtMV above 100% and was 100% interest-only compared with 1.2% at year-end 2014. This is a very small part of the total mortgage portfolio. LtMV above 100% is decreasing as a result of higher house prices and limited inflow into this loan type category under the current mortgage acceptance rules.

Consumer loans

Consumer loans indicators

(in millions)	31 December 2015	31 December 2014	31 December 2013
Gross carrying amount	15,147	16,052	16,241
Forbearance ratio	4.3%	2.9%	2.1%
Past due but not impaired	607	633	885
Past due ratio	4.0%	3.9%	5.4%
Coverage ratio	54.8%	61.4%	57.7%
Impaired ratio	5.7%	5.4%	5.5%
Total risk mitigation	11,990	9,807	7,955

The Consumer loans portfolio (excluding residential mortgages) includes current account-related products, revolving and non-revolving credit facilities and credit cards. Consumer loans are predominantly sold within

Retail Banking and Private Banking. This also includes the private labels Alfam and MoneYou for personal loans and International Card Services (ICS) for credit cards.

Consumer loans breakdown

The gross carrying amount for Consumer loans decreased by EUR 0.9 billion to EUR 15.1 billion compared with year-end 2014. Consumer loans represent around 6% of the total loans and receivables portfolio. The forbearance ratio of Consumer loans increased to 4.3% at 31 December 2015 compared with 2.9% at year-end 2014. This increase is a combination of a decreased Consumer loan portfolio together with the result of an inflow of several new forborne clients. The past due but not impaired ratio of the Consumer loan portfolio remained fairly stable at 4.0% at 31 December 2015 compared with 31 December 2014.

In 2015, Allowances for impairments for Consumer loans dropped by 11.6% compared with year-end 2014, as a result of improved economic conditions and stringent monitoring of our clients, while the impaired exposure for the Consumer loan portfolio remained relatively stable in this period. These developments resulted in a decreased coverage ratio of 54.8% at 31 December 2015 compared with 61.4% at year-end 2014.

Total risk mitigation increased to EUR 12.0 billion compared with EUR 9.8 billion at year-end 2014. This increase was mainly the result of improved collateral reporting.

Corporate loans Corporate loans indicators

The Corporate loan portfolio grew slightly to EUR 84.9 billion at 31 December 2015, compared with EUR 84.7 billion at 31 December 2014. The main development in this portfolio was an increase driven by higher volumes in term loans.

The forborne ratio improved to 7.4% at year-end 2015 compared with 7.9% at year-end 2014. This improvement was mainly the result of debt repayments on existing forborne contracts with refinancing measures in the performing portfolio, primarily related to one single client in the real estate sector, offset by the inflow of new forborne clients.

Corporate loans past due improved to 1.3% at 31 December 2015 compared with 2.1% at year-end 2014. This improvement was the result of a combination of the upturn of the Dutch economy and strict credit monitoring. The coverage ratio for Corporate loans increased to 63.6% at 31 December 2015 compared with 60.5% at 31 December 2014, as a result of a gradually declining impaired portfolio and slightly increased Allowances for impairments.

Business Report

Other

Real estate

The Dutch commercial real estate market showed continued signs of improvement in 2015, thanks largely to high demand from investors. This demand resulted in an increase in investment volume compared with 2014. Levels in 2015 were close to or even equal to the 2007 volume (EUR 12 billion1 invested in Dutch commercial real estate), due to several large deals that were closed, especially in the fourth quarter of 2015.

Investor demand is up for both prime and non-prime offices, thanks mainly to the current low interest rate environment. On the down side, demand from users remained subdued as the vacancy rate in the office market continued to grow. The retail segment is still under pressure, given soft consumer spending and the increase of e-trading. On the upside, consumer confidence is at its highest level in eight years. This optimism resulted in rising retail sales, which stabilised the level of vacancy rates. Logistical real estate benefited from an increase in demand as trade picked up. Demand from national and international logistics companies remained relatively buoyant.

ABN AMRO's real estate portfolio has relatively low Loan-to-Values. Loans are based mainly on Dutch property. The loan portfolio consists mainly of investment loans diversified across different asset types. Real estate loans may include additional collateral, e.g. parent company guarantees.

At 31 December 2015, the EAD of ABN AMRO's real estate financing as shown in the industry concentration table, according to the ICB Industry code real estate, amounted to EUR 13.2 billion (31 December 2014: EUR 14.5 billion). Exposures to social housing corporations are included in the real estate exposure, and includes

guarantees by the Waarborgfonds Sociale Woningbouw (WSW, a state agency). WSW provides guarantees to lenders granting loans to housing associations for social housing projects and other properties with a social or public function.

The impaired exposure for real estate amounted to EUR 656 million at 31 December 2015 compared with EUR 793 million at year-end 2014, as a result of write-offs of several files. Specific loan impairment charges amounted to EUR 13 million in 2015 compared with EUR 68 million in 2014. The coverage ratio for real estate remained stable at 49% at 31 December 2015 (31 December 2014: 49%).

Commercial Real Estate

Commercial real estate (CRE) is defined as 'land or property owned by project developers or investors with the purpose to develop, to trade or to rent the land or property. The credit quality of the counterparty depends on real estate-generating cash flows and income producing real estate.'

Although they do overlap, categorisation of the real estate Industry Classification Benchmark (ICB) is not equal to commercial real estate. The main differences between real estate and CRE are:

• Å social housing corporations are not included in CRE;
• Å corporate unsecured real estate and real estate for own use financing is not included in CRE;
• Å private individual exposures are not included in real estate.

CRE is mainly originated by the businesses Corporate Banking and, to a lesser extent, Retail Banking and Private Banking.

Energy, Commodities & Transportation Clients (ECT) ECT portfolio composition

	31 December 2015 31 December 2014
(in billions)	Energy	Commodi ties	Transporta tion	Total ECT clients	Energy	Commodi ties	Transporta tion	Total ECT clients
On-balance sheet exposure	4.7	11.1	9.3	25.0	3.7	11.7	6.8	22.2
Guarantees and letters of credit	0.7	5.5	0.2	6.3	0.6	6.9	0.2	7.7
Subtotal	5.3	16.5	9.5	31.4	4.3	18.5	7.1	29.9
Undrawn committed credit facilities	2.3	2.4	1.9	6.7	2.0	1.6	1.5	5.2
Total	7.6	19.0	11.4	38.0	6.3	20.2	8.5	35.0
RWA (REA) (in billions) RWA (REA) (in %) Exposure at Default (in billions)	19%	59%	22%	12.2 100% 32.0	16%	53%	31%	10.8 100% 24.0
Exposure at Default (in %)	18%	51%	31%	100%	18%	51%	31%	100%

ABN AMRO provides financial solutions and support to clients across the entire value chain of the Energy, Commodities & Transportation (ECT) industry. ECT Clients finances and serves corporate clients that are active worldwide in Energy (upstream, offshore, midstream, FPSO, corporate lending), Commodities (energy, agricultural and metals) and Transportation (ocean-going vessels and containers).

ECT Clients' controlled growth strategy is based on in-depth sector knowledge and focuses on monitoring and managing the credit risk profile of the portfolio in line with the respective market sentiment, trends and economic cycles. Dedicated credit policies are in place for the three ECT Clients sectors, including criteria for transaction structures, type of clients, advance rates, sustainability requirements and exclusion of certain types of transactions, obligors and markets. Core components of ECT Clients' risk management include regular contact and client intimacy at various levels in the client organisation, adherence to a strict client acceptance procedure, monthly credit monitoring meetings for clients with an increased risk ('watch') as well as frequent updates and deep dives into the portfolio and market developments. The majority of the loan book is US-dollar denominated

and typically secured by either commodities for which liquid markets exist, first priority ship mortgages, or pledged contracted project cash flows. Conservative advance rates are applied, taking into account through-thecycle asset values.

ECT Clients' total loan portfolio amounted to an equivalent of EUR 25.0 billion on-balance sheet exposure at 31 December 2015, compared with EUR 22.2 billion at year-end 2014. The increase of the on-balance sheet exposure of ECT Clients' portfolio by 12.6% was primarily due to the appreciation of the US dollar against the euro of 11.5% over the same period. Growth in Energy, Clients & Transportation Clients sectors was offset by lower utilisation of credit facilities in Commodities Clients due to the low commodity prices.

Commodities Clients remains the largest sector of ECT Clients and accounted for EUR 11.1 billion of the ECT Clients loan portfolio (down from EUR 11.7 billion at year-end 2014). Loans to clients in the Transportation Clients sector now account for EUR 9.3 billion (up from EUR 6.8 billion at year-end 2014). Energy Clients' share in the on-balance exposure is now EUR 4.7 billion (up from EUR 3.7 billion at year-end 2014).

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Annual Financial Statements

Other

The off-balance sheet exposure, consisting mainly of short-term letters of credit secured by commodities, guarantees and availability under committed credit lines, increased slightly to EUR 13.0 billion at 31 December 2015, of which EUR 3.0 billion in Energy Clients, EUR 7.9 billion in Commodities Clients and EUR 2.1 billion in Transportation Clients. At year-end 2014, the off-balance exposure was EUR 12.9 billion.

The full-year 2015 impairment charges, divided over Energy, Commodities and Transportation, amounted to EUR 128 million, compared with EUR 54 million in 2014. The increase was mainly due to a specific large file in the third quarter as well as an increase in the IBNI allowance. Like other parts of International Clients, impairment charges for ECT Clients are typically incurred over a few individual files and can be relatively large compared with other parts of the corporate loan book.

ECT Clients operates in cyclical sectors. This cyclicality is carefully considered in relation to lending policies, financing structures, advance rates and risk management. As market circumstances are challenging for some of the clients in the ECT sectors, close monitoring of the impact of these developments is required.

The bank periodically performs sensitivity analyses and stress testing exercises to gain insight into the credit performance under price scenarios, economic scenarios and risk measures. Developments in commodity prices and specifically in oil and gas are under continued close attention in terms of risk management and stringent credit monitoring.

Oil price risk on ECT Clients exposure

ECT Clients is exposed to the oil and gas market in particular through Energy Clients and Commodity Clients active in energy markets. Market circumstances were challenging in 2015 for companies operating in oil and gas related sectors. We apply close risk monitoring to our clients in these markets as well as frequent price sensitivity analysis to assess the potential impact of oil price fluctuations.

The breakdown below shows the composition of our direct and indirect oil and gas-related exposure.

	Activity/ Business Line1	Description	Estimated size	Estimated Sensitivity
Energy Clients portfolio of EUR 5.3 billion	Trade Finance Commodities Energy Clients	Trade related exposure; majority is short-term and a substantial part is self-liquidating trade finance, generally for major trading companies Facilities are mostly secured and either pre-sold or price hedged, not exposing the bank to oil price risk		Not directly exposed to oil price risk
	Floating Production Storage & Offloading Energy Clients	Floating Production Storage & Offloading vessels are developed for exploitation of oil and gas fields Financing structures rely on long term contracts with investment grade major oil companies	Roughly 30% of ECT Clients, in which Commodities Energy is the largest part
	Corporate Lending Energy Clients	Corporate Loans in oil & gas sector: predominantly loans to investment grade integrated oil companies
	Midstream Energy Clients	E.g. pipelines, tank farms, LNG terminals, etc. These assets typically generate revenues from medium to long-term tariff based contracts, not directly affected by oil price movements
	Offshore Drilling Companies Energy Clients	Loans to finance drilling rigs Generally backed by 3-7 year charter contracts and corporate guaranteed	Roughly 6%	Exposed to oil price risk. In part mitigated by management, technology, low costs and contracts
	Other Offshore Companies Energy Clients	Diversified portfolio of companies active in pipe laying, heavy lifting, subsea services, wind park installation, etc. Corporate guaranteed	of ECT Clients
	Upstream (Reserve Base Lending) Energy Clients	Financing based on borrower's oil & gas assets. Loans secured by proven developed reserves of oil & gas. Includes smaller independent oil & gas producers Majority of clients are active in gas sector rather than oil and have loss absorbing capital structures in place (junior debt, second lien, equity)	Roughly 4% of ECT Clients	Exposure to oil price risk. Risk mitigants may include protection, i.e. low advance rates
	Total Oil & Gas related exposures	Total Oil & Gas exposure, of on-balance sheet outstandings + issued LCs and Guarantees, has been relatively flat since beginning of 2015	Roughly 40%2 of ECT Clients	and loss absorbing capital structures

1 The allocation of clients into Energy Clients sub-segment has been based on management views for managerial purposes. Clients can have activities that could be mapped in other sectors. 2 40% of the subtotal of ECT clients (EUR 31.4 billion)

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Business Report

ABN AMRO Clearing

ABN AMRO Clearing covers the full market chain from market access and execution services to clearing, settlement and multi-product asset servicing on a global basis. ABN AMRO Clearing offers 24-hour/5-day global services across multiple asset classes. In addition, ABN AMRO Clearing provides collateralised financing and securities borrowing and lending services to its clients. With a top-three ranking based on turnover and global market share, ABN AMRO Clearing plays an important role in supporting the global financial infrastructure. Target client groups of ABN AMRO Clearing are categorised into three groups: Professional Trading Groups (PTG), Prime (hedge funds) and Corporates.

Sound risk management is a cornerstone of the business model of ABN AMRO Clearing. Risk centres are operated in various time zones, and these local risk centres are supported and governed by various risk functions at the bank's head office in Amsterdam. In its daily operational activities ABN AMRO Clearing is confronted with various risks such as market, credit, liquidity, operational, and reputational risks. Accurate identification and control of these risks constitutes an important part of day-to-day operations. The risk appetite of ABN AMRO Clearing is aligned with ABN AMRO's corporate strategy and thus set within the boundaries of a moderate risk profile. It is monitored on a monthly basis by benchmarking actual and expected risk profiles by a designated risk committee, the Clearing Business Risk Committee.

Market and credit risk

Local risk management monitors client activity on a daily and intraday basis to ensure that all clients stay within the agreed market and credit risk parameters. Although ABN AMRO Clearing does not run market risk on its own, it will encounter market risk as a result of its credit activities: (i) ABN AMRO Clearing explicitly guarantees, as a third-party clearing member, the fulfilment of obligations towards clearing houses and other third parties arising from clients' transactions. In the event of a client defaulting, it has the legal obligation to settle all of the client's positions with the relevant clearing houses, possibly at a loss. Additionally, (ii) ABN AMRO Clearing provides credit lines to clients to leverage business opportunities. To manage the above, all client exposures are fully collateralised.

Liquidity risk

Liquidity risk is the risk of having insufficient funds at some point in time at the right locations around the world to meet margin calls with other brokers or clearing houses or failing to settle other transaction types. In conjunction with ABN AMRO Bank, Clearing constantly evaluates its liquidity needs globally and implements mitigants to avoid any temporary liquidity shortfalls.

Operational and reputational risk

ABN AMRO Clearing devotes a great deal of attention to the operational and regulatory risk component of its business model. Being a highly IT-intensive organisation, business information security, IT security and business continuity management play an important role in the operational risk agenda.

Like ABN AMRO, a full control framework is implemented in order to identify, measure, manage and monitor operational and regulatory risks. Dedicated staff members constantly monitor the operational risk profile of the global firm by, among other things, proactively performing risk assessments, keeping track of up-to-date operating policies and procedures, monitoring controls, properly following up on implementation of audit points, following up on operational losses/near misses, and performing disaster recovery rehearsals to test business continuity.

As part of ABN AMRO's governance, ABN AMRO Clearing applies the three lines of defence model (3LoD). Three lines of defence governance is supported by the Clearing Business Risk Committee, where all three lines interact to discuss the design, existence and operating effectiveness of the control framework and individual risks.

Clearing has not suffered significant losses over the past few years. In 2015, the total credit loss was around 5.1bps (2014: 0.3bps) on the total outstanding credit limits of EUR 30.0 billion (2014: EUR 27.1 billion). The higher loss in 2015 resulted from the unprecedented movement of the Swiss franc in January 2015.

224

Operational risk

Operational risk by risk type

Operational losses by event category1 Distribution (% of total loss amount)

Operational losses by event category Frequency (% of total number of lossses)

31 XX 30 XX

Execution, delivery, process management

External fraud

3 XX 3 XX

Disaster and public safety

Technology and infrastructure failures

0 XX 0 XX

Employee practices and workplace safety

Internal fraud

34 XX

Clients, products and business practices

2014 2015

10

20

30

40

50

1 Due to recoveries and the development of loss amounts over time, the figures of previous years can be subject to change.

The total operational net loss increased in 2015. However, excluding the settlement of one single claim (Vestia) for the sale of interest rate derivatives contracts, the bank's total loss decreased. In addition to the losses, ABN AMRO provisioned for litigation of historical claims against the bank. These claims are accounted for in the balance sheet under Provisions (more information on provisions is included in Note 28 to the Annual Financial Statements).

The development of the loss amounts for each event category shows an increase compared with 2014 for Clients, products and business practices due to the aforementioned settlement. For the other main event categories, loss amounts decreased in 2015.

Cybercrime

ABN AMRO is faced with the constant threat of cybercrime by organised crime groups, activists and/or ill-intentioned employees. We therefore continuously monitor this threat and adjust the bank's defences where necessary. The volume of phishing, malware and card theft attacks was higher in 2015 than it was in 2014.

The bank further strengthened its security controls throughout the year, resulting in very low losses despite the persistent volume of attacks, and our clients did not experience a decrease in service availability due to cybercrime. Operational losses as a result of external fraud through digital client channels in 2015 remained at the low level of 2014. Compared with 2012 (baseline: 100), the level of fraud losses in 2014 and in 2015 was 7.

Dutch banks cooperate, through the Dutch Banking Association and the Dutch Payments Association, in order to guarantee Dutch society's shared interest in secure payments. Dutch banks have agreed not to compete in matters of security. Individual banks do not report figures on losses due to fraud related to internet banking, skimming and debit cards; these figures are reported jointly.

Business continuity

To address incidents/crises threatening the continuity of critical business processes, business continuity mitigation controls are in place, such as crisis management, business relocation plans and IT disaster recovery plans. During 2015, ABN AMRO's crisis management organisation proved to be stable and able to respond to incidents to assure recovery of these business processes within an acceptable timeframe, while the number of 'code red' escalations was lower than in 2014.

Risk, funding & capital Report / Risk, funding & capital review / Operational risk

Stability of digital services

Availability of the bank's internet banking services during peak hours was 99.5% on average in 2015.

Regulatory capital v

The bank's own funds for operational risks in 2015 were calculated based on the Standardised Approach (TSA). Under the TSA, gross income figures are mapped to a set of prescribed Basel II business lines, such as Retail, Payments and Trading & Sales. Depending on the business line, a percentage (predefined by the directives) is applied for calculating capital for that business line. The TSA capital for the bank is the sum of the TSA capital for each business line.

RWA (REA) flow statement operational risk (in millions) EDTF 16

No material changes were noted in the movements in RWA (REA) for operational risk in 2015.

Market risk

ABN AMRO is exposed to market risk in its trading book and banking book. The following table represents the

market risk factors to which the different assets and liabilities of the balance sheet are sensitive.

Total market risk exposure

Market risk exposure traded and non-traded risk s

Carrying Carrying Carrying Primary risk amount Market risk measure amount Market risk measure amount Market risk measure sensitivity Traded Non-trad Traded Non-trad Traded Non-trad risk ed risk risk ed risk risk ed risk (in millions) Assets subject to market risk Cash and balances at central banks 26,195 26,195 706 706 9,523 9,523 Interest rate Interest rate/equity/ Financial assets held FX/commodities/ for trading 1,706 1,706 9,017 9,017 12,019 12,019 credit spread Interest rate/equity/ FX/commodities/ Derivatives 19,138 14,735 4,403 25,285 19,730 5,555 14,271 11,848 2,423 credit spread Interest rate/FX/ Financial investments 40,542 40,542 41,466 41,466 28,111 28,111 credit spread Securities financing 20,062 20,062 18,511 18,511 18,362 18,362 Interest rate/FX Loans and receivables - banks 15,680 15,680 21,680 21,680 23,967 23,967 Interest rate/FX Loans and receivables - customers 259,319 259,319 261,910 261,910 257,028 257,028 Interest rate/FX Other assets 7,676 7,676 8,292 8,292 8,741 8,741 Total assets 390,317 16,440 373,877 386,867 28,746 358,121 372,022 23,867 348,155
Liabilities subject
to market risk Interest rate/equity/
Financial liabilities FX/commodities/
held for trading 459 459 3,759 3,759 4,399 4,399 credit spread
Interest rate/equity/
FX/commodities/
Derivatives 22,425 12,958 9,466 30,449 18,203 12,246 17,227 9,849 7,378 credit spread
Securities financing 11,372 11,372 13,918 13,918 12,266 12,266 Interest rate/FX
Due to banks 14,630 14,630 15,744 15,744 11,626 11,626 Interest rate/FX Due to customers 230,297 230,297 216,011 216,011 207,584 207,584 Interest rate/FX
Issued debt 76,207 76,207 77,131 77,131 88,682 88,682 Interest rate/FX
Subordinated
liabilities 9,708 9,708 8,328 8,328 7,917 7,917 Interest rate
Other liabilities 7,635 7,635 6,652 6,652 8,753 8,753
Total liabilities 372,733 13,418 359,315 371,990 21,962 350,028 358,454 14,248 344,206
Equity 17,584 17,584 14,877 14,877 13,568 13,568
Total liabilities and equity 390,317 13,418 376,899 386,867 21,962 364,905 372,022 14,248 357,774

Activities in the trading book are sensitive to multiple risk factors. As stated in the paragraphs on market risk in the trading book, the overall sensitivity to these risk factors is carefully managed to remain within the bank's risk appetite. Most assets and liabilities in the banking book are to a large extent sensitive to interest rate risk. Some of the assets and liabilities are also sensitive to FX risk; however, ABN AMRO minimises this risk through hedging.

Market risk in the trading book Market risk exposure d

The next graph shows the total VaR ('VaR diversified') and aggregation of the stand-alone risk factors ('VaR undiversified').

ABN AMRO applies a diversified portfolio VaR approach. This approach takes into account the fact that returns across risk factors may offset one another to a certain extent and consequently reduce risk. As long as those returns are not perfectly correlated to one another,

VaR figures based on a diversified portfolio approach will be lower compared with the figures when using undiversified VaR. Undiversified VaR means that the VaR figures computed for the different risk factors are summed up without taking into account any offset across risk factors and therefore negates the potential for risk reduction.

VaR diversified and undiversified (in millions) EDTF 23

Internal aggregated diversified and undiversified VaR for all trading positions bd

	2015			2014	2013
(in millions)	Diversified	Undiversified	Diversified	Undiversified	Diversified	Undiversified
VaR at last trading day of period	3.0	3.4	1.4	2.5	1.4	2.4
Highest VaR	12.7	14.8	3.8	5.1	5.4	7.1
Lowest VaR	1.1	2.1	0.8	1.6	0.7	1.6
Average VaR	4.9	6.3	1.4	2.5	2.0	3.0

During 2015, the average diversified 1-day VaR at a 99% confidence level increased by EUR 3.5 million to EUR 4.9 million compared with EUR 1.4 million in 2014. The highest VaR in 2015 was EUR 12.7 million compared with EUR 3.8 million in 2014. Average undiversified VaR, being the sum of VaR across the FX, Equity, Interest Rates and Commodity risk factors, increased from EUR 2.5 million in 2014 to EUR 6.3 million in 2015. While the risk profile remained stable and moderate, this increase was driven by a low interest rate environment related to ECB quantitative easing in Q1 2015 and the VaR methodology. The VaR methodology was enhanced in Q4 2015 to handle low interest rate movements.

Market risk in the banking book b

Market risk in the banking book is the risk that the value or the earnings of the bank decline because of unfavourable market movements. The market risk of the banking book consists predominantly of interest rate risk. Interest rate risk arises from holding loans with different interest rate maturities than the interest rate maturities of the savings and funding of the bank. The assets have on average a longer behavioural maturity than the liabilities, especially savings.

Risk, funding & capital Report / Risk, funding & capital review / Market risk
-------------------------------------------------------------------------------	--	--

ABN AMRO uses a combination of portfolio (macro) hedges and specific asset or liability (micro) hedges to swap fixed interest rates to a floating interest rate position. The resulting interest rate position, after the application of interest rate hedges, is in line with the bank's strategy and risk appetite.

Market risk exposure

The table below shows the interest rate risk metrics at year-end 2015 and 2014.

Interest rate risk metrics vd

	31 December 2015	31 December 2014	31 December 2013
NII-at-risk (in %)	1.3	2.2	5.4
Duration of equity (in years)	3.6	4.0	4.3

NII-at-Risk is defined as the worst outcome of two scenarios: a gradual increase in interest rates and a gradual decline in interest rates by 200bps. A floor on interest rates is assumed in the falling rates scenario. NII-at-Risk in 2015 decreased to 1.3% (approximately EUR 80 million) and reflects a reduction of NII of

approximately EUR 80 million in the falling rates scenario. In a scenario in which interest rates rise, NII would increase by 2.0% (approximately EUR 120 million).

Duration of equity showed a moderate decrease to 3.6 years.

Regulatory capital market risk vd

Capital requirement and risk exposure amount vd

	31 December 2015		31 December 2014		31 December 2013
(in millions)	Capital requirement	RWA (REA)	Capital requirement	RWA (REA)	Capital requirement	RWA (REA)
Position risk in traded debt instruments	128	1,600	122	1,524	139	1,735
Position risk in equities	2	23	6	76	23	281
Commodity risk	7	88	17	211	30	380
Add-on	320	4,000	320	4,000	320	4,000
Total	457	5,710	465	5,811	512	6,396

The above table shows the composition of the trading books of ABN AMRO, broken down by risk factor and required regulatory capital/risk exposure amount.

RWA (REA) flow statement market risk (in millions) EDTF 16

RWA (REA) decreased slighly to EUR 5.7 billion at 31 December 2015 compared with EUR 5.8 billion at 31 December 2014. This decline was related to slightly lower RWA amounts for the traded debt instruments position.

Liquidity risk

Liquidity risk management

Liquidity risk indicators

	31 December 2015	31 December 2014	31 December 2013
Going concern liquidity management
Survival period (moderate stress)	> 12 months	>12 months	>12 months
Loan-to-Deposit ratio (in %)	108.9%	116.5%	120.6%
Contingency liquidity risk management
Available liquidity buffer (in billions)	82.8	73.9	75.9
Basel III
LCR ratio	>100%	>100%	100%
NSFR ratio	>100%	>100%	>100%

The Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR) both remained above 100% during 2015. This is in line with the bank's targeted early compliance with future regulatory requirements.

The survival period reflects the period that the bank's liquidity position is expected to remain positive in an internal stress scenario in which wholesale funding markets deteriorate and retail and commercial clients withdraw a proportion of their deposits. The survival period was consistently >12 months during 2015.

The Loan-to-Deposit (LtD) ratio decreased to 109% at 31 December 2015 compared with 117% at 31 December 2014. This was caused chiefly by a large increase in client deposits across all business segments, particularly in the first half of the year.

The following table shows the development of the LtD ratio over the last three years.

230

Loan-to-Deposit ratio bi

(in millions)	31 December 2015	31 December 2014	31 December 2013
Loans and receivables - customers1	259,319	261,910	257,028
Gross up savings in mortgage linked saving products	7,911	7,571	7,236
Deductions
Selected current accounts related to ABN AMRO Clearing Bank	4,799	4,806	2,030
Fair value adjustment from hedge accounting	4,849	5,739	4,422
Total deductions	-9,648	-10,546	-6,452
Adjusted Loans and receivables - customers	257,582	258,935	257,812
Due to customers1	230,297	216,011	207,584
Gross up savings in mortgage linked saving products	7,911	7,571	7,236
Debt certificates issued through Groenbank B.V.	55	103	227
Fiduciary deposits		422	749
Deductions
Deposits from Dutch State Treasury Agency (DSTA)	-1,750	-1,900	-2,100
Adjusted Due to customers	236,513	222,207	213,696
Loan-to-Deposit ratio (LtD)	108.9%	116.5%	120.6%

¹ Excluding securities financing.

The liquidity buffer consists largely of cash and deposits at central banks, government bonds and retained RMBS. Most of the securities in the liquidity buffer, with the exception of the retained RMBS, are eligible for the LCR. The internal assessment of the eligibility and haircut for several liquidity instruments deviates from the Basel III regulation, which explains the differences between the liquidity values. For government bonds, the internal haircut is higher. This explains why the liquidity buffer value for government bonds is lower than the LCR eligible amount.

The liquidity buffer increased by EUR 8.9 billion to EUR 82.8 billion at 31 December 2015 compared with EUR 73.9 billion at 31 December 2014. The increase in the buffer was primarily driven by a higher cash position due to an improved LtD ratio.

The increase in cash allowed for further optimisation of the liquidity buffer. This is reflected in the decrease of the retained RMBS portfolio. Retained RMBS have liquidity value for internal stress testing purposes, but are not eligible for the LCR. Cash and government bonds, on the other hand, have liquidity value both for internal and regulatory purposes.

Further information on the composition of the government bond portfolio is provided in note 16 to the Annual Financial Statements.

Liquidity buffer composition bi

	31 December 2015		31 December 2014		31 December 2013
	Liquidity buffer		of which LCR eligible	Liquidity buffer	of which LCR eligible		Liquidity buffer	of which LCR eligible
(in billions, liquidity value)		Level 1	Level 2		Level 1	Level 2		Level 1	Level 2
Cash & Central Bank deposits1	24.4	24.4		5.3	5.3		16.8	16.8
Government bonds	26.0	26.9		27.3	28.3		18.0	18.8
Covered bonds	1.4		1.3	2.0		1.8	2.2		1.9
RMBS retained	24.0			31.8			33.1
Third party RMBS	0.7		0.6	1.0		0.8	1.1		0.9
Other	6.3	2.5	0.8	6.5	1.9	1.8	4.7	0.6	2.1
Total	82.8	53.8	2.7	73.9	35.6	4.4	75.9	36.2	4.9

¹ The mandatory cash reserve with the central bank has been deducted from the cash and central bank deposits in the liquidity buffer.

The following table shows the breakdown per currency of the liquidity buffer. The main currencies are EUR and USD, in line with the composition of our balance sheet.

Liquidity buffer currency diversification bi

(in billions, liquidity value)	31 December 2015	31 December 2014	31 December 2013
EUR	77.9	68.5	73.1
USD	2.4	2.1	1.7
GBP	0.3	0.3	0.2
CHF		0.6	0.2
Other	2.2	2.4	0.7
Total	82.8	73.9	75.9

The monthly averages for 2015, 2014 and 2013 are shown in the table below:

Liquidity buffer composition - monthly average b

(in billions, liquidity value)	2015	2014	2013
Cash & Central Bank deposits	11.1	5.6	14.5
Government bonds	26.8	23.3	14.8
Covered bonds	1.7	2.2	2.3
RMBS retained	29.8	32.1	32.1
Third party RMBS	0.8	1.0	1.1
Other	7.0	6.6	4.8
Total	77.2	70.9	69.6

Funding

Liability and equity breakdown

(in billions)

Liability and equity breakdown ba

Client deposits are our main source of funding, complemented by a well-diversified book of wholesale funding. Client deposits increased by EUR 14.3 billion in 2015. This increase in deposits improved the Loan-to-Deposit ratio (LtD ratio) to 108.9% at 31 December 2015 from 116.5% at 31 December 2014. The resulting increase in Cash and balances at central banks was used to further strengthen the liquidity buffer. For full-year 2015, the share of client deposits as a percentage of the total balance sheet increased to 59% from 56% in 2014. Total wholesale funding remained stable at 22% of the total balance sheet.

The graph below shows the liability and equity breakdown for the full balance sheet. The increase in client deposits was offset by a decrease in other liabilities, mainly due to a decrease in the trading book.

1 A part of due to banks is reclassified as securities financing. Comparative figures have been amended accordingly.

Audited EDTF 21

The graph below shows the breakdown of clients deposits by segment.

Breakdown of client deposits Audited EDTF 21

(in billions)

233

The inflow of EUR 6.3 billion in Retail Banking and Private Banking deposits was predominantly caused by an increase of deposits at MoneYou and the increase of Private Banking deposits both in the Netherlands and internationally. The increase of EUR 8.1 billion in Corporate Banking deposits was due to an increase across all segments.

Available funding instruments ba

A key goal of the funding strategy is to diversify funding sources. To this end, the set of funding instruments includes a broad set of funding programmes in different currencies, markets, maturities and investor bases. A description of capital and funding instruments issued by ABN AMRO is provided on our website, abnamro.com. We continuously assess our wholesale funding base in order to determine the optimum use of funding sources. The main wholesale funding types can be specified as follows:

(in millions)	31 December 2015	31 December 2014	31 December 2013
Euro Commercial Paper	1,326	1,706	2,054
London Certificates of Deposit	3,744	1,436	5,258
French Certificats de Dépôt	164	1,517	4,668
US Commercial Paper	4,585	4,070	3,630
Total Commercial Paper/Certificates of Deposit	9,820	8,729	15,610
Senior guaranteed (medium-term notes Dutch State)1)			1,423
Senior unsecured (medium-term notes)	37,404	32,252	33,089
Covered bonds	25,956	27,077	25,913
Securitisations	2,968	9,001	12,295
Saving certificates	59	72	352
Total issued debt	76,207	77,131	88,682
Subordinated liabilities	9,708	8,328	7,917
Total wholesale funding	85,915	85,458	96,599
Other long-term funding2)	6,813	6,900	4,500
Total funding instruments3)	92,728	92,358	101,099
- of which issued debt matures within one year	19,607	20,194	30,719

Overview of funding types ba

¹ The Dutch State guaranteed medium-term notes matured in May 2014.

² Includes long-term repo (recorded in Securities financing), TLTRO funding (recorded in Due to banks) and funding with the Dutch State as counterparty (recorded in Due to customers). ³ Includes FX effects, fair value adjustments and interest movements.

Total wholesale funding increased to EUR 85.9 billion on 31 December 2015, compared with EUR 85.5 billion at 31 December 2014. The amount of short-term funding (CP/CD) increased to EUR 9.8 billion at 31 December 2015, compared with EUR 8.7 billion at 31 December 2014.

The following graph shows the development of wholesale funding types relative to the balance sheet total at 31 December 2015 and 31 December 2014.

234

Funding vs balance sheet total Audited EDTF 21

(as % of total assets)

Long-term funding components ba

Long-term funding components

The following graph shows an overview of the outstanding long-term funding at 31 December 2015 and 31 December 2014. The information presented is based on notional

Audited EDTF 21

values and therefore differs from the information above due to discrepancies between notional value and issue price and fair value hedge accounting adjustments.

Strategic Report

Annual Financial Statements

Funding issuance in 2015 ba

ABN AMRO executed a successful funding strategy in 2015, reflected in issuance in more than ten currencies and a presence in almost all funding and capital markets. We raised EUR 14.3 billion in long-term wholesale funding (including EUR 2.8 billion in subordinated debt) compared with EUR 9.2 billion in 2014. The majority was issued as senior unsecured wholesale funding. This includes our first Green senior bond. We further diversified our funding profile by issuing, among other things, a 15-year covered bond. Furthermore, EUR 1 billion of Additional Tier 1 capital instruments were issued in September 2015.

A large part of our wholesale funding was raised through private placements. The remainder of funding was raised through benchmark transactions and taps on existing instruments.

Long-term funding raised in 2013, 2014 and 2015 Audited EDTF 21

(notional amounts, in billions)

1 Other long-term funding includes long-term repos, TLTRO funding and funding with the Dutch State as counterparty.

As a result of our diversification strategy, the long-term funding in non-euro currencies rose to 27% of total outstanding long-term funding compared with 21% at year-end 2014. In 2015, the bank raised 63% of long-term funding in EUR and the remainder mainly in USD, GBP, JPY, AUD, NOK, CHF, CAD and NZD. Diversification of the outstanding long-term funding in non-euro currencies is shown in the following graph.

Non-euro currency diversification

of total outstanding long-term funding (in billions) Audited EDTF 21

Strategic Report

Other

Maturity calendar ba

We enhanced the maturity profile of our long-term wholesale funding predominantly by spreading out redemptions of funding instruments over time. For the coming years, ABN AMRO will focus on further optimising its wholesale maturity profile and on maintaining its diverse funding base.

The average maturity of newly issued funding increased to 7.5 years (up from 5.5 years in 2014), while the average maturity of outstanding long-term funding increased to 4.6 years at year-end 2015 (up from 4.3 years at year-end 2014). This was caused mainly by the issuance of long-term secured funding in the third quarter of 2015.

The stated maturity calendar assumes redemption on the earliest possible call date or otherwise the legal maturity

Maturity calendar at 31 December 2015

(notional amounts, in billions)

date, as early redemption of subordinated instruments is subject to the approval of the regulators. However, this does not mean that the instruments will be called at the earliest possible call date.

In 2014, ABN AMRO participated in the Targeted Long-Term Refinancing Operations (TLTRO) programme, which is the European Central Bank's programme to support lending to the real economy (particularly for SMEs). ABN AMRO participated in the TLTRO for a total amount of EUR 4.0 billion. The contractual maturity date is 2018. However, depending on developments in the eligible lending activities underlying the TLTRO programme, early repayment could be mandatory. Given expected developments, early repayment in the second half of 2016 is considered likely.

Audited EDTF 21

1 Other long-term funding includes long-term repos, TLTRO funding and funding with the Dutch State as counterparty.

Maturity calendar

											31 December 2015
(notional amounts, in billions)	2016	2017	2018	2019	2020	2021	2022	2023	2024	2025	≥ 2026	Total
Senior unsecured	8.5	7.5	3.6	5.0	4.6	0.8	2.5	1.1	0.2	1.6	0.9	36.5
Covered bonds	0.6	2.1	1.9	1.8	2.3	2.4	2.6	1.8	1.7	0.3	5.5	23.1
Securitisations	0.6	1.1	0.8	0.5								3.0
Subordinated liabilities	1.2	2.1			1.6	1.2	1.5	0.1		1.4		9.2
Other long-term
funding1	1.0	1.0	4.0		0.1	0.3					0.5	6.8
Total	11.8	13.9	10.3	7.3	8.7	4.7	6.7	3.1	1.9	3.3	6.8	78.5

¹ Other long-term funding includes long-term repos, TLTRO funding and funding with the Dutch State as counterparty.

237

Capital

Capital structure b

ABN AMRO's solid capital position ensures that the bank is already compliant with the fully-loaded capital requirements of the Capital Requirements Directive IV (CRD IV). The overall capital base increased over the year, primarily due to profit accumulation, a decrease in RWA

and capital issuances. The bank strives to optimise its capital structure in anticipation of pending regulatory requirements. The capital structure consists mainly of common equity and highly loss-absorbing capital to cover unexpected losses. The subordination of specific capital instruments provides further protection to senior creditors.

Regulatory capital structure bv

			Basel III	Basel II
(in millions)	31 December 2015	31 December 2014	31 December 2013 pro-forma1)	31 December 2013
Total Equity - EU IFRS	17,584	14,877	13,568	13,568
Participations in financial institutions >10%				-336
Cash flow hedge reserve	1,056	1,223	1,467	1,467
Dividend reserve	-414	-275	-200	-200
Capital securities	-993
Other regulatory adjustments	-466	-399	1,183	1,199
Common Equity Tier 1/Core Tier 1 capital	16,768	15,426	16,018	15,698
Innovative hybrid capital instruments	700	800	800	1,000
Capital securities	993
Other regulatory adjustments	-234	-241	-317
Tier 1 capital	18,226	15,985	16,501	16,698
Subordinated liabilities Tier 2	4,938	5,502	5,607	5,610
Excess Tier 1 instrument recognised as Tier 2 capital	300	200
Participations in financial institutions >10%				-336
Other regulatory adjustments	-33	-39	-164	25
Total regulatory capital2)	23,431	21,648	21,944	21,997

¹ Pro-forma figures are not audited.

² DNB requires Dutch banks to disclose the Basel I floor in accordance with CRR article 500. The Basel I floor is calculated by multiplying Basel I RWA (REA) of EUR 184 billion by 8% times 80%. After adjusting for IRB provision shortfall, this results in a minimum required amount of own funds of EUR 11.6 billion as per 31 December 2015. ABN AMRO comfortably meets this requirement. Introduction

238

Regulatory capital flow statement bq

			Basel III	Basel II
(in millions)	2015	2014	2013 pro-forma1	2013
Common Equity Tier 1 capital/Core Tier 1 capital
Balance at 1 January	15,426	16,018	14,700	14,700
Addition of net profit attributable to shareholders	1,919	1,134	1,160	1,160
Reserved dividend	-414	-275	-200	-200
Interim dividend paid	-350	-125	-150	-150
Change in pension scheme (excluding impact on P&L)		-1,682
Other, including regulatory adjustments	186	356	508	188
Balance at end of period	16,768	15,426	16,018	15,698
Additional Tier 1 capital
Balance at 1 January	559	483	800	997
New issued Tier 1 eligible capital instruments	993
Redeemed Tier 1 eligible capital instruments
Other, including regulatory adjustments	-93	76	-317	3
Balance at end of period	1,459	559	483	1,000
Tier 1 capital	18,226	15,985	16,501	16,698
Tier 2 capital
Balance at 1 January	5,663	5,443	6,703	6,703
New issued Tier 2 eligible capital instruments	2,859
Redeemed Tier 2 ineligible capital instruments	-759		-1,399	-1,399
Other, including regulatory adjustments	-2,559	220	139	-5
Balance at end of period	5,205	5,663	5,443	5,299
Total regulatory capital	23,431	21,648	21,944	21,997

¹ Pro-forma figures are not audited.

RWA (REA) b

			Basel III	Basel II
(in millions)	31 December 2015	31 December 2014	31 December 2013 pro-forma1	31 December 2013
Credit risk	86,063	87,667	92,631	86,201
- of which standardised	7,110	7,834	13,392	10,731
- of which advanced	78,953	79,833	79,239	75,470
Operational risk	16,227	16,168	16,415	16,415
- of which standardised	16,227	16,168	16,415	16,415
- of which advanced
Market risk	5,710	5,811	6,396	6,396
- of which standardised	5,710	5,811	6,396	6,396
- of which advanced
Total RWA (REA)	108,001	109,647	115,442	109,012

¹ Pro-forma figures are not audited.

239

Main changes in capital position q

At 31 December 2015, the phase-in CRD IV Common Equity Tier 1, Tier 1 and total capital ratios were 15.5%, 16.9% and 21.7% respectively, an increase compared with Q3 2015. All capital ratios were well above regulatory minimum requirements and in line with the bank's risk

appetite and strategic ambitions. ABN AMRO's capital position strengthened over the past quarter, as a result of profit accumulation.

The following chart shows the primary drivers of the capital ratios in 2014.

Developments impacting capital ratios in 2015 (in %) EDTF 11

Developments impacting capital ratios in 2015 q

Common Equity Tier 1 capital

Common Equity Tier 1 capital increased in 2015 primarily due to profit accumulation.

Net reported profit attributable to the shareholder of ABN AMRO in 2015 amounted to EUR 1,919 million. Net profit after dividend allocation is included in Common Equity Tier 1 capital, in accordance with regulations and ABN AMRO's dividend policy.

In 2016, ABN AMRO will be required to meet a required minimum CET1 ratio of 10.25% on a consolidated basis, which is composed of a 9.5% SREP requirement and a 0.75% phase-in of the systemic risk buffer (SRB). The SRB is expected to grow by 0.75 percentage point per annum up to 3.0% in 2019. The 9.5% CET1 requirement for 2016 includes the capital conservation buffer. ABN AMRO is comfortably above the 10.25% minimum, with phase-in CET1 at 15.5% at 31 December 2015.

Additional Tier 1

ABN AMRO currently has one EUR 1.0 billion in an AT1 instrument outstanding, which was issued in September 2015. The AT1 instrument has triggers at the Group level (7% CET1), the sub-consolidated level (5.125% CET1) and the solo level (5.125% CET1). If the CET1 ratio breaks through the trigger level, the AT1 will be temporarily written down. Based on December 2015 figures, ABN AMRO is comfortably above the trigger levels, with the Group level CET1 ratio at 15.5%, the sub-consolidated CET1 ratio at 15.5% and the solo CET1 ratio at 14.6%. Available Distributable Items (ADI) totalled EUR 15.1 billion at 31 December 2015.

240

Introduction

Strategic Report

Business Report

Tier 2 capital

The fully-loaded total capital ratio increased by 0.2 percentage points compared with 31 December 2014. Over 2015, profit accumulation, capital issuances (EUR 1.5 billion T2 issuance and USD 1.5 billion T2 issuance) and a slightly lower RWA level more than compensated for the fact that certain Tier 2 instruments were excluded from the Total Capital calculation. The exclusion applies to Tier 2 instruments that had been issued after year-end 2011 (the CRR cut-off date) and before revocation of the 403 liability statement of ABN AMRO Group (on 1 June 2015) that had been issued on behalf of ABN AMRO Bank. These Tier 2 instruments no longer meet the requirements of the Capital Requirements Regulation (CRR). Furthermore, three other instruments became subject to the grandfathering regime and their Tier 2 eligibility amortises annually.

Risk-weighted assets

The introduction of the CRD IV/CRR transitional rules on 1 January 2014 resulted in a considerable increase in RWA (REA) with an adverse impact on the capital ratios. The increase in RWA (REA) was mainly driven by additional capital requirements for potential mark-to-market counterparty credit risk losses (credit valuation adjustment), exposure to central counterparties, the deferred tax assets related to temporary differences, along with the riskweighting of participations in financial institutions.

Capital ratios are supported by a decrease in group level RWA (REA) compared with December 2014. Total RWA (REA) decreased by EUR 1.6 billion, amounting to EUR 108.0 billion at 31 December 2015, compared with EUR 109.6 billion at 31 December 2014. This decrease was primarily driven by lower credit risk. More information on RWA (REA) is provided in the Risk sections of this report.

Further information on share capital and dividend v Share capital

The share capital remained unchanged in 2015. At 31 December 2015, the authorised share capital amounted to EUR 4,700 million distributed over 4,500 million class A ordinary shares and 200 million class B ordinary shares. The class A and B ordinary shares both have a nominal value of EUR 1.00 each.

At 31 December 2014, issued and paid-up capital amounted to EUR 940 million and consisted of 940 million class A ordinary shares. Further information is provided in note 31 to the Annual Financial Statements.

Dividend

ABN AMRO proposes a final cash dividend of EUR 414 million, or EUR 0.44 per share. Together with the interim cash dividend of EUR 350 million paid in August 2015, this will bring the total dividend to EUR 764 million, or EUR 0.81 per share, and the payout ratio to 40%1 , in line with the target payout ratio for 2015.

A payout ratio of 40% over 2015 is in line with the communicated dividend policy of ABN AMRO. ABN AMRO anticipates an increase in the dividend payout ratio to 50% in 2017, while remaining well positioned to meet fully-loaded Basel III/CRD IV requirements and upcoming regulatory requirements.

241

¹ This is based on reported net profit excluding net reserved coupons for AT1 capital securities and net profit attributable to non-controlling interests.

Capital instruments

Capital instruments b

					31 December 2015	31 December 2014			31 December 2013
(in millions)	ISIN/CUSIP	Maturity date	First possible call date	Nominal amount	Carrying amount	Nominal amount	Carrying amount	Nominal amount	Carrying amount
Tier 1
EUR 1,000 million 4.31%
per annum1	XS0246487457	Perpetual	March 2016	1,000	1,042	1,000	1,077	1,000	1,103
EUR 1,000 million 5.75%			September
per annum	XS1278718686	Perpetual	2020	1,000	993
Total Tier 1 capital instruments				2,000	2,035	1,000	1,077	1,000	1,103
Tier 2
GBP 150 million (originally
GBP 750 million) 5.00%			February
per annum2	XS0244754254	Perpetual	2016	204	213	192	208	179	200
EUR 1,650 million (originally EUR 2,000 million)		October 2017	October 2012			1,650	1,654	1,650	1,654
EUR 1,228 million 6.375%
per annum	XS0619548216	April 2021		1,228	1,489	1,228	1,524	1,228	1,443
USD 595 million 6.250% per annum	XS0619547838	April 2022		546	606	489	543	432	462
USD 113 million 7.75%
per annum	00080QAD7/ N0028HAP0	May 2023		93	101	93	82	82	83
EUR 1,000 million 7.125%
per annum	XS0802995166	July 2022		1,000	1,121	1,000	1,128	1,000	1,024
USD 1,500 million 6.25%		September	September
per annum	XS0827817650	2022	2017	1,377	1,392	1,234	1,246	1,090	1,094
SGD 1,000 million 4.7%		October	October
per annum	XS0848055991	2022	2017	649	640	623	617	575	569
EUR 1,500 million 2.875% per annum	XS1253955469	June 2025	June 2020	1,500	1,537
USD 1,500 million 4.75%
per annum	US00080QAF28	July 2025		1,204	1,250
EUR various smaller
instruments		2015 - 2020		313	316	226	250	281	285
Total Tier 2 capital
instruments				8,113	8,666	6,735	7,251	6,517	6,814
Of which eligible for regulatory capital:
Basel III, Tier 1						800		800
Basel III, Tier 2				4,938		5,502		5,607
Basel III, Excess Tier 1 instrument recognised
as Tier 2 capital				2,000		200

¹ The EUR 1,000 million instrument will be redeemed in full on 10 March 2016. 2 The GBP 150 million instrument will be redeemed in full on 17 February 2016.

242 Introduction

Movements in subordinated liabilities b

	2015	2014	2013
(in millions)	Carrying amount	Carrying amount	Carrying amount
Balance as at 1 January	8,328	7,917	9,736
Issuance	2,839
Redemption	-1,740	-51	-1,497
Foreign exchange differences	271	277	-114
Other	11	185	-209
Balance as at 31 December	9,708	8,328	7,917

Minimum capital requirement

bv9r

The Pillar 1 capital requirement is the absolute minimum amount of capital required to cover the three major risk types that a bank faces: credit risk, operational risk and market risk as determined in the CRD IV Pillar 1 framework.

The following table provides an overview of RWA (REA) and minimum capital requirements per risk type, category of exposure and regulatory approach.

243

Minimum capital requirements bv9r

		Basel III				Basel II
		31 December 2015	31 December 2014		31 December 2013
(in millions)	Capital requirement	RWA (REA)	Capital requirement	RWA (REA)	Capital requirement	RWA (REA)
Credit risk IRB
Central governments and central banks	78	978	162	2,020	42	528
Institutions1	231	2,887	398	4,972	336	4,201
Corporates	3,247	40,592	2,927	36,586	3,122	39,020
Retail	2,130	26,631	2,292	28,646	2,177	27,212
- of which secured by immovable property/retail mortgages	1,622	20,269	1,722	21,521	1,546	19,326
- of which qualifying revolving exposures	240	3,005	296	3,702	296	3,700
-of which other retail	269	3,357	274	3,423	335	4,186
Equities not held for trading	415	5,185	401	5,009	219	2,733
Securitisation positions	7	84	19	237	23	286
Credit valuation adjustment2	88	1,105	101	1,264
Other3)	119	1,491	88	1,099	119	1,490
Total credit risk IRB	6,316	78,953	6,387	79,833	6,038	75,470
Credit risk SA
Central governments and central banks	11	132	12	154	6	80
Institutions1	12	153	28	344	34	425
Corporates	283	3,535	301	3,758	474	5,930
Retail	63	793	78	974	109	1,364
Secured by mortgages on
immovable property	41	510	43	541
Exposures in default	7	88	13	156
Other3)	152	1,900	153	1,907	235	2,932
Total credit risk SA	569	7,110	627	7,834	858	10,731
Other risks
Market risk	457	5,710	465	5,811	512	6,396
- of which Standardised Approach	457	5,710	465	5,811	512	6,396
- of which Internal Model Approach
Operational risk	1,298	16,227	1,293	16,168	1,313	16,415
- of which Standardised Approach	1,298	16,227	1,293	16,168	1,313	16,415
Total other risks	1,755	21,938	1,758	21,979	1,825	22,811
Total	8,640	108,001	8,772	109,647	8,721	109,012

¹ Institutions include exposures to banks and investment companies, regional and local governments and pension funds.

² The 2014 Capital requirement on Credit valuation adjustment has been restated.

³ Other includes non-credit obligations.

244

Risk, funding & capital Report / Risk, funding & capital review / Capital

Main regulatory developments

Basel III/CRD IV 9

The Capital Requirements Directive IV (CRD IV) and the Capital Requirements Regulation (CRR) set the framework for the implementation of Basel III in the European Union. CRD IV and CRR were phased in on 1 January 2014 and are expected to be fully effective by January 2019. ABN AMRO is already managing its regulatory capital adequacy position in anticipation of Basel III fully-loaded requirements. ABN AMRO is compliant with the more restrictive fully-loaded capital requirements.

Basel IV

Also commonly referred to as Basel IV, the Basel Committee on Banking Supervision has presented two consultative documents on a revision of the Standardised Approach and the design of a capital floor framework based on this revised Standardised Approach. This framework will replace the current transitional floor based on the Basel I standard. The aim of the revised capital floor framework is to enhance the reliability and comparability of risk-weighted capital ratios. The revision of the Standardised Approach for Residential Real Estate and SMEs in combination with the revision of the capital floors could lead to a significant risk-weighted assets inflation risk for ABN AMRO.

Regulatory developments, such as the Basel proposal (especially with respect to the risk-weighting of mortgages and corporate loans) and increasing capital requirements set by the regulators, could have a significant impact on the bank's capital position going forward. Hence, ABN AMRO will continue to focus on capital efficiency and further strengthen its capital position.

BRRD

The Bank Recovery and Resolution Directive (BRRD) provides authorities with more comprehensive and effective measures to deal with failing banks. Implementation of BRRD in the European Union began in 2015 and the bail-in framework will be applicable as from January 2016. Implementation of the bail-in framework has led to the introduction of additional loss-absorbing measures, such as the Minimum Requirement for own funds and Eligible Liabilities (MREL).

The Group is monitoring pending regulatory requirements in relation to MREL and aims for at least 8% MREL by year-end 2018 (through subordinated debt and profit retention). The final regulatory requirements for MREL will determine the precise measures to be undertaken to achieve the MREL requirement. At 31 December 2015, the Group had a 6.8% MREL (based on Own Funds and Other subordinated liabilities).

ABN AMRO will continue to issue new capital instruments to further enhance its buffer of loss-absorbing instruments in view of scheduled amortisations, MREL and any other regulatory changes.

Although TLAC is currently not applicable to the bank, ABN AMRO continues to monitor TLAC requirements following the publication of the final terms in November 2015.The final terms for TLAC are considered to be in line with the current ambition to steer MREL to 8%, while further convergence between TLAC and MREL requirements is anticipated.

Impact of CRD IV/CRR fully-loaded rules on capital ratios

	Phase-in	Basel III fully-loaded
31 December 2015
Common Equity Tier 1 capital	16,768	16,695
Common Equity Tier 1 ratio	15.5%	15.5%
Tier 1 capital	18,226	17,688
Tier 1 ratio	16.9%	16.4%
Total regulatory capital	23,431	20,624
Total capital ratio	21.7%	19.1%
RWA (REA)	108,001	108,001
Leverage ratio (CDR)	3.9%	3.8%

Under the CRD IV/CRR fully-loaded rules for capital deductions, prudential filters and RWA (REA), the impact on the capital ratios is as follows:

• Å RWA (REA) are equivalent to those under phase-in rules;
• Å The amount of Common Equity Tier 1 capital is approximately equal to the amount under the phase-in rules since the fully-loaded impact on Common Equity Tier 1 capital deductions is largely neutral;
• Å Total capital is expected to decrease by EUR 2.8 billion, resulting in a decline in the total capital ratio of 2.6 percentage points, from 21.7% to 19.1%. This is primarily due to the loss of eligibility of non-CRR compliant Tier 1 and Tier 2 capital instruments.

The CRR fully-loaded Common Equity Tier 1 ratio at 31 December 2015 was equivalent to the CRR phase-in Common Equity Tier 1 ratio of 15.5%.

Leverage ratio

		31 December 2015	31 December 2014	31 December 2013
(in millions)	Phase-in	Fully-loaded	Fully-loaded	Fully-loaded
Tier 1 capital	18,226	17,688	15,435	14,087
Exposure measure (CDR)
On-balance sheet exposures	390,317	390,317	386,867	372,022
Off-balance sheet items	29,183	29,183	26,702	25,704
On-balance sheet netting	26,621	26,621	37,709	54,336
Derivative exposure	31,541	31,541	-11,783	-2,667
Securities financing exposures	1,317	1,317	1,078	3,746
Other regulatory measures	-14,443	-14,322	-19,262	-11,197
Exposure measure	464,536	464,657	421,311	441,944
Leverage ratio (CDR)	3.9%	3.8%	3.7%	3.2%

The CRR introduced a non-risk based leverage ratio to be monitored until 2017 and to be further refined and calibrated before becoming a binding measure as from 2018. The Commission Delegated Regulation (CDR), applicable since 1 January 2015, amended the leverage ratio definition to enhance comparability of leverage ratio disclosures. The Group aims for at least a 4% leverage ratio by year-end 2018, to be achieved by profit retention, issuance of AT1 instruments and the management of the balance sheet.

At 31 December 2015, the Group had a CDR fully-loaded leverage ratio of 3.8%, up from 3.5% at 30 September 2015. The leverage ratio benefited from an increase in Tier 1 capital through profit accumulation. In addition, the exposure measure fell significantly over the fourth quarter, predominantly due to a decrease in total assets and in clearing guarantees positions.

The fully-loaded CDR leverage ratio at 31 December 2015 increased by 0.1 percentage point compared with the 2014 year-end level of 3.7%. A revised method for calculating the exposure measure for clearing services was implemented in Q2 2015. This revised method led to an exposure measure add-on at 31 December 2015 of approximately EUR 43 billion. If the fully-loaded leverage ratio had been calculated consistently using this revised calculation method (assuming clearing guarantees positions of EUR 43 billion), the leverage ratio would have amounted to 3.3% at 31 December 2014. It is anticipated that BCBS will issue a consultation to revise the methodology (SA-CCR instead of CEM), which might reduce the exposure measure for clearing guarantees again. Adoption of this method is still under discussion.

247

Additional risk, funding & capital disclosures

Additional risk, funding & capital disclosures

The following section includes additional disclosures on risk, funding and capital. This information is provided according to EU IFRS, Pillar 3, EDTF and market discipline. This required information is a supplement to the core analysis provided in the Risk, funding & capital review section and provides additional or more detailed information.

Credit risk exposure b

The following table presents the EU IFRS view on maximum exposure to credit risk. The financial instruments subject to credit risk are presented in accordance with EU IFRS at carrying amounts, without consideration of collateral or other credit enhancements. As such, the table does not represent the Group's risk management view.

Maximum exposure to credit risk EU IFRS b

(in millions)		31 December 2015		31 December 2014		31 December 2013
Cash and balances at central banks		26,195		706		9,523
Financial assets held for trading	1,706		9,017		12,019
Less: equity securities	19		4,946		6,471
Financial assets held for trading		1,687		4,071		5,548
Derivatives		19,138		25,285		14,271
Financial investments	40,542		41,466		28,111
Less: equity instruments	367		225		209
Less: private equities and venture capital	577		246		121
Less: Equity securities	54		78		182
Financial investments		39,543		40,918		27,599
Securities financing		20,062		18,511		18,362
Loans and receivables - banks		15,680		21,680		23,967
Loans and receivables - customers		259,319		261,910		257,028
Other assets	4,925		4,986		5,128
Less: Unit-linked investments	2,543		2,453		2,171
Less: Assets held for sale	32		25		29
Less: Other	452		582		746
Other assets		1,899		1,926		2,182
On-balance sheet maximum exposure to credit risk		383,522		375,007		358,480
Off-balance sheet
Committed credit facilities	21,559		16,164		13,764
Guarantees and other commitments	13,868		15,335		16,103
Revocable credit facilities1)	82,865		78,508		71,657
Off-balance sheet credit facilities and
guarantees		118,292		110,007		101,524
Maximum exposure to credit risk		501,814		485,014		460,004

¹ Although not committed, ABN AMRO has the opinion that revocable credit facilities give rise to credit risk. These are not included as committed credit facilities in note 33.

Maturity distribution by exposure class v

				31 December 2015
(in millions, Exposure at Default)	Less than one year	Between one year and five years	More than five years	Total
Central governments and central banks	34,315	9,635	14,942	58,892
Institutions1	8,583	2,108	3,486	14,177
Corporates	45,375	35,347	18,406	99,128
Retail	10,025	5,152	158,952	174,129
- of which secured by immovable property	1,525	4,028	153,753	159,306
- of which qualifying revolving exposures	3,593		3,185	6,778
- of which other retail	4,907	1,124	2,014	8,045
Securitisation positions			1,125	1,125
Total IRB2	98,298	52,242	196,912	347,452
Total SA3	3,103	1,352	11,113	15,568
Total	101,401	53,594	208,025	363,020
Percentage of total	28%	15%	57%	100%

				31 December 2014
(in millions, Exposure at Default)	Less than one year	Between one year and five years	More than five years	Total
Central governments and central banks	15,478	8,393	18,214	42,085
Institutions1	9,152	2,174	6,965	18,291
Corporates	45,729	29,635	14,487	89,851
Retail	10,698	3,978	158,935	173,611
- of which retail mortgages	1,278	2,942	153,365	157,585
- of which qualifying revolving exposures	3,972		3,162	7,134
- of which other retail	5,448	1,036	2,408	8,892
Securitisation positions	978		1,456	2,434
Total IRB2	82,035	44,180	200,058	326,273
Total SA3	3,726	1,429	13,656	18,811
Total	85,761	45,609	213,714	345,084
Percentage of total	25%	13%	62%	100%

31 December 2013

(in millions, Exposure at Default)	Less than one year	Between one year and five years	More than five years	Total
Central governments and central banks	22,540	8,359	14,121	45,020
Institutions1	11,044	3,992	3,546	18,582
Corporates	41,369	28,186	17,924	87,479
Retail	10,797	3,881	159,520	174,198
- of which retail mortgages	1,225	2,831	153,847	157,903
- of which qualifying revolving exposures	4,262		3,012	7,274
- of which other retail	5,310	1,050	2,661	9,021
Securitisation positions		1,198	1,313	2,511
Total IRB2	85,750	45,616	196,424	327,790
Total SA3	3,657	1,904	7,182	12,743
Total	89,407	47,520	203,606	340,533
Percentage of total	26%	14%	60%	100%

¹ Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.

² Exposure at Default does not include EAD calculated for equities not held for trading and other non-credit obligations.

³ Exposure at Default does not include EAD calculated for other non-credit obligations.

250

Regulatory gross and net exposure by riskweight under the Standardised Approach

These tables provide a breakdown of the regulatory gross and net credit exposure by risk weight for our credit portfolio exposures treated under the Standardised Approach, according to Basel-defined exposure classes.

SA approach: regulatory gross and net credit exposure by risk-weight v

										31 December 2015
(in millions, Exposure at Default)	Risk weight	0%	2%	10%	20%	35%	50%	75%	100%	150%	Other risk weights	Total EAD
Regulatory gross exposure
Central governments and central banks		2,786							114		78	2,979
Institutions1			4,094		255						136	4,485
Corporates								3	6,085	1	865	6,953
Retail								5,041			576	5,617
Covered bonds
Secured by real estate						418			6		2,434	2,858
Exposures in default									602	66		668
Other		621							728		3,305	4,654
Total2		3,407	4,094		255	418		5,043	7,534	66	7,395	28,213

¹ Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.

² Exposure at Default does not include EAD calculated for other non-credit obligations.

				31 December 2015
(in millions, Exposure at Default)	Risk weight	0%	2%	10%	20%	35%	50%	75%	100%	150%	Other risk weights	Total EAD	Total RWA (REA)
Regulatory net exposure
Central governments and central banks		2,805							114		39	2,958	132
Institutions1			4,094		254						45	4,393	153
Corporates						19		2	3,076		865	3,962	3,535
Retail								818			540	1,358	793
Covered bonds
Secured by real estate						393			5		2,434	2,832	510
Exposures in default									19	46		65	88
Other		621							728		2,307	3,655	1,900
Total SA2		3,426	4,094		254	413		820	3,942	46	6,228	19,223	7,110

¹ Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.

² Exposure at Default does not include EAD calculated for other non-credit obligations.

Strategic Report

251

Introduction

SA approach: regulatory gross and net credit exposure by risk-weight v

										31 December 2014
(in millions, Exposure at Default)	Risk weight	0%	10%	20%	35%	50%	75%	100%	150%	200%	Total EAD
Regulatory gross exposure
Central governments and central banks		2,414		60				144			2,618
Institutions1		5,280		826	91	54	6		1		6,259
Corporates					290	308	590	5,272			6,459
Retail					418	27	5,479	68			5,993
Covered bonds
Secured by real estate					581			5			587
Exposures in default								595	95		690
Other		488		239	620	415		3,556	53		5,371
Total2	8,182			1,125	2,001	804	6,076	9,639	149		27,976

¹ Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.

² Exposure at Default does not include EAD calculated for other non-credit obligations.

								31 December 2014
(in millions, Exposure at Default)	Risk weight 0%	10%	20%	35%	50%	75%	100%	150%	Total 200% EAD	Total RWA (REA)
Regulatory net exposure
Central governments and central
banks	2,413		48				144		2,606	154
Institutions1	5,282	2	853	90	52	6		1	6,286	344
Corporates		44 21	44	401	894	392	2,810	1	4,606	3,758
Retail		820	226	389	300	755	1		2,490	974
Covered bonds
Secured by real estate		1,296	843	562			5		2,706	541
Exposures in default							38	79	117	156
Other	-230	1,044	233	774	737		617	53	3,228	1,907
Total SA2	7,509	3,183	2,248	2,215	1,982	1,153	3,614	134	22,039	7,834

¹ Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.

² Exposure at Default does not include EAD calculated for other non-credit obligations.

252

(in millions, Exposure at Default)	Risk weight	0%	10%	20%	35%	50%	75%	100%	150%	200%	Total EAD
Regulatory gross exposure
Central governments and central banks		119	118					65			302
Institutions1			889	749		77		3			1,718
Corporates			51	25	346	1,005	111	8,636	75	1	10,250
Retail			687	1,014	716	422	5,899	97	14		8,849
- of which retail mortgages			687	838	716	24		48	1		2,314
- of which qualifying revolving exposures
- of which other retail				176		398	5,899	49	13		6,535
Securitisation positions
Total2		119	1,745	1,788	1,062	1,504	6,010	8,801	89	1	21,119

31 December 2013

¹ Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.

² Exposure at Default does not include EAD calculated for other non-credit obligations.

												31 December 2013
(in millions, Exposure at Default)	Risk weight	0%	10%	20%	35%	50%	75%	100%	150%	200%	Total EAD	Total RWA (REA)
Regulatory net exposure
Central governments and central banks		155	120					65			340	80
Institutions1			936	879	94	187	12	8			2,116	425
Corporates			51	25	299	1,062	111	5,034	55	1	6,638	5,930
Retail			687	1,062	688	395	781	26	10		3,649	1,364
- of which retail mortgages			687	886	688			1			2,262	497
- of which qualifying revolving exposures
- of which other retail				176		395	781	25	10		1,387	867
Securitisation positions
Other		190	975	312	1,029	2,843	53	895		2	6,299	2,932
Total SA2		345	2,769	2,278	2,110	4,487	957	6,028	65	3	19,042	10,731

¹ Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.

² Exposure at Default does not include EAD calculated for other non-credit obligations.

Credit quality by exposure class under the Internal Ratings-Based approach vt

The following tables provide an overview of EAD, REA and LGD buckets by exposure class and grade category. Introduction

253

IRB approach: credit quality by exposure class vt

							31 December 2015
		Total			LGD 0% - 20%	LGD 20% - 50%	LGD >50%
				RWA (REA)/
(in millions)		EAD	RWA (REA)	EAD	EAD (%)	EAD (%)	EAD (%)
Exposure class	Grade category
Central governments and	Investment grade	58,769	746	1%	41%	54%	5%
central banks	Sub-investment grade	123	232	189%		75%	25%
	Default without provision
	Default with provision
	Total	58,892	978	2%	41%	54%	5%
Institutions1	Investment grade	13,804	2,337	17%	19%	77%	4%
	Sub-investment grade	351	548	156%	8%	81%	11%
	Default without provision	11	2	18%	100%
	Default with provision	10		1%	53%		47%
	Total	14,177	2,887	20%	19%	77%	4%
Corporates	Investment grade	37,131	9,147	25%	39%	57%	4%
	Sub-investment grade	56,787	25,674	45%	78%	22%
	Default without provision	961	486	51%	99%	1%
	Default with provision	4,250	5,285	124%	2%	53%	45%
	Total	99,128	40,592	41%	60%	36%	3%
Retail	Investment grade	140,275	8,986	6%	81%	17%	2%
	Sub-investment grade	31,295	13,469	43%	57%	31%	12%
	Default without provision
	Default with provision	2,559	4,175	163%	5%	76%	19%
	Total	174,129	26,631	15%	76%	20%	4%
Securitisation positions	Investment grade	1,125	84	7%	100%
	Sub-investment grade
	Default without provision
	Default with provision
	Total	1,125	84	7%	100%	0%	0%
Credit valuation
adjustment	Investment grade		318
	Sub-investment grade		787
	Default without provision
	Default with provision
	Total		1,105
Total	Investment grade	251,105	21,618	9%	62%	35%	3%
	Sub-investment grade	88,556	40,710	46%	70%	26%	4%
	Default without provision	972	488	50%	99%	1%	0%
	Default with provision	6,819	9,460	139%	3%	62%	35%
	Total2	347,452	72,277	21%	63%	33%	4%

¹ Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.

² Exposure at Default does not include EAD calculated for equities not held for trading and other non-credit obligations.

254

IRB approach: credit quality by exposure class vt

							31 December 2014
		Total			LGD 0% - 20%	LGD 20% - 50%	LGD >50%
(in millions)		EAD	REA	RWA (REA)/ EAD	EAD (%)	EAD (%)	EAD (%)
Exposure class	Grade category
Central governments and	Investment grade	41,815	1,946	5%	63%	37%
central banks	Sub-investment grade	270	63	23%		98%	2%
	Default without provision
	Default with provision		11
	Total	42,085	2,020	5%	63%	37%	0%
Institutions1)	Investment grade	17,867	4,584	26%	37%	55%	8%
	Sub-investment grade	418	388	93%		66%	34%
	Default without provision	7		0%	100%
	Default with provision
	Total	18,291	4,972	27%	36%	55%	9%
Corporates	Investment grade	33,899	7,437	22%	43%	54%	3%
	Sub-investment grade	50,658	24,575	49%		72%	28%
	Default without provision	1,070	467	44%	100%
	Default with provision	4,224	4,107	97%	17%	35%	48%
	Total	89,851	36,586	41%	18%	63%	19%
Retail	Investment grade	135,157	10,991	8%	78%	20%	2%
	Sub-investment grade	35,258	13,222	38%	64%	23%	13%
	Default without provision
	Default with provision	3,196	4,434	139%	5%	77%	18%
	Total	173,611	28,646	17%	74%	22%	5%
Securitisation positions	Investment grade	2,434	237	10%	100%
	Sub-investment grade
	Default without provision
	Default with provision
	Total	2,434	237	10%	100%	0%	0%
Credit valuation
adjustment	Investment grade
	Sub-investment grade		1,264
	Default without provision
	Default with provision
	Total		1,264
Total	Investment grade	231,172	25,196	11%	67%	31%	2%
	Sub-investment grade	86,604	39,512	46%	26%	52%	22%
	Default without provision	1,077	467	43%	100%	0%	0%
	Default with provision	7,420	8,552	115%	12%	53%	35%
	Total2	326,273	73,726	23%	55%	37%	8%

¹ Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.

² Exposure at Default does not include EAD calculated for equities not held for trading and other non-credit obligations.

255

		Total			LGD 0% - 20%	LGD 20% - 50%	LGD > 50%
(in millions)		EAD	RWA	RWA (REA)/ EAD	EAD (%)	EAD (%)	EAD (%)
Exposure class	Grade category
Central governments and	Investment grade	44,998	474	1%	76%	24%
central banks	Sub-investment grade	22	54	245%			100%
	Default without provision
	Default with provision
	Total	45,020	528	1%	76%	24%	0%
Institutions1	Investment grade	17,811	3,521	20%	7%	79%	14%
	Sub-investment grade	763	673	88%	3%	76%	21%
	Default without provision
	Default with provision	8	7	88%		100%
	Total	18,582	4,201	23%	7%	79%	14%
Corporates	Investment grade	28,999	7,820	27%	26%	70%	4%
	Sub-investment grade	52,775	26,949	51%	57%	43%
	Default without provision	1,290	2,567	199%	75%	25%
	Default with provision	4,415	1,684	38%	14%	86%
	Total	87,479	39,020	45%	45%	54%	1%
Retail	Investment grade	135,764	8,050	6%	78%	21%	1%
	Sub-investment grade	35,202	14,742	42%	59%	28%	13%
	Default without provision
	Default with provision	3,232	4,420	137%	72%	28%
	Total	174,198	27,212	16%	74%	23%	3%
Securitisation positions	Investment grade	2,511	286	11%	100%
	Sub-investment grade
	Default without provision
	Default with provision
	Total	2,511	286	11%	100%	0%	0%
Total	Investment grade	230,083	20,151	9%	66%	32%	2%
	Sub-investment grade	88,762	42,418	48%	57%	37%	6%
	Default without provision	1,290	2,567	199%	75%	25%	0%
	Default with provision	7,655	6,111	80%	38%	62%	0%
	Total2	327,790	71,247	22%	63%	34%	3%

¹ Institutions include exposures to banks and investment undertakings, regional governments and local authorities, and pension funds.

² Exposure at Default does not include EAD calculated for equities not held for trading and other non-credit obligations.

31 December 2013

256

European exposures

European government and government-guaranteed exposures b

			31 December 2015		31 December 2014		31 December 2013
(in billions)	Government	Government guaranteed	Gross carrying amount	Government	Gross Government carrying guaranteed amount	Government	Government guaranteed	Gross carrying amount
Netherlands	8.5		8.5	10.5	10.5	11.2		11.2
France	4.7		4.7	4.9	4.9	5.1		5.1
Germany	4.5		4.5	4.5	4.5	2.4		2.4
Austria	1.8		1.8	2.0	2.0	1.6		1.6
Belgium	3.2		3.2	3.2	3.2	2.6		2.6
European Union	1.6		1.6	1.6	1.6	1.3		1.3
Finland	2.1		2.1	2.2	2.2	1.1		1.1
Italy	0.4		0.4	1.0	1.0	0.5		0.5
Denmark	0.3		0.3	0.2	0.2	0.2		0.2
Poland	0.4		0.4	0.4	0.4	0.3		0.3
United Kingdom	0.3		0.3	0.3	0.3	0.2		0.2
Spain	0.6		0.6	0.6	0.6	0.2		0.2
Luxembourg	0.1		0.1	0.2	0.2	0.1		0.1
Sweden	0.4		0.4	0.3	0.3	0.1		0.1
Switzerland				0.6	0.6	0.3		0.3
Total	29.0		29.0	32.6	32.6	27.2		27.2

Specific products and types of financing v Exposure at Default for equities not held for trading v

	31 December 2015			31 December 2014		31 December 2013
(in millions, Exposure at Default)	EAD	RWA (REA)	EAD	RWA (REA)	EAD	RWA (REA)
IRB - Private equity (190%)	645	1,226	588	1,118	329	625
IRB - Equity exposures subjected to risk weighting (250%)		1,949		1,985
IRB - Exchanged traded (290%)	98	287	95	275	243	705
IRB - Other equity (370%)	465	1,723	441	1,631	379	1,403
Total	1,208	5,185	1,124	5,009	951	2,733

Exposure at Default for OTC derivatives v

(in millions, Exposure at Default)	31 December 2015	31 December 2014	31 December 2013
Gross positive fair value1	45,135	52,974	13,642
Add: Potential future exposure add-on	11,369	11,607	5,187
Gross Exposure at Default	56,504	64,581	18,829
Less: Netting benefits Less: Collateral held	45,541 3,950	51,079	9,689 138
Net Exposure at Default	7,012	13,502	9,002

¹ Due to the implementation of CRD IV/CRR derivative exposures to central counterparties (CCP) are included as from 2014.

257

Additional information on forborne, past due and impaired loans

Forbearance credit quality b

	31 December 2015
(in millions)	Total forborne assets	Forborne assets not past due and not impaired	Forborne assets past due but not impaired	Impaired forborne assets	Specific allowance	Collective allowance	Total allowance
Loans and receivables - banks
Loans and receivables - customers
Residential mortgages	1,757	1,101	394	263	27	36	63
Consumer loans	648	419	106	123	31	27	57
Corporate loans	6,276	4,159	337	1,780	764	73	837
Other loans and receivables - customers	383	168	60	156	36		36
Total Loans and receivables - customers	9,065	5,847	897	2,321	857	136	993
Total	9,065	5,847	897	2,321	857	136	993

Forbearance credit quality b

	31 December 2014
(in millions)	Total forborne assets	Forborne assets not past due and not impaired	Forborne assets past due but not impaired	Impaired forborne assets	Specific allowance	Collective allowance	Total allowance
Loans and receivables - banks
Loans and receivables - customers
Residential mortgages	1,814	872	490	453	28	81	109
Other consumer loans	470	270	65	135	23	41	64
Corporate loans	6,698	4,295	500	1,903	824	59	883
Other loans and receivables - customers	92	30	33	29	8		8
Total Loans and receivables - customers	9,074	5,466	1,088	2,520	884	181	1,065
Total	9,074	5,466	1,088	2,520	884	181	1,065

Forbearance credit quality b

							31 December 2013
(in millions)	Total forborne assets	Forborne assets not past due and not impaired	Forborne assets past due but not impaired	Impaired forborne assets	Specific allowance	Collective allowance	Total allowance
Loans and receivables - banks
Loans and receivables - customers
Residential mortgages	2,421	589	401	1,431	20	430	450
Other consumer loans	337	244	6	87	9	26	35
Corporate loans	6,273	4,433	194	1,646	754	57	811
Other loans and receivables - customers	160	25	135
Total Loans and receivables - customers	9,191	5,291	736	3,164	783	513	1,296
Total	9,191	5,291	736	3,164	783	513	1,296

Introduction

Risk, funding & capital Report / Additional risk, funding & capital disclosures

Forborne assets by geography b

	31 December 2015
(in millions)	The Netherlands	Rest of Europe	USA	Asia	Rest of the world	Total
Loans and receivables - banks
Loans and receivables - customers
Residential mortgages	1,722	32			2	1,757
Consumer loans	603	43		1	1	648
Corporate loans	5,167	402	72	188	447	6,276
Other loans and receivables - customers	361	23				383
Total Loans and receivables
- customers	7,853	500	72	189	451	9,065
Total	7,853	500	72	189	451	9,065

Forborne assets by geography b

	31 December 2014
(in millions)	The Netherlands	Rest of Europe	USA	Asia	Rest of the world	Total
Loans and receivables - banks
Loans and receivables - customers
Residential mortgages	1,770	30			14	1,814
Other consumer loans	456	13				470
Corporate loans	5,812	464	17	104	300	6,698
Other loans and receivables - customers	81	11				92
Total Loans and receivables - customers	8,120	518	17	104	314	9,074
Total	8,120	518	17	104	314	9,074

Forborne assets by geography b

		31 December 2013
(in millions)	The Netherlands	Rest of Europe	USA	Asia	Rest of the world	Total
Loans and receivables - banks
Loans and receivables - customers
Residential mortgages	2,331	90				2,421
Other consumer loans	316	20			1	337
Corporate loans	5,380	516	15	46	316	6,273
Other loans and receivables - customers	138	22				160
Total Loans and receivables
- customers	8,165	648	15	46	317	9,191
Total	8,165	648	15	46	317	9,191

259

Risk, funding & capital Report / Additional risk, funding & capital disclosures

Forborne assets by business segment b

(in millions)	31 December 2015	31 December 2014	31 December 2013
Retail Banking	2,157	2,092	2,536
Private Banking	375	276	311
Corporate Banking	6,533	6,706	6,344
Total	9,065	9,074	9,191

Maturity of impaired exposures

					31 December 2015
(in millions)	Gross carrying amount	Impaired exposures	<= one year impaired	>one year & <= five years impaired	> five years impaired
Securities financing	20,073	11			11
Loans and receivables - banks	15,682	2		2
Loans and receivables - customers
Residential mortgages1	146,932	1,031	732	288	12
Consumer loans2	15,147	860	243	586	31
Corporate loans1	84,864	4,872	1,301	2,740	831
Other loans and receivables - customers1, 3	11,881	210	57	138	14
Total Loans and receivables
- customers	258,824	6,973	2,334	3,752	887
Other assets	1,903	9	4	4	1
Total on-balance sheet	296,482	6,994	2,338	3,757	898
Total off-balance sheet	118,300	22	21	1
Total	414,782	7,016	2,358	3,759	899

¹ Carrying amount excludes fair value adjustment from hedge accounting.

² Consumer loans in the programme lending portfolio that are more than 90 days due are immediately impaired.

³ Other loans and receivables - customers consist of Government and official institutions, Financial lease receivables and factoring.

Maturity of impaired exposures

					31 December 2014
(in millions)	Gross carrying amount	Impaired exposures	<= one year impaired	>one year & <= five years impaired	> five years impaired
Securities financing	18,521	10			10
Loans and receivables - banks	21,680
Loans and receivables - customers
Residential mortgages1	148,402	1,478	1,038	426	13
Consumer loans2	16,052	868	320	490	57
Corporate loans1	84,694	4,989	1,515	2,666	809
Other loans and receivables - customers1, 3	11,799	265	67	184	14
Total Loans and receivables - customers	260,947	7,601	2,941	3,766	894
Other assets	1,932	12	12
Total on-balance sheet	303,080	7,622	2,952	3,766	904
Total off-balance sheet	110,011	9	9
Total	413,092	7,632	2,962	3,766	904

¹ Carrying amount excludes fair value adjustment from hedge accounting.

² Consumer loans in the programme lending portfolio that are more than 90 days due are immediately impaired.

³ Other loans and receivables - customers consist of Government and official institutions, Financial lease receivables and factoring.

					31 December 2013
(in millions)	Gross carrying amount	Impaired exposures	<= one year impaired	>one year & <= five years impaired	> five years impaired
Securities financing	18,386	23		23
Loans and receivables - banks	23,967
Loans and receivables - customers
Residential mortgages1	150,493	1,739	1,273	451	15
Consumer loans2	16,241	887	449	415	23
Corporate loans1	83,462	5,038	1,729	2,745	564
Other loans and receivables - customers1, 3	7,408	137	57	71	9
Total Loans and receivables - customers	257,604	7,801	3,508	3,682	611
Other assets	2,187	13	13
Total on-balance sheet	302,144	7,837	3,521	3,705	611
Total off-balance sheet	101,525	8	8
Total	403,669	7,845	3,529	3,705	611

¹ Carrying amount excludes fair value adjustment from hedge accounting.

² Consumer loans in the programme lending portfolio that are more than 90 days due are immediately impaired.

³ Other loans and receivables - customers consist of Government and official institutions, Financial lease receivables and factoring.

Maturity of allowances for impairments for identified credit risk

	31 December 2015
(in millions)	Impaired exposures	Allowances for Impairments for identified credit risk	<= one year impaired	>one year & <= five years impaired	> five years impaired
Securities financing	11	-11			-11
Loans and receivables - banks	2	-2		-2
Loans and receivables - customers
Residential mortgages1	1,031	-245	-160	-78	-7
Consumer loans2	860	-471	-140	-312	-19
Corporate loans1	4,872	-3,098	-625	-1,708	-764
Other loans and receivables - customers1, 3	210	-78	-21	-49	-9
Total Loans and receivables - customers	6,973	-3,892	-946	-2,147	-800
Other assets	9	-4	-2	-1	-1
Total on-balance sheet	6,994	-3,908	-948	-2,150	-811
Total off-balance sheet	22
Total	7,016	-3,909	-948	-2,150	-811

¹ Carrying amount excludes fair value adjustment from hedge accounting.

² Consumer loans in the programme lending portfolio that are more than 90 days due are immediately impaired.

³ Other loans and receivables - customers consist of Government and official institutions, Financial lease receivables and factoring.

Maturity of allowances for impairments for identified credit risk

			31 December 2014
(in millions)	Impaired exposures	Allowances for Impairments for identified credit risk	<= one year impaired	>one year & <= five years impaired	> five years impaired
Securities financing	10	-10			-10
Loans and receivables - banks
Loans and receivables - customers
Residential mortgages1	1,478	-408	-266	-132	-10
Consumer loans2	868	-533	-158	-338	-37
Corporate loans1	4,989	-3,017	-711	-1,611	-696
Other loans and receivables - customers1, 3	265	-115	-48	-56	-11
Total Loans and receivables - customers	7,601	-4,073	-1,184	-2,136	-753
Other assets	12	-5	-5
Total on-balance sheet	7,622	-4,088	-1,189	-2,136	-763
Total off-balance sheet	9
Total	7,632	-4,089	-1,189	-2,136	-763

¹ Carrying amount excludes fair value adjustment from hedge accounting.

² Consumer loans in the programme lending portfolio that are more than 90 days due are immediately impaired.

³ Other loans and receivables - customers consist of Government and official institutions, Financial lease receivables and factoring.

262

(in millions)	Impaired exposures	Allowances for Impairments for identified credit risk	<= one year impaired	>one year & <= five years impaired	> five years impaired
Securities financing	23	-23		-23
Loans and receivables - banks
Loans and receivables - customers
Residential mortgages1	1,739	-472	-316	-147	-9
Consumer loans2	887	-512	-216	-283	-13
Corporate loans1	5,038	-3,237	-906	-1,779	-552
Other loans and receivables - customers1, 3	137	-86	-22	-57	-7
Total Loans and receivables - customers	7,801	-4,307	-1,460	-2,266	-581
Other assets	13	-5	-5
Total on-balance sheet	7,837	-4,335	-1,465	-2,289	-581
Total off-balance sheet	8
Total	7,845	-4,335	-1,465	-2,289	-581

31 December 2013

¹ Carrying amount excludes fair value adjustment from hedge accounting.

² Consumer loans in the programme lending portfolio that are more than 90 days due are immediately impaired.

³ Other loans and receivables - customers consist of Government and official institutions, Financial lease receivables and factoring.

Maturity overview of assets and liabilities

bp

The following table shows the financial assets and liabilities arranged by the earliest possible contractual maturity. This picture is not consistent with how we view and manage liquidity, as it does not take expected client behaviour and other factors into account. Most notably,

this table does not reflect prepayment of mortgages and other loans and the fact that the behavioural maturities of client deposits are not in line with the contractual maturities. Financial investments relate to the liquidity buffer and can be liquidated quickly despite the longer contractual maturity.

263

Contractual maturity of assets and liabilities bp

									31 December 2015
(in millions)	Up to one month	Between one and three months	Between three and six months	Between six and twelve months	Between one and two years	Between two and five years	More than five years	Maturity not applicable	Total
Assets
Cash and balances at central banks	26,195								26,195
Financial assets held for trading1	1,706								1,706
Derivatives	720	845	349	409	1,192	3,847	11,777		19,138
Financial investments	980	3,898	1,924	1,028	3,050	9,039	19,641	981	40,542
Securities financing	17,006	2,335	96			625			20,062
Loans and receivables - banks2	5,192	2,151	198	205	413	291	7,229		15,680
Loans and receivables - customers2	27,306	6,645	2,623	7,362	29,267	21,090	165,026		259,319
Other assets1	3,463	44	6	33	350	211	1,116	2,454	7,676
Total assets	82,568	15,918	5,195	9,037	34,272	35,104	204,789		3,435 390,317
Liabilities
Financial liabilities held for trading1	459								459
Derivatives	743	793	423	387	1,175	3,291	15,613		22,425
Securities financing	10,252	79	1		1,028	11			11,372
Due to banks2	4,342	1,077	541	401	32	4,446	3,790		14,630
Due to customers2	203,662	16,514	1,751	2,240	924	1,495	3,710		230,297
Issued debt	4,745	6,045	4,340	4,472	11,015	21,570	24,020		76,207
- of which senior secured			135	439	2,282	6,664	16,436		25,956
- of which senior unsecured	1,325	649	3,331	3,301	7,628	13,607	7,563		37,404
- of which securitisation				600	1,100	1,250	18		2,968
- of which other	3,420	5,396	874	132	5	49	3		9,879
Subordinated liabilities			5		82	114	9,507		9,708
Other liabilities1	2,581	681	287	525	663	7	181	2,710	7,635
Total liabilities	226,784	25,190	7,348	8,025	14,919	30,934	56,822		2,710 372,733
Total equity								17,584	17,584
Total liablities and equity	226,784	25,190	7,348	8,025	14,919	30,934	56,822		20,295 390,317
Off-balance sheet liabilities
Committed credit facilities	21,559								21,559
Guarantees	2,440								2,440
Irrevocable facilities	5,737								5,737
Recourse risks arising from discounted bills	5,691								5,691
Total off-balance sheet liablities	35,427								35,427

¹ Excluding Derivatives.

² Excluding Securities financing.

Introduction

Contractual maturity of assets and liabilities bp

									31 December 2014
(in millions)	Up to one month	Between one and three months	Between three and six months	Between six and twelve months	Between one and two years	Between two and five years	More than five years	Maturity not applica ble	Total
Assets
Cash and balances at central banks	706								706
Financial assets held for trading1	9,017								9,017
Derivatives	19,826	11	34	293	167	959	3,995		25,285
Financial investments	637	1,336	4,119	3,399	2,510	8,305	20,628	531	41,466
Securities financing	14,856	2,316	628		96	615			18,511
Loans and receivables - banks2	10,672	556	262	402	154	331	9,303		21,680
Loans and receivables - customers2	18,218	13,324	3,788	14,468	20,952	21,307	169,851		261,910
Other assets1	2,978	199	1,585	596	223	205	1,393	1,112	8,292
Total assets	76,911	17,742	10,417	19,158	24,101	31,723	205,171	1,643	386,867
Liabilities Financial liabilities held for trading1
Derivatives	3,759 18,262	20	71	145	387	1,813	9,750		3,759 30,449
Securities financing	11,285	1,551	82			1,000			13,918
Due to banks2	5,910	925	441	258	105	4,372	3,732		15,744
Due to customers2	193,014	11,564	1,957	2,314	1,577	1,681	3,904		216,011
Issued debt	3,499	8,195	3,688	4,995	11,554	21,340	23,859		77,131
- of which senior secured				2,961	558	6,387	17,171		27,077
- of which senior unsecured	1,139	2,172	473	782	8,396	12,603	6,687		32,252
- of which securitisation		3,171	378	500	2,600	2,350			9,000
- of which other	2,360	2,852	2,837	753					8,802
Subordinated liabilities	3				1,304	3,605	3,415		8,328
Other liabilities1	1,969	150	439	479	580	5	335	2,695	6,652
Total liabilities	237,701	22,405	6,679	8,191	15,508	33,816	44,995	2,695	371,990
Total equity								14,877	14,877
Total liabilities and equity	237,701	22,405	6,679	8,191	15,508	33,816	44,995	17,572	386,867
Off-balance sheet liabilities
Committed credit facilities	16,164								16,164
Guarantees	2,592								2,592
Irrevocable facilities	5,499								5,499
Recourse risks arising from discounted bills	7,243								7,243
Total off-balance sheet liablities	31,498								31,498

¹ Excluding Derivatives.

² Excluding Securities financing.

Contractual maturity of assets and liabilities bp

									31 December 2013
(in millions)	Up to one month	Between one and three months	Between three and six months	Between six and twelve months	Between one and two years	Between two and five years	More than five years	Maturity not applica ble	Total
Assets
Cash and balances at central banks	9,523								9,523
Financial assets held for trading1	12,019								12,019
Derivatives	11,880	11	19	48	354	631	1,328		14,271
Financial investments	455	935	610	1,302	2,173	6,761	15,374	501	28,111
Securities financing	14,593	1,959	869	301		98	542		18,362
Loans and receivables - banks2	16,448	491	227	133	18	137	6,513		23,967
Loans and receivables - customers2	21,809	7,790	1,799	12,809	24,799	20,324	167,698		257,028
Other assets1	2,335	79	109	583	51	176	1,687	3,721	8,741
Total assets	89,062	11,265	3,633	15,176	27,395	28,127	193,142	4,222	372,022
Liabilities
Financial liabilities held for trading1	4,399								4,399
Derivatives	9,863	15	33	47	318	1,710	5,241		17,227
Securities financing	9,449	321	1,460	1	25	1,002	8		12,266
Due to banks2	6,035	2,576	390	180	251	166	2,028		11,626
Due to customers2	182,749	13,606	2,176	1,684	884	2,250	4,235		207,584
Issued debt	6,974	7,720	7,156	8,869	11,715	22,007	24,241		88,682
- of which senior secured			75	2,071	3,006	5,016	15,745		25,913
- of which senior unsecured	3,918	350	2,309	4,103	4,477	12,050	7,306		34,513
- of which securitisation		2,040	40	80	4,221	4,930	982		12,293
- of which other	3,056	5,330	4,732	2,615	11	11	208		15,963
Subordinated liabilities		51			3	3,053	4,810		7,917
Other liabilities1	1,017	2,489	881	795	4	5	698	2,864	8,753
Total liabilities	220,486	26,778	12,096	11,576	13,200	30,193	41,261	2,864	358,454
Total equity								13,568	13,568
Total liabilities and equity	220,486	26,778	12,096	11,576	13,200	30,193	41,261	16,432	372,022
Off-balance sheet liabilities
Committed credit facilities	13,764								13,764
Guarantees	3,534								3,534
Irrevocable facilities	5,415								5,415
Recourse risks arising from discounted bills	7,154								7,154
Total off-balance sheet liablities	29,867								29,867

¹ Excluding Derivatives. ² Excluding Securities financing.

The following table provides a maturity analysis of the earliest contractual undiscounted cash flows for financial assets and liabilities. Financial assets and liabilities held for trading are recorded under On demand, at fair value. We believe this best represents the short-term nature and the cash flows of these activities. The contractual maturity of the instruments may be extended over significantly longer periods.

266

Introduction

Maturity based on contractual undiscounted cash flows b

											31 December 2015
		Trad		Between	Between	Between	Between	Between
		ing	Up to	one and	three	six and	one and	two and	More	No
(in millions)	On demand	deriv atives	one month	three months	and six months	twelve months	two years	five years	than five years	matu rity	Total
Assets:
Cash and balances at central banks	26,195										26,195
Financial assets held for trading1	1,706										1,706
Derivatives		223	275	393	541	889	1,923	4,184	4,083	77	12,588
Financial investments	50		957	4,003	2,157	1,448	3,769	10,613	20,810	981	44,789
Securities financing	12,781		4,227	2,339	98	4	8	639			20,097
Loans and receivables - banks2	2,859		2,340	2,174	246	294	571	657	7,591		16,731
Loans and receivables - customers2	13,885		13,798	8,062	6,067	13,697	39,657	44,637	186,843		326,644
Other assets	2,570		894	46	11	43	365	245	1,147	2,377	7,698
Total undiscounted assets	60,046		223 22,491	17,016	9,120	16,376	46,292		60,975 220,473 3,435 456,446
Gross settled derivatives not held for trading:
Contractual amounts receivable			33	41	41	107	190	355	184		951
Contractual amounts payable			3	9	6	15	26	50	10		120
Total undiscounted gross settled derivatives not held for trading			30	32	35	92	165	305	174		832
Net settled derivatives not held for trading			245	362	506	797	1,756	3,878	3,836		11,379
Liabilities:
Financial liabilities held for trading1	459										459
Derivatives		249	258	203	507	902	1,698	3,465	8,230	1,313	16,824
Securities financing	9,521		732	81	5	6	1,029	11			11,385
Due to banks2	1,979		2,371	1,100	590	490	197	4,795	3,972		15,493
Due to customers2	147,728		55,963	16,546	1,784	2,285	992	1,643	3,824		230,765
Issued debt	2,082		2,726	6,284	4,879	5,403	12,430	24,553	25,775		84,132
Subordinated liabilities			20	79	201	374	784	1,749	11,165		14,372
Other liabilities	1,218		1,364	682	288	527	664	8	182	2,710	7,642
Total liabilities	162,987		249 63,433	24,974	8,256	9,986	17,794	36,223			53,148 4,023 381,073
Gross settled derivatives
not held for trading:
Contractual amounts receivable							1	3	1		6
Contractual amounts payable			10	3	11	68	88	66	16		260
Total undiscounted gross settled derivatives not held for trading			10	2	11	67	86	63	15		254
Net settled derivatives not held for trading			248	201	481	794	1,547	3,340	7,084		13,695
Net liquidity gap	-102,941		-26 -40,941	-7,958	864	6,390	28,498		24,751 167,325	-588	75,373
Off balance sheet liabilities
Committed credit facilities	21,559										21,559
Guarantees	2,440										2,440
Irrevocable facilities	5,737										5,737
Recourse risks arising
from discounted bills	5,691										5,691
Total off-balance sheet liabilities	35,427										35,427

¹ Excluding Derivatives.

² Excluding Securities financing.

Maturity based on contractual undiscounted cash flows b

		31 December 2014
(in millions)	On demand	Trad ing deriv atives	Up to one month	Between one and three months	Between three and six months	Between six and twelve months	Between one and two years	Between two and five years	More than five years	No matu rity	Total
Assets:
Cash and balances at central banks	611		95								706
Financial assets held for trading1	9,017										9,017
Derivatives		19,730	84	219	83	582	786	1,857	2,195		25,535
Financial investments			668	1,456	4,395	3,857	3,294	10,036	22,499		46,205
Securities financing	126		14,740	2,323	634	8	109	639			18,579
Loans and receivables - banks2	8,372		2,305	574	304	479	296	660	9,630		22,620
Loans and receivables - customers2)	315		18,331	14,899	7,530	21,165	32,294	47,090	193,785		335,411
Other assets	352		2,627	203	1,592	604	235	234	1,419	1,113	8,380
Total undiscounted assets	18,794 19,730		38,851	19,674	14,539	26,694	37,014	60,515	229,529	1,113	466,453
Gross settled derivatives not held for trading:
Contractual amounts receivable			25	42	29	77	142	301	174		790
Contractual amounts payable			6	13	17	28	57	110	29		260
Total undiscounted gross settled derivatives not held for trading Net settled derivatives not held for			19	28	12	49	85	191	145		530
trading			65	191	58	529	693	1,653	1,990		5,178
Liabilities:
Financial liabilities held for trading1	3,759										3,759
Derivatives		18,203	115	162	475	593	1,163	2,562	6,323		29,597
Securities financing	49		11,243	1,555	88	10	19	1,036			13,999
Due to banks2	1,974		3,943	946	489	345	267	4,712	3,910		16,586
Due to customers2	64,330		128,752	11,600	2,003	2,378	1,668	1,878	4,053		216,662
Issued debt	63		3,512	8,477	4,312	6,072	13,169	24,741	25,864		86,210
Subordinated liabilities			19	62	156	296	1,781	4,602	3,949		10,864
Other liabilities	1,341		629	151	442	482	582	9	339	2,696	6,670
Total liabilities			71,517 18,203 148,212	22,954	7,965	10,176	18,648	39,540	44,439 2,696		384,348
Gross settled derivatives not held for trading:
Contractual amounts receivable			8	1	8	17	31	30	5		100
Contractual amounts payable			4	2	2	30	34	34	7		112
Total undiscounted gross settled
derivatives not held for trading Net settled derivatives not held for trading			-4		-6	14	3	4	1		12
			119	158	455	548	1,098	2,459	5,270		10,106
Net liquidity gap	-52,723		1,527 -109,361	-3,280	6,574	16,518	18,367	20,975	185,090 -1,583		82,105
Off balance sheet liabilities
Committed credit facilities	16,164										16,164
Guarantees	2,592										2,592
Irrevocable facilities	5,499										5,499
Recourse risks arising from discounted bills	7,243										7,243
Total off-balance sheet liabilities	31,498										31,498

¹ Excluding Derivatives.

² Excluding Securities financing.

Introduction Strategic Report

Maturity based on contractual undiscounted cash flows b

	31 December 2013
(in millions)	On demand	Trad ing deriv atives	Up to one month	Between one and three months	Between three and six months	Between six and twelve months	Between one and two years	Between two and five years	More than five years	No matu rity	Total
Assets:
Cash and balances at central banks	9,523										9,523
Financial assets held for trading1	11,840		20								11,860
Derivatives		11,998	59	178	73	491	932	2,146	1,959		17,836
Financial investments			464	971	696	1,457	2,438	7,343	15,771	542	29,682
Securities financing	7,021		7,579	1,967	878	310	15	131	596		18,497
Loans and receivables - banks2	3,751		12,704	502	257	171	124	384	6,757		24,650
Loans and receivables - customers2	2		22,240	9,335	5,532	19,573	36,035	45,848	191,451		330,016
Other assets	389		1,980	148	214	790	245	115	1,658	3,730	9,269
Total undiscounted assets	32,526 11,998		45,046	13,101	7,650	22,792	39,789		55,967 218,192 4,272		451,333
Gross settled derivatives not held for trading:
Contractual amounts receivable			8	21	34	57	117	299	165		701
Contractual amounts payable			5	5	11	20	40	119	29		229
Total undiscounted gross settled derivatives not held for trading Net settled derivatives not held			3	16	23	37	77	180	136		472
for trading			32	154	33	447	622	1,895	1,650		4,833
Liabilities:
Financial liabilities held for trading1	4,378		21								4,399
Derivatives		9,849	117	199	483	554	1,306	4,001	6,587		23,096
Securities financing	3,064		6,391	328	1,471	13	47	1,044	8		12,366
Due to banks2	1,942		4,102	2,597	422	230	336	357	2,189		12,175
Due to customers2	60,916		121,913	13,653	2,231	1,763	1,012	2,527	4,434		208,449
Issued debt			7,020	7,886	7,523	9,463	12,597	23,862	25,330		93,681
Subordinated liabilities			12	101	125	238	453	4,030	5,467		10,426
Other liabilities	639		393	2,511	1,029	1,106	32	44	482	2,744	8,980
Total liabilities	70,939		9,849 139,969	27,275	13,284	13,367	15,783	35,865	44,497 2,744		373,572
Gross settled derivatives
not held for trading:
Contractual amounts receivable			3	3	16	21	40	72	8		163
Contractual amounts payable			11	4	13	29	54	97	12		220
Total undiscounted gross settled derivatives not held for trading			8	1	-3	8	14	25	4		57
Net settled derivatives not held for trading			97	182	454	525	1,235	3,687	6,099		12,279
Net liquidity gap	-38,413		2,149 -94,923	-14,174	-5,634	9,425	24,006		20,102 173,695 1,528		77,761
Off balance sheet liabilities
Committed credit facilities	13,764										13,764
Guarantees	3,534										3,534
Irrevocable facilities	5,415										5,415
Recourse risks arising from discounted bills	7,154										7,154
Total off-balance sheet liabilities	29,867										29,867

¹ Excluding Derivatives.

² Excluding Securities financing.

Introduction

Strategic Report

Business Report

Investor Relations Our relationship with investors during the bank's IPO

"We were in close contact with investors throughout the IPO process. During the 8-day roadshow in Europe and the US, we held more than 100 meetings and talked to over 250 institutional investors."

Introduction

Strategic Report

Business Report

Governance Report

Annual Financial Statements

Other

Other

Our investors gave us valuable input as we mapped out the bank's future and set our financial targets.

"It took us several years to prepare for the Initial Public Offering (IPO). During this time, we met with many institutional investors on a regular basis to put our bank on their radar and hear their views. They gave us valuable input as we set the bank's financial targets and mapped out its future. Investors were looking forward to seeing us listed and were pleased with how the IPO went.

Employees, too, were proud about the listing. Afterwards, my colleagues and I watched a video of ABN AMRO teams around the world as they watched the listing ceremony and cheered. Staff all the way from Hong Kong to São Paulo to Chicago and Amsterdam, and at every office in the Netherlands, were dressed in green and yellow to celebrate the big event. All of us had been working towards a common goal, and that was to become a listed bank."

Who

Dies Donker, Head of Investor Relations ABN AMRO

Governance Report

This report presents an overview of the Group's corporate governance framework, including the Supervisory Board report and the Remuneration report.

274

Governance Report

Corporate governance

General Meeting and shareholder structure	276
Supervisory Board	281
Managing Board	289
Corporate governance codes and regulations	294
Legal structure	298

300

Supervisory Board report

Supervisory Board Committees	308
Philosophy, policies and principles	312

312

Remuneration report

Details of Remuneration 321 323 Employee representation

325 Senior Managing Directors

Other

Strategic Report Corporate governance

Corporate governance

This section provides an overview of corporate governance at ABN AMRO Group, including the composition of the Managing Board and the Supervisory Board.

Overview

Good corporate governance is critical for us to realise our strategic ambition of being a trusted and professional partner for all our stakeholders, including customers, savers and deposit holders, investors, holders of depositary receipts, employees and the society in which we carry out our activities. Corporate governance gives meaning to who we are, what we stand for, what we aim for, how we make and implement decisions, and how we connect with each other and the world around us. The Managing Board and Supervisory Board underpin the importance of good corporate governance and exert every effort to be a frontrunner in this area.

In 2015 we launched a number of initiatives to further strengthen our corporate governance ahead of the IPO. Among other things, we updated the Rules of Procedure for both the Supervisory Board and the Managing Board to implement and comply with the Dutch Corporate Governance Code, Banking Code, CRD IV, the Dutch

Financial Markets Supervision Act (Wet op het financieel toezicht) and other regulatory principles. Moreover, the Articles of Association of ABN AMRO Group have been amended, also in connection with implementation of the full structure regime (volledige structuurregime). We have changed the risk governance and related decision framework by adopting an updated Risk Governance Charter and other policies (see for more information on ABN AMRO's risk governance, the Risk, Funding & Capital Report). We also took significant steps towards integrated reporting, of which this Annual Report is the result. In preparation of the IPO, we entered into a Relationship Agreement with NLFI and made other arrangements, and adopted policies for bilateral communication with shareholders and holders of depositary receipts. We also implemented a defence mechanism whereby the independent foundation STAK AAG is the holder of shares in ABN AMRO Group's capital sold by NLFI and has issued depositary receipts (certificaten) representing such shares.

Introduction

274

ABN AMRO Group is a public company with limited liability incorporated on 18 December 2009 under Dutch law. The company has a two-tier board consisting of a Managing Board and a Supervisory Board. The composition of the Supervisory Boards of ABN AMRO Group and ABN AMRO Bank is identical, as is the composition of the Managing Boards of ABN AMRO Group and ABN AMRO Bank and the committees of these boards. Pursuant to section 2:154

Governance Report / Corporate governance

of the Dutch Civil Code, the full structure regime applies to ABN AMRO Group as from the listing of depositary receipts for shares in the capital of ABN AMRO Group on Euronext Amsterdam. The main consequence of application of the mandatory full structure regime lies in the authority to appoint and dismiss members of the Managing Board, which has shifted from the General Meeting of Shareholders (the General Meeting) to the Supervisory Board.

General Meeting and shareholder structure

General Meeting

The annual General Meeting is held each year, on 30 June at the latest. The agenda for the annual General Meeting must contain certain matters as specified in ABN AMRO's Articles of Association and under Dutch law, including the adoption of the Annual Financial Statements. The General Meeting is also entitled to approve important decisions regarding the identity or character of ABN AMRO, including major acquisitions and divestments.

The Supervisory Board, the Managing Board, shareholders or (subject to the conditions set out in the Dutch Civil Code) holders of depositary receipts issued with the cooperation of ABN AMRO Group representing at least 10% of the issued share capital may convene additional extraordinary General Meetings at any time. Pursuant to (and subject to certain conditions set forth in) the Relationship Agreement, in the event that NLFI requests the Managing Board or Supervisory Board to convene a General Meeting, the Managing Board or the Supervisory Board (as the case may be) need to ensure that such meeting will be convened within 60 calendar days of NLFI's request. Shareholders or holders of depositary receipts who alone or together represent at least three percent of the issued share capital of ABN AMRO Group are entitled to have items added to the agenda of the General Meeting, provided that ABN AMRO Group receives the request, including the reasons, no later than 60 days prior to the General Meeting.

The most recent annual General Meeting of ABN AMRO Group was held on 2 April 2015. Agenda items included the adoption of the 2014 Annual Financial Statements, the adoption of the dividend policy and of the proposed dividend for the year 2014, the reappointment of Mr De Haan as a member of the Supervisory Board, discharge of the members of the Managing Board and of the Supervisory Board for the performance of their duties in 2014, and the appointment of KPMG as external auditor for the financial year ending 31 December 2015 and EY as external auditor for the financial years ending 31 December 2016, 2017 and 2018. In addition, the shareholder was informed of key developments in Retail Banking. In 2015, the General Meeting passed a number of resolutions related to the IPO outside a meeting. These resolutions were, among other things, to appoint ABN AMRO Bank as underwriter in the IPO, to approve the amendment of the Articles of Association of ABN AMRO Group, to authorise the Managing Board until 24 May 2017, subject to the approval of the Supervisory Board, to issue shares, restrict or exclude pre-emptive rights and to repurchase shares and depositary receipts up to specified maximum numbers, to allow submission of information to shareholders by electronic means and to approve the amendments to the Supervisory Board Rules of Procedure.

276

Governance Report / Corporate governance / General Meeting and shareholder structure

Shareholder structure

ABN AMRO Bank is a wholly-owned subsidiary of ABN AMRO Group. At 31 December 2015, all shares in the capital of ABN AMRO Group were held by two foundations: NLFI and STAK AAG. On that date, NLFI held 77% and STAK AAG held 23% of the shares in the issued capital of ABN AMRO Group. Both foundations have issued depositary receipts for shares in ABN AMRO Group. Only STAK AAG's depositary receipts are issued with the cooperation of ABN AMRO Group and traded on Euronext Amsterdam.

STAK AAG

STAK AAG is independent from ABN AMRO and the holder of shares in ABN AMRO Group's issued share capital. STAK AAG has acquired such shares for the purpose of administration (ten titel van beheer) in exchange for depositary receipts. The manner in which this structure can serve as a defence measure and STAK AAG's role in this is further described in the Anti-takeover measures section of this chapter.

In addition to serving as a defence measure, STAK AAG also aims to promote the exchange of information between ABN AMRO Group on the one hand and holders of depositary receipts and shareholders on the other hand, for example, by organising a meeting of depositary receipt holders prior to ABN AMRO Group's General Meeting. STAK AAG will also report on its activities periodically, at least once a year. This report will be published by the board of STAK AAG for the first time in 2016. In addition, through STAK AAG (and in the form of depositary receipts) further selldowns of NLFI's shareholding in ABN AMRO Group will take place.

The STAK AAG website (stichtingadministratiekantoorabnamro.com) provides more information on the activities of STAK AAG, the Articles of Association (including STAK AAG's objects), the trust conditions and any meetings of depositary receipt holders.

277

NLFI

The Dutch State holds an interest in ABN AMRO Group through NLFI. NLFI was set up as a means to avoid potential conflicting responsibilities that the Dutch Minister of Finance might otherwise face, as a shareholder and as a regulator, and to avoid undesired political influence being exerted. NLFI issued exchangeable depositary receipts for shares in the capital of ABN AMRO Group to the Dutch State. NLFI is responsible for managing these shares and exercising all rights associated with these shares under Dutch law, including voting rights. NLFI acts as a standalone shareholder independently from the Dutch State, including the Dutch Ministry of Finance. Material and principal decisions taken by NLFI require the prior approval of the Dutch Minister of Finance, who can also give binding voting instructions to NLFI with respect to such decisions. NLFI is not permitted to dispose of or encumber the ordinary shares in the capital of ABN AMRO Group, except pursuant to an authorisation from and on behalf of the Dutch Minister of Finance.

NLFI entered into a Relationship Agreement with ABN AMRO Group with respect to their mutual relationship after the IPO. Upon the IPO, the Relationship Agreement replaced an earlier memorandum of understanding between NLFI and ABN AMRO Group. The Relationship Agreement will terminate if and when NLFI (directly or indirectly) holds less than 10% of ABN AMRO Group's issued share capital, except for a limited number of clauses, which will not terminate under any circumstances. The Relationship Agreement includes, among other things, and subject to certain conditions as set forth therein:

Å the right of NLFI to advise (i) the Supervisory Board on the appointment or reappointment of members of the Managing Board and of the Chairman of the Managing Board or the Supervisory Board, and (ii) the Managing Board on a proposal for the appointment of the external auditor;

• Å NLFI's right of prior approval of:
  • Å any issuance of (or granting of rights to acquire) shares in ABN AMRO Group or ABN AMRO Bank for as long as NLFI holds at least 33 1/3% of the shares in ABN AMRO Group;
  • Å (a) for as long as NLFI holds more than 50% of the shares in ABN AMRO Group: any investments or divestments by ABN AMRO Group or any of its subsidiaries with a value of more than 5% of the equity of ABN AMRO Group, and (b) for as long as NLFI holds 50% or less but 33 1/3% or more of the shares in ABN AMRO Group: any investment or divestments by ABN AMRO Group or any of its subsidiaries with a value of more than 10% of the equity of ABN AMRO Group;
• Å the obligation for ABN AMRO Group to convene a General Meeting within 60 calendar days of NLFI's request and the right of NLFI to put items on the agenda for a General Meeting subject to the relevant provisions of the Articles of Association;
• Å the obligation for NLFI to sell down through STAK AAG;
• Å certain orderly market arrangements; and
• Å certain information rights for NLFI as long as it holds at least 33 1/3% of the shares in ABN AMRO Group.

The full text of the Relationship Agreement is available on abnamro.com.

On 3 December 2015 a periodic information meeting was held with NLFI, in accordance with the terms of the Relationship Agreement. Among other things, the following topics were discussed: a review of the IPO process, a discussion on the risk appetite for 2016, a preview of the annual General Meeting 2016 and of the meeting of holders of depositary receipts, and intended disclosures by ABN AMRO about the Relationship Agreement. No effect has otherwise been given (or was requested to be given) to information rights of NLFI under the Relationship Agreement until 31 December 2015.

Governance Report / Corporate governance / General Meeting and shareholder structure

Policy for bilateral contacts with shareholders

ABN AMRO recognises the importance of bilateral communication with its shareholders and potential shareholders and holders of depositary receipts. In order to facilitate such bilateral communication, the Managing Board of ABN AMRO Group has adopted, with the approval of its Supervisory Board, a policy on bilateral contacts with shareholders in accordance with best practice provision IV.3.13 of the Dutch corporate governance code.

In the policy on bilateral contacts with shareholders, ABN AMRO Group expresses its commitment to maintaining an open and constructive dialogue with its (potential) shareholders and holders of depositary receipts. This outline policy also describes circumstances in which ABN AMRO Group may have bilateral contacts or share information with its (potential) shareholders and holders of depositary receipts. Moreover, the policy summarises the special position and purpose of STAK AAG and situations in which ABN AMRO Group may have bilateral conversations and share information with it. The policy, however, does not apply to the contacts between ABN AMRO Group and NLFI as that relationship is governed, among other things, by the Relationship Agreement (see above). ABN AMRO Group's policy on bilateral contacts with shareholders is published on abnamro.com.

Anti-takeover measures

ABN AMRO has implemented a structure whereby STAK AAG is the holder of shares in ABN AMRO's issued share capital and has issued depositary receipts representing such shares with the cooperation of ABN AMRO Group. The purpose of creating the depositary receipts and having STAK AAG be the legal owner of the underlying shares is that this structure can serve as a defence measure against circumstances or actions which threaten the continuity of ABN AMRO Group or its businesses or which are in conflict with the interests of ABN AMRO Group or its business, taking into account the interests of the relevant stakeholders (which circumstances or actions may include hostile public offer situations and shareholder activism).

Pursuant to the articles of association of STAK AAG, if STAK AAG exercises the rights attached to those shares it should, in normal circumstances, exercise the rights attached to the shares in such a way to ensure that the interests of the depositary receipt holders of ABN AMRO Group and of the enterprises maintained by ABN AMRO Group and the companies affiliated to it in a group are optimally safeguarded. STAK AAG shall deter any influence that could affect the independence, continuity or identity of ABN AMRO Group, of the enterprises maintained by ABN AMRO Group and of the companies affiliated to it in a group, in conflict with the interests of ABN AMRO Group and those enterprises to the maximum of its abilities.

In principal, STAK AAG each time will grant a power of attorney to the holders of depositary receipts to exercise the voting rights attached to the underlying shares and will not exercise voting rights on the shares, unless holders of depositary receipts have requested STAK AAG to do so. The foregoing may be different in certain (hostile) circumstances as described in section 2:118a of the Dutch Civil Code. In such case, STAK AAG may refuse or revoke powers of attorney for up to two years (whereby NLFI needs to approve such refusal of revocation as long as NLFI holds at least 33 1/3% of the shares in ABN AMRO Group). STAK AAG will vote in such event itself and should then, pursuant to the trust conditions and the objects clause of STAK AAG as laid down in the articles of association of STAK AAG, primarily focus on the interests of ABN AMRO Group and of the businesses maintained by ABN AMRO Group and by companies associated with ABN AMRO Group in a group. In doing so, STAK AAG will always take into account the legitimate interests of the customers, savers and deposit holders, shareholders, holders of depositary receipts, employees and the society in which ABN AMRO Group performs its activities.

ABN AMRO Group Annual Report 2015

Employee Council (Raad van Medewerkers)

ABN AMRO's employees are represented by works councils (ondernemingsraden) at all levels of its group. Under Dutch law, the managing board of any company running an enterprise where a works council has been established must seek the non-binding advice of the works council before taking certain decisions with respect to the enterprise, such as those related to a major restructuring, a change of control, or the appointment or dismissal of a member of the managing board. Certain other decisions directly involving employment matters that apply either to all employees or certain groups of employees may only be taken with the works council's consent.

The Employee Council deals primarily with topics that affect all parts of the group's organisation and meets regularly with members of the Managing Board and Supervisory Board on various other occasions throughout the year. The Employee Council and ABN AMRO Group have entered into an agreement pursuant to which the Employee Council has been granted certain additional rights (the Works Council Covenant). Pursuant to the Works Council Covenant, the Employee Council has the right of inquiry within the meaning of Section 2:346 of the Dutch

Civil Code in the event of a 'hostile situation'. The Works Council Covenant qualifies the following situations as hostile: (i) a public offer has been announced or is made in respect of shares in the capital of ABN AMRO Group (or in respect of depositary receipts representing such shares) or there is a justified expectation that this will take place, without agreement first having been reached between the bidder and ABN AMRO Group, (ii) the exercise of the voting rights by a depositary receipt holder or shareholder would effectively be in conflict with the interest of ABN AMRO Group and its business, or (iii) any other situation in which the independence, continuity or identity of ABN AMRO Group and the enterprises associated with ABN AMRO Group could be harmed. Other situations can be qualified as hostile by agreement between the Employee Council and ABN AMRO Group. Furthermore, when NLFI requests the consent, cooperation and/or a position statement of ABN AMRO Group in the event of a subsequent placement or a private sale of shares or depositary receipts, the Employee Council will be requested by ABN AMRO Group to provide advice within the meaning of articles 25 and 26 of the Works Councils Act (Wet op de Ondernemingsraden).

Strategic Report

Supervisory Board

Supervisory Board Hans de Haan, Annemieke Roobeek, Bert Meerstadt, Rik van Slingelandt, Olga Zoutendijk, Steven ten Have.

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Other

Composition

The Supervisory Board determines the minimum number of its members, which must in any case be at least three people. The Supervisory Board has drawn up a profile for its size, its composition and, taking into account the nature of its business, its activities and the desired expertise and background of its members. This profile was discussed in the General Meeting and with ABN AMRO Group's central works council (also referred to the Employee Council). The full profile of the Supervisory Board is available on abnamro.com, as an annex to the Rules of Procedure of the Supervisory Board.

In accordance with the best practice provisions of the Dutch Corporate Governance Code, Supervisory Board members at ABN AMRO are appointed for a maximum of three 4-year terms (which terms end at the close of the first General Meeting that is held after four years have passed since his or her last appointment). Mr De Haan was reappointed in 2015 until the General Meeting of 2016. To allow for more diversity in the expiry dates of the appointments, Ms Roobeek and Mr Wakkie were reappointed in 2014 until the General Meeting of 2017 and Mr Ten Have, Mr Meerstadt and Ms Oudeman until the General Meeting of 2018, respectively. Mr Wakkie resigned from his position as a member of the Supervisory Board in March 2015 and Ms Oudeman resigned in September 2015. Mr Van Slingelandt was reappointed in 2014 as a member of the Supervisory Board until the General Meeting of 2016 and was appointed as Chair of the Supervisory Board for the same period. Ms Zoutendijk was appointed as a member of the Supervisory Board, effective as from 1 July 2014, and as Vice-Chair as from 20 August 2015. The Supervisory Board has adopted a retirement and reappointment schedule, which is published on abnamro.com.

The suitability and integrity screening procedure by DNB and the ECB has been completed for three candidates to fill current vacancies on the Supervisory Board following the resignations of Mr Wakkie and Ms Oudeman and because Mr De Haan has indicated that he will not apply for re-appointment at the end of his current term at the General Meeting in May 2016. The Supervisory Board has granted the General Meeting and the Employee Council the opportunity to recommend people to the Supervisory Board for nomination. The Supervisory Board will nominate Mr Arjen Dorland, Ms Frederieke Leeflang and Mr Tjalling Tiemstra for appointment to the Supervisory Board of ABN AMRO Group for a period of four years. The General Meeting will decide on their nominations on 18 May 2016. The Employee Council has confirmed its support for all nominations.

Mr De Haan will resign from the Supervisory Board on 18 May 2016, in accordance with the rotation schedule. In addition, Mr Van Slingelandt has announced that he will not be available for reappointment at the end of his current term at the General Meeting in May 2016. The Chairman to be appointed by the Supervisory Board as of the General Meeting will be announced prior to that meeting as soon as all regulatory approvals have been obtained. In addition, ABN AMRO is in the regulatory approval process to add further banking expertise to the Supervisory Board.

Business Report

Introduction

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Other

The Supervisory Board evaluates its own functioning and that of its individual members on an annual basis and is of the opinion that its composition, including the abovementioned appointments, matches the Supervisory Board profile in terms of combined experience and expertise, independence and variety of ages and genders. The Supervisory Board carried out a review of its own performance and that of its members over 2015 which was completed in the first quarter of 2016. The selfassessments include an evaluation of the effectiveness of the introductory and lifelong learning programmes.

Important topics covered in the evaluation are the Supervisory Board's role with respect to strategy, risk management and internal control, culture and behaviour within the organisation, the dynamics between the Supervisory Board members, the composition and expertise of the Supervisory Board, the functioning of the members of the Supervisory Board and of the Committees and their members and the search process used for new members to the Supervisory Board. The effectiveness of the procedures for the meetings of the Supervisory Board are also part of the evaluation. The self-assessments are supported by an independent corporate advisory firm.

The Supervisory Board has at its disposal expertise relating to strategy, management and organisation, cost management, accountancy and business economics, the Dutch and international banking sectors, risk management, remuneration and human resources management, sustainability and corporate social responsibility, international issues, the development of products and services, and the markets in which the bank is active. The Supervisory Board has at least one financial expert. The appointments of Mr Dorland, Ms Leeflang and Mr Tiemstra will increase the IT, financial and legal expertise, respectively, of the Supervisory Board. An overview of the current composition of the Supervisory Board, including key information on the backgrounds and the terms of office of each Board member, is provided below and on abnamro.com.

All members of the Supervisory Board passed the fit and proper test under the Dutch Financial Supervision Act. The Supervisory Board confirms that all members of the Supervisory Board are independent within the meaning of provision III.2.2 of the Dutch Corporate Governance Code.

CV Supervisory Board

Rik van Slingelandt (Dutch, male, 1946) Chairman

Rik van Slingelandt was appointed to the Supervisory Boards of ABN AMRO Group and ABN AMRO Bank on 27 October 2010 and was then appointed Vice-Chairman with effect from 1 January 2011.

Rik van Slingelandt was appointed Chairman of the Supervisory Board as from the General Meeting of 10 April 2014. His present term expires in 2016.

Last executive position held: Member of Managing Board of Rabobank. Supervisory Positions: Chairman Supervisory Board, Kahn Holding B.V; Member Supervisory Board, Anthos Bank B.V.

Olga Zoutendijk (Dutch, female, 1961) Vice-Chair

Olga Zoutendijk was appointed to the Supervisory Boards of ABN AMRO Group and ABN AMRO Bank on 1 July 2014. Olga Zoutendijk was appointed Vice-Chair as from 20 August 2015. Her present term expires in 2018.

Last executive position held: Senior Managing Director and Group Head of Wholesale Banking, Asia and member of the Wholesale Banking Global Executive Committee, Standard Chartered Bank.

Hans de Haan (Dutch, male, 1944) Member

Hans de Haan was appointed to the Supervisory Board of ABN AMRO Group on 18 December 2009 and, as from 1 April 2010, to the Supervisory Boards of ABN AMRO Bank and Fortis Bank (Nederland) N.V. (as from 1 July 2010 merged with ABN AMRO Bank). His present term expires in 2016.

Last executive position held: Chartered accountant and partnerwith Ernst & Young Accountants. Other Positions: Board Member, Stichting Trustee Achmea Hypotheekbank (until June 2015); Chairman of Board, Stichting Lehman Brothers Treasury Co.

Steven ten Have (Dutch, male, 1967) Member

Steven ten Have was appointed to the Supervisory Board of ABN AMRO Group on 30 March 2010 and, as from 1 April 2010, to the Supervisory Boards of ABN AMRO Bank and Fortis Bank (Nederland) N.V. (as from 1 July 2010 merged with ABN AMRO Bank). His present term expires in 2018.

Current positions: Partner with Ten Have Change Management; full professor of Strategy &

Change Management/Director of the MSc. Change Management programme at Vrije Universiteit Amsterdam.

Supervisory positions: Chairman Supervisory Board, Software Improvement Group (SIG) B.V. Supervisory positions: Member of the Education Council of the Netherlands (Onderwijsraad); Board Member, Dutch Quality Institute (Stichting Instituut Nederlandse Kwaliteit, or INK, until March 2016); Chairman, Stichting Center for Evidence-Based Management.

Bert Meerstadt (Dutch, male, 1961) Member

Bert Meerstadt was appointed to the Supervisory Board of ABN AMRO Group on 30 March 2010 and, as from 1 April 2010, to the Supervisory Boards of ABN AMRO Bank and Fortis Bank (Nederland) N.V. (as from 1 July 2010 merged with ABN AMRO Bank). His present term expires in 2018. Current position: Board advisor. Supervisory Positions: Vice-Chairman Supervisory Board, Lucas Bols Holding N.V.; Non-executive

Other positions: Chairman of Board, Vereniging Friends of Concertgebouw and Royal Concertgebouw Orchestra; Board Member, Stichting Maatschappij tot Redding van Drenkelingen (Society for Prevention and Saving of Drowning Victims); Chairman of Board, Stichting Blinden Penning (Foundation for the Blind and Visually Impaired).

Annemieke Roobeek (Dutch, female, 1958) Member

director, Talgo.

Annemieke Roobeek was appointed to the Supervisory Board of ABN AMRO Group on 30 March 2010 and, as from 1 April 2010, to the Supervisory Boards of ABN AMRO Bank and Fortis Bank (Nederland) N.V. (as from 1 July 2010 merged with ABN AMRO Bank). Her present term expires in 2017. Current positions: Professor of Strategy and Transformation Management at Nyenrode Business Universiteit; Director and owner of MeetingMoreMinds B.V.; Owner of Open Dialogue B.V.; Co-owner of XL Labs B.V. Supervisory Positions: Member Supervisory Board, Abbott Healthcare Products B.V.; Member Supervisory Board, KLM N.V. Other positions: Board Member, Vereniging REFILL (until September 2015); Member Advisory Board, Vereniging Koninklijke Horeca Nederland; Chairperson, PGGM Advisory Board for Responsible Investment; Chairperson, Stichting INSID, Institute for Sustainable Innovation & Development directed by His Royal Highness Prince Carlos de Bourbon Parme; Member, "Raad van Eigen Wijzen" (Advisory Board), CPI Governance; Member, International Advisory Board of Howaldt & Co, Hamburg, Germany.

Business Report

Governance Report / Corporate governance / Supervisory Board

Responsibilities

The Supervisory Board supervises the Managing Board as well as ABN AMRO Group's general course of affairs and its business. In addition, it supports the Managing Board by providing advice. In performing their duties, the members of the Supervisory Board are guided by the interests of ABN AMRO Group, which include the interests of the business associated with it (including but not limited to the legitimate interests of all of ABN AMRO Group's stakeholders, such as its customers, savers and deposit holders, shareholders, holders of depositary receipts, employees and the society in which ABN AMRO Group carries out its activities). Specific powers are vested in the Supervisory Board, including the approval of certain decisions taken by the Managing Board.

More information on the activities of the Supervisory Board in 2015 is provided in the Supervisory Board Report included in this Annual Report.

The Rules of Procedure of the Supervisory Board are available on abnamro.com.

Appointment, suspension and dismissal

The members of the Supervisory Board are appointed by the General Meeting. Only candidates who have passed the fit and proper test under the Dutch Financial Markets Supervision Act are eligible for appointment. Such appointment is based on a nomination by the Supervisory Board. The Supervisory Board must notify the General Meeting and the Employee Council simultaneously of its nomination. The General Meeting may reject the nomination with an absolute majority of the votes cast, which majority represents at least one-third of the issued share capital. If an absolute majority has rejected the nomination, but the majority did not represent at least one-third of the issued share capital, a new meeting can be convened to vote on the nomination, whereby the nomination can be rejected by an absolute majority of the votes cast (irrespective of the issued share capital present or represented at the meeting and irrespective of the percentage of the issued share capital which that majority represents). In the event that the General Meeting does

not appoint the person nominated and does not resolve to reject the nomination, the Supervisory Board will appoint the person nominated.

The General Meeting and the Employee Council may recommend candidates to the Supervisory Board to be nominated as members of the Supervisory Board. The Supervisory Board is required to nominate a candidate recommended by the Employee Council in respect of one-third of the members of the Supervisory Board. The Supervisory Board must accept such recommendation of the Employee Council, unless it is of the opinion that the candidate recommended is expected to be unsuitable to fulfil the duties of a member of the Supervisory Board or that the Supervisory Board would not be properly composed if the appointment were made as recommended.

The Supervisory Board may suspend any of its members at all times. The suspension shall lapse by law if ABN AMRO Group, represented by the Supervisory Board, has not requested the Enterprise Court within one month after commencement of the suspension to dismiss the suspended member of the Supervisory Board on the grounds mentioned by law. The General Meeting can dismiss the Supervisory Board in its entirety for reasons of lack of confidence, by an absolute majority of the votes cast, representing at least one-third of the issued share capital (whereby the possibility to hold a second General Meeting in which no quorum applies is excluded). The resolution to dismiss the Supervisory Board shall have immediate effect and the Managing Board is required to request the Enterprise Court without delay to appoint one or more members to the Supervisory Board on a temporary basis.

ABN AMRO Group and NLFI have agreed in the Relationship Agreement that, as long as NLFI directly or indirectly holds 10% or more of ABN AMRO Group's issued share capital, it will be given the opportunity to advise on the decision of the Supervisory Board to appoint the Chair of the Supervisory Board, while any amendment to the profile for the Supervisory Board is subject to the prior approval of NLFI.

Governance Report / Corporate governance / Supervisory Board

Supervisory Board committees

Composition

The Supervisory Board has established three regular committees to prepare its decision-making and to advise the Supervisory Board on certain matters: the Audit Committee, the Remuneration, Selection & Nomination Committee and the Risk & Capital Committee. The Rules of Procedure of the Supervisory Board include the terms of reference of these committees of the Supervisory Board and are available on abnamro.com. Furthermore, the Supervisory Board installed a special committee relating to the preparations for the IPO.

Audit Committee

The Audit Committee is tasked with the direct supervision of all matters relating to financial reporting and controlling. In doing so, it is responsible for supervising (and advising the complete Supervisory Board) in respect of, among other things, (i) the assessment of the principles of valuation and determination of results for the financial statements, (ii) internal control and financial reporting functions, (iii) internal and external audit, (iv) risk assessment of issues that could impact the financial reporting, (v) compliance with applicable laws and regulations, (vi) mediation between internal or external auditors and/or management, and (vii) reporting to the Supervisory Board. The Audit Committee is chaired by Mr De Haan. Mr Meerstadt, Mr Van Slingelandt and Ms Zoutendijk were members on 31 December 2015.

Remuneration, Selection & Nomination Committee

The Remuneration, Selection & Nomination Committee is responsible for supervising (and advising the complete Supervisory Board) with regard to, among other things, (i) remuneration policies and execution thereof for members of the Managing Board, the Supervisory Board and selected members of senior management, (ii) the selection, appointments and reappointments regarding the Supervisory Board and the Managing Board, (iii) succession plans for the Supervisory Board and the Managing Board, (iv) the knowledge, skills, experience, performance, size, composition and profile of both boards, (v) the performance of the members of both boards, and (vi) reporting on the execution of the remuneration policies through a remuneration report. Mr Ten Have is the

chairman of the Remuneration, Selection & Nomination Committee. Mr Meerstadt and Mr Van Slingelandt were members on 31 December 2015. There is currently one open position in the Remuneration, Selection & Nomination Committee, which will be filled when the nominated candidates for the Supervisory Board have been appointed by the General Meeting. Until that time, all decisions on the aforementioned topics will be adopted by the complete Supervisory Board, since the quorum for the Remuneration, Selection & Nomination Committee meetings is not met.

Risk & Capital Committee

The Risk & Capital Committee is responsible for supervising and advising the complete Supervisory Board with respect to, among other things, (i) risk management and risk control, including pricing policies, (ii) compliance, (iii) the allocation of capital and liquidity, (iv) the bank's risk appetite, (v) compliance with applicable laws and regulations (including codes of conduct and internal procedures), (vi) risk awareness within the bank, (vii) sound remuneration policies and practices in light of risk, capital, liquidity and expected earnings, (viii) proposing corrective and/or disciplinary measures against members of the Managing Board in the event of breach of applicable laws and regulations and (ix) periodic review of the Group's actual risk profile. Ms Zoutendijk is the Chair of the Risk & Capital Committee. Mr De Haan, Ms Roobeek and Mr Van Slingelandt were members on 31 December 2015.

IPO Special Committee

In order to advise the complete Supervisory Board on recurring topics regarding the IPO and to prepare related decisions, the Supervisory Board established an additional committee chaired by Mr Van Slingelandt and of which Mr De Haan, Mr Ten Have and, until his resignation, Mr Wakkie were members. This committee ceased to exist after the IPO was launched.

Introduction

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Other

Maximum number of positions of members of the Managing Board and Supervisory Board

Under CRD IV, all members of the management body of a bank (including non-executive members or supervisory board members acting in their role of overseeing and monitoring management decision-making) must commit sufficient time to allow them to perform their duties and to be able to understand the bank's business. In respect of significant banks, such as ABN AMRO Bank, Article 91 of CRD IV contains a specific regulation for the limitation of the number of executive and non-executive directorships such members may hold (which rules have been implemented in Dutch law through Section 3:8-3 Dutch Financial Markets Supervision Act). The rules in the Dutch Corporate Governance Code are also applicable to ABN AMRO Group, but are not as strict as the rules under CRD IV.

All members of the Managing Board and Supervisory Board currently comply with the aforementioned rules under CRD IV and the Dutch Corporate Governance Code. It is noted that with respect to Supervisory Board member Ms Roobeek and nominated Supervisory Board member Mr Tiemstra, requests for authorisation of one additional non-executive directorship that each of them currently holds have been approved by the ECB.

Introductory programme and lifelong learning programme

Introductory programme

Upon their appointment, all members of the Supervisory Board follow an introductory programme designed to ensure that they have the relevant knowledge to fulfil their duties, including thorough knowledge of ABN AMRO. The programme provides the information needed for participation in the lifelong learning programme. As the knowledge, background and experience of newly appointed members of the Supervisory Board differ, the curriculum of the introductory programme is tailor-made.

Lifelong learning programme

A lifelong learning programme for the Supervisory Board and the Managing Board has been put in place at ABN AMRO and is designed to keep the members' expertise up to date and to broaden and deepen their knowledge where necessary. In most cases, members of the Supervisory Board and Managing Board participate in the same courses to foster knowledge-sharing between the boards.

The curriculum is being developed and updated continuously to ensure a balanced programme which covers all relevant aspects of the bank's performance and takes into account current developments in the financial industry. Topics covered in 2015 include a workshop on IPO valuation (including the various valuation methods generally used for banks, the main drivers in valuation, the market context and the manner in which a purchase price range for a (soon to be listed) company is determined). Other workshops included detailed sessions on information security and data management, including an explanation on relevant developments in cloud computing and a visit to ABN AMRO's data centre, interest rate swaps (including an explanation of a bank's duty of care, re-evaluations of interest rate swaps and lessons learned) and the ECT Clients market (including its clients, market developments and the related risk management).

Managing Board

Managing Board Joop Wijn, Kees van Dijkhuizen, Chris Vogelzang, Caroline Princen, Johan van Hall, Gerrit Zalm, Wietze Reehoorn.

Other

ABN AMRO Group Annual Report 2015

Strategic Report

Business Report

Business Report

Governance Report / Corporate governance / Managing Board

Composition

The Supervisory Board determines the number of members of the Managing Board, the minimum being two people. As at 31 December 2015, the Managing Board consists of seven members.

With the exception of Mr Van Dijkhuizen, who was appointed in 2013 for a period of four years, all members of the Managing Board were reappointed at the General Meeting, held on 10 April 2014. The Managing Board members were reappointed, taking into due consideration their performance during the previous four-year term and the strategic goals of ABN AMRO in the upcoming years. Each reappointment was for a term which ends at the close of the first General Meeting that is held after four years have passed since his or her last appointment, which is the maximum period for appointments and reappointments according to the best practice provision II.1.1 of the Dutch Corporate Governance Code.

An overview of the current composition of the Managing Board, including key information on the backgrounds and terms of office of each Board member, is provided in the Composition of the Managing Board section of this report and on abnamro.com.

The composition of the Managing Board matches the Managing Board profile in terms of combined experience and expertise, and mixture of age. The members of the Managing Board have thorough knowledge of the financial sector in general and the banking sector in particular, and they collectively have broad experience in the fields of governance, regulatory affairs, organisation and communication, products, services and markets within ABN AMRO's scope of activities. They also have profound knowledge of sound and controlled operational policies and processes, enabling them to make balanced and consistent decisions.

In line with the group's diversity policy, ABN AMRO strives to meet the gender target of 30% for both the Supervisory Board and the Managing Board. ABN AMRO Group currently meets the requirements for the Supervisory Board. For the Managing Board, where 14% (1 out of 7) of its members is female, the diversity target was not met in 2015. Since all current Managing Board members were either appointed in 2013 or reappointed in 2014 for a four-year period, the percentage of female Managing Board members will likely remain unaffected until any member of the Managing Board resigns or any appointment period expires. Upon such resignation or expiration, ABN AMRO Group will give due consideration to any then applicable gender requirements when seeking to find suitable new members for those open positions who meet the fit and proper requirements under the Dutch Financial Markets Supervision Act. In addition, ABN AMRO continues to encourage greater diversity at other levels of the group. See also the Our people section of the Business Report.

Responsibilities

The members of the Managing Board collectively manage ABN AMRO Group and are responsible for its strategy, structure and performance. In carrying out their duties, the members of the Managing Board are guided by the interests and continuity of ABN AMRO Group, which include the interests of the business associated with it (including but not limited to the legitimate interests of all of ABN AMRO Group's stakeholders, such as its customers, savers and deposit holders, shareholders, holders of depositary receipts (certificaten), employees and the society in which ABN AMRO Group carries out its activities). To support the members in carrying out these responsibilities, the Managing Board holds weekly Board meetings. The Managing Board is accountable for the performance of its duties to the Supervisory Board and to the General Meeting.

The Rules of Procedure of the Managing Board are available on abnamro.com.

Appointment, suspension and dismissal

Managing Board members are appointed by the Supervisory Board. The Supervisory Board notifies the General Meeting of a contemplated appointment of a member of the Managing Board. Only candidates found to meet the fit and proper test under the Dutch Financial Markets Supervision Act are eligible for appointment. The Supervisory Board may appoint one of the members of the Managing Board as chairman.

ABN AMRO Group and NLFI have agreed in the Relationship Agreement (which is published on abnamro. com) that, as long as NLFI directly or indirectly holds 10% or more of ABN AMRO Group's issued share capital, it will be given the opportunity to advise on the decision of the Supervisory Board to appoint or reappoint any member of the Managing Board and on the appointment of the Chairman of the Managing Board.

The Supervisory Board may at all times suspend a member of the Managing Board. If the Supervisory Board fails to adopt a resolution on his or her dismissal or extension of the suspension within three months after suspension of a member of the Managing Board, the suspension will be terminated. The suspension may only be extended once for a maximum term of three months. The suspended member will be given the opportunity to account for his or her actions at the General Meeting, in which the General Meeting will be given the opportunity to advise on the intended dismissal. The suspendend member may arrange for an adviser to be present for assistance in that meeting.

Managing Board committees

The Managing Board has established a number of committees that are responsible for decision-making on certain subjects and for advising the Managing Board on certain matters. These committees include three riskrelated committees: the Group Risk Committee, the Group Asset & Liability Committee and the Central Credit Committee. More information on the delegated authority of these risk-related committees is provided in the Risk, funding & capital Report. In addition, the Managing Board has installed a Group Disclosure Committee, a Group Transition Management Committee and a Group Regulatory Committee. The Group Disclosure Committee is responsible for, among other things, advising and supporting the Managing Board in relation to (i) supervision on the accuracy and timeliness of public disclosures by the group and (ii) integrity with regard to the financial statements and other public disclosures. The Group Transition Management Committee has been attributed responsibility for, among other things, tactical management of the Group-wide transition programmes. The Group Regulatory Committee is responsible for, among other things, (i) ensuring a good understanding and an adequate overview of, (ii) regularly informing and consulting the Managing Board about, and (iii) making strategic choices and taking decisions on, matters relating to changing national and international laws and regulations affecting the Group. As part of the preparations for the IPO, the Managing Board installed the IPO Steering Committee, which was mandated to monitor, assess and manage the progress, overall planning and timelines for the preparation and execution of the IPO. This committee ceased to exist following the IPO.

Business Report

Governance Report / Corporate governance / Managing Board

CV Managing Board

Gerrit Zalm (Dutch, male, 1952) Chairman

Gerrit Zalm was appointed to the Managing Board of the former ABN AMRO Bank N.V. (later renamed RBS N.V.) on 1 December 2008 in the role of Vice-Chairman, and on 28 February 2009 he became Chairman until 1 April 2010. Additionally, from 28 February 2009 to 1 April 2010, he was Chairman of the Managing Board of ABN AMRO Holding N.V. He was Chairman of the Managing Board of ABN AMRO Bank on 9 April 2009. He has been Chairman of the Managing Boards of ABN AMRO Group and

Fortis Bank (Nederland) N.V. (as from 1 July 2010 merged with ABN AMRO Bank) since 1 April 2010. His present term expires in 2018. Supervisory positions: Non-executive Director, Royal Dutch Shell; Member Supervisory Council, Stichting VUmc Fonds (as of January 2016). Other positions: Chairman Advisory Council, 'Wigo-4it', a cooperative effort of the social assistance organisations of the four largest cities in the Netherlands; Board Member, Dutch Banking Association; Chairman, Board of Governors National Academy for Finance and Economics.

Johan van Hall (Dutch, male, 1960) Chief Operating Officer/Vice-Chairman

Johan van Hall was appointed to the Managing Board of ABN AMRO Bank on 9 April 2009, to the Managing Board of ABN AMRO Group on 18 December 2009 and to the Managing Board of Fortis Bank (Nederland) N.V. (as from 1 July 2010 merged with ABN AMRO Bank) on 1 April 2010. Johan van Hall is the Chief Operating Officer responsible for Technology, Operations & Property Services (TOPS). He has been Vice-Chairman of the Managing Board since 1 June 2013. His present term expires in 2018.

Supervisory positions: Member Supervisory Board, Equens SE (pan-European Payment Processor); Vice-Chairman, Central Committee for Statistics (CCS); Member Supervisory Council, Christelijk Voortgezet Onderwijs Baarn/Soest.

Other positions: Board Member, Nyenrode International Advisory Board; Member, NBA Signaleringsraad (Dutch professional organisation for accountants); Chairman, Stichting ABN AMRO Support for SUPPORT.

Board of ABN AMRO Bank on 9 April 2009. He was appointed to the Managing Boards of ABN AMRO Group and Fortis Bank (Nederland) N.V. (as from 1 July 2010 merged with ABN AMRO Bank) on 1 April 2010. Chris Vogelzang is responsible for Retail Banking and Private Banking. His present term expires in 2018.

Supervisory positions: Member Supervisory Board, Hespri Holding B.V; Member Supervisory Council, Stichting Prins Bernhard Cultuurfonds; Member Supervisory Council, Rijksmuseum.

Other positions: Board Member, Dutch Banking Association; Board Member, Alumnifonds (Ubbo Emmius Fonds) Rijksuniversiteit

Groningen; Treasurer, Stichting Aanwending Loterijgelden Nederland (until February 2016).

Joop Wijn (Dutch, male, 1969) Corporate Banking

Joop Wijn was appointed to the Managing Boards of ABN AMRO Group, ABN AMRO Bank and Fortis Bank (Nederland) N.V. (as from 1 July 2010 merged with ABN AMRO Bank) on 1 April 2010 and is responsible for Corporate Banking. His present term expires in 2018. Supervisory positions: Member Supervisory Board, Schiphol Group; Member Supervisory Board,

Jaarbeurs Utrecht (Congress and Meeting Centre, Fairs and Events); Member Supervisory Board, Stadsherstel Amsterdam N.V. Other positions: Chairman of the Board, Stichting Oranje Fonds; Member Executive Board, Vereniging VNO-NCW (Confederation of Netherlands Industry and Employers); Chairman, Stichting Kunst & Historisch Bezit ABN AMRO (Art & History Foundation).

Kees van Dijkhuizen (Dutch, male, 1955) Chief Financial Officer

Kees van Dijkhuizen was appointed to the Managing Boards of ABN AMRO Group and ABN AMRO Bank on 1 May 2013. Kees van Dijkhuizen has been Chief Financial Officer since 1 June 2013. His present term expires in 2017. Supervisory positions: Member Supervisory Council, Museum Meermanno.

Other positions: Chairman, Government Committee on Export, Import and Investment Guarantees; Chairman, Committee on Supervision of Dutch Banking Association; Board Member, Stichting Duisenberg School of Finance; Board Member, Stichting Bewind (Protector and administrator, testamentary duties, regarding separated capital for part of the House of Oranje-Nassau); Member, AFM Capital Market Committee.

Caroline Princen (Dutch, female, 1966) People, Regulations & Identity

Caroline Princen was appointed to the Managing Boards of ABN AMRO Group, ABN AMRO Bank and Fortis Bank (Nederland) N.V. (as from 1 July 2010 merged with ABN AMRO Bank) on 1 April 2010. Caroline Princen is responsible for People, Regulations & Identity. Her present term expires in 2018. Supervisory positions: Member Supervisory Council, EYE Film Institute; Member Supervisory

Council, UMC (Universitair Medisch Centrum Utrecht); Member Supervisory Board, Koninklijke Coöperatieve Bloemenveiling FloraHolland U.A. Other positions: Member Executive Board, Stichting Steun Alzheimercentrum VUmc; Chairperson, Stichting ABN AMRO Foundation; Member IMD Foundation Board; Chairperson, Commissie Monitoring Talent naar de Top (as from February 2016).

Wietze Reehoorn (Dutch, male, 1962) Chief Risk Officer

Wietze Reehoorn was appointed to the Managing Boards of ABN AMRO Group, ABN AMRO Bank and Fortis Bank Nederland N.V. (as from 1 July 2010 merged with ABN AMRO Bank) on 1 April 2010. As Chief Risk Officer, Wietze Reehoorn is responsible for Risk Management & Group Strategy.

His present term expires in 2018. Supervisory positions: Member Supervisory Council, Rijksuniversiteit Groningen; Member Supervisory Board, Stichting Amsterdam Institute of Finance (AIF); Member Supervisory Council, Stichting Topsport Community. Other positions: Board Member, Abe Bonnema Stichting.

Corporate governance codes and regulations

ABN AMRO Group is required to comply with a wide variety of governance codes and regulations. This includes the Dutch Corporate Governance Code, the Banking Code and CRD IV. This section explains how ABN AMRO Group complies with these codes and regulations. More comprehensive overviews of ABN AMRO Group's compliance with such codes and regulations are published under the Corporate Governance section of abnamro.com.

Dutch Corporate Governance Code

We believe that corporate governance that meets high international standards significantly boosts confidence in companies. As such, compliance with the applicable corporate governance codes by financial institutions contributes significantly to restoring trust in the financial sector as a whole. As of the listing of the depositary receipts on Euronext Amsterdam, ABN AMRO Group is required to adhere to the Dutch Corporate Governance Code. ABN AMRO Group complies with all principles and best practices of the Dutch Corporate Governance Code that are applicable to it, except for the deviations and nuances which are described below. Additionally, ABN AMRO publishes under the Corporate Governance section of its website a detailed comply or explain list that also specifies which principles or best practices are not applicable to ABN AMRO Group.

ABN AMRO Group applies best practice provisions I.2 and IV.3.9, which provide that (a) each substantial change in the corporate governance structure of ABN AMRO Group and in compliance with the Code and (b) material changes in the Articles of Association and proposals to appoint members of the Supervisory Board (and members of the Managing Board, but this is not applicable to ABN AMRO Group), should be presented to the General Meeting as a separate discussion item or voting item, as applicable.

The only exception to this practice is that the Managing Board and the Supervisory Board may decide to place certain topics on the agenda under one agenda item if this is justified because of the interrelation between the topics. ABN AMRO Group considers this a further substantiation of this best practice provision, which may be necessary due to the fact that in practice there can be a situation in which proposals to amend the Articles of Association or the corporate governance structure of ABN AMRO Group are interrelated in such a way that separate votes on each of those proposals could lead to an imbalanced voting result and, as a consequence, to imbalance in the corporate governance structure.

ABN AMRO Group applies principle II.3, best practice provisions II.3.2 – II.3.4, principle III.6 and best practice provisions III.6.1 – III.6.3, which deal with actual and apparent conflicts of interest. However, ABN AMRO Group makes an exception with respect to conflicts of interest that are exclusively the result of the identical composition of the Managing Boards of ABN AMRO Bank and ABN AMRO Group and the Supervisory Boards of the respective entities. Moreover, ABN AMRO entered into an agreement on 3 November 2015 with Worldline in respect of its shareholding in Equens SE, where Managing Board member Mr Van Hall is a supervisory director. That transaction is expected to close in the first half of 2016. The procedure as imposed by the Dutch Corporate Governance Code and the Rules of Procedure of the Managing Board, respectively, in case of a conflict of interest has been strictly adhered to and accordingly Mr Van Hall has not and will not participate in the related Managing Board deliberations and decisions.

ABN AMRO Group does not fully apply principle III.5. Instead of having a separate remuneration committee and a selection and nomination committee, these committees are combined into one committee.

ABN AMRO Group applies best practice provision III.5.4, which provides for the responsibilities of the audit committee. However, in deviation from this provision, ABN AMRO Group has decided to assign responsibility for supervising the functioning of the internal risk management system and compliance with codes of conduct to the Risk & Capital Committee, instead of to the Audit Committee, as ABN AMRO Group has a separate Risk & Capital Committee.

Principle III.8 and best practice provision III.8.1 – III.8.4 are not applicable because ABN AMRO Group has a two-tier board.

ABN AMRO Group does not apply principle IV.2 (and best practice provision IV.2.8). In contradiction to this principle and provision, the issuing of depositary receipts by STAK AAG is primarily used as a protective measure and not to prevent a situation in which, as a result of shareholder absenteeism, a minority of shareholders can control the decision-making process at a General Meeting. Regulatory considerations have been decisive in choosing a structure with depositary receipts as a protective measure. Declarations of No Objection could be obtained up front only by means of a structure with depositary receipts. These Declarations of No Objection are required in connection with the (indirect) acquisition of a qualified holding in ABN AMRO Bank, and certain other regulated entities in which ABN AMRO Group holds an interest. Therefore, this structure provided the greatest possible certainty of adequate protection of ABN AMRO Group against a hostile takeover. Although the issuing of depositary receipts has been primarily set up as a protective measure and not to prevent absenteeism, STAK AAG does aim to promote the exchange of information between ABN AMRO Group on the one hand and holders of depositary receipts and shareholders on the other hand, for example, by organising a meeting of depositary receipt holders prior to every General Meeting.

Compliance with best practice provisions IV.2.1 – IV.2.7 is a responsibility of the board of STAK AAG. With respect to best practice provisions IV.2.5 and IV.2.8, the following applies. Under normal circumstances, STAK AAG will be guided by the interests of the holders of depositary receipts and will take into account the interests of ABN AMRO Group and the enterprises associated with it. In principle, STAK AAG each time has the obligation to grant a power of attorney to depositary receipt holders to exercise the voting rights attached to the underlying shares and will not exercise voting rights on the shares in ABN AMRO Group (unless depositary receipt holders have requested STAK AAG to do so). The foregoing could be different in hostile situations as described in Article 2:118a of the Dutch Civil Code. In this case, pursuant to the depositary receipt terms (administratievoorwaarden), STAK AAG should, when exercising the voting rights in accordance with the objects clause of STAK AAG as laid down in the articles of association of STAK AAG, primarily focus on the interests of ABN AMRO Group and its business.

ABN AMRO Group applies principle IV.3, which deals with equal and simultaneous provision of information to shareholders, however with the understanding that ABN AMRO Group will observe the Relationship Agreement with NLFI and the special position of STAK AAG. In this respect, reference is made to ABN AMRO Group's policy on bilateral contacts with shareholders, which is further described above and can be found on abnamro.com.

Dutch Banking Code

The Dutch Banking Code was introduced in 2010 to ensure that banks commit to and account for treating their customers with care while balancing the interests of various stakeholders. An updated Dutch Banking Code came into effect on 1 January 2015, along with the Social Charter (Maatschappelijk Statuut) which is complementary to the Dutch Banking Code. The updated Dutch Banking Code takes into account the recommendations of the Banking Code Monitoring Commission, the report of the Committee on the Structure of Banks, the government's view on the Dutch banking industry and the vision of the Dutch Banking Association (of which ABN AMRO Group is a member). The new Dutch Banking Code, along with the introduction of the Social Charter and the implementation of the Banker's Oath (together with the associated rules of conduct and disciplinary rules), is applicable to all employees of financial institutions in the Netherlands and emphasises the social role of banks and their commitment to meeting the expectations of society at large. The updated Dutch Banking Code sets out principles that banks with a corporate seat in the Netherlands should observe in terms of corporate governance, risk management, audit and remuneration. Although ABN AMRO Group does not have a banking licence itself, the Dutch Banking Code does apply to ABN AMRO Bank as the main entity within the group that holds a banking licence.

We are committed to complying with the Dutch Banking Code and devote a great deal of effort to ensuring that the spirit of the code is reflected in the behaviour of employees and in the culture of the bank. As such, we are pleased to confirm that ABN AMRO Group complies with the principles of the Dutch Banking Code 2015.

A principle-by-principle overview of the manner in which ABN AMRO Bank complies with the Dutch Banking Code 2015 is published on abnamro.com. Throughout 2015, we continued to improve the manner in which we apply the principles of the Dutch Banking Code, taking into account the focus areas indicated by the Dutch Banking Code Monitoring Committee.

All members of the Supervisory Board and Managing Board of ABN AMRO Group took the Banker's Oath on 4 July 2013. Taking the oath has been required by law since 1 January 2013. The oath is a confirmation of ABN AMRO's existing policy, which is fully in line with the bank's business principles and core values. Along with the introduction of a Social Charter and the update of the Dutch Banking Code, the Dutch banking industry has taken the initiative to have all employees take the Banker's Oath. Employees take the oath so that they will be personally responsible for complying with these rules of conduct and may be held accountable for non-compliance in the near future. At 31 December 2015, over 97% of our employees had taken the Banker's Oath. All employees of a bank in the Netherlands must have taken the Banker's Oath by 1 April 2016.

Subsidiaries of ABN AMRO Bank and the Dutch Banking Code

On 31 December 2015, ABN AMRO Bank had four Dutch subsidiaries with a banking licence: ABN AMRO Clearing Bank N.V., ABN AMRO Groenbank B.V., ABN AMRO Hypotheken Groep B.V. and International Card Services B.V. ABN AMRO applies the principles of the Dutch Banking Code to all of these Dutch bank subsidiaries on a consolidated basis. An explanation of the manner in which the Dutch bank subsidiaries comply with the Dutch Banking Code is published on abnamro.com.

CRD IV

Article 96 of CRD IV requires financial institutions to explain on their website how they comply with the requirements of Articles 88 through 95 of CRD IV. These Articles set out governance, disclosure, remuneration and nomination requirements for financial institutions. The obligation to publish such an overview was implemented in Dutch law by Article 134b of the Decree on prudential measures FMSA (Besluit prudentiële regels Wft). ABN AMRO has published on abnamro.com an overview of how ABN AMRO Group and ABN AMRO Bank comply with Article 134b of the Prudential Measures Decree and Article 96 of CRD IV.

Subsidiaries and international governance

ABN AMRO has designed group-wide policies and standards to ensure that all relevant parts of the organisation adhere to governance principles and requirements. Considering the varying business activities, local regulatory requirements, organisations and risk frameworks of subsidiaries and branches, actual implementation of the group-wide policies and standards may differ between the subsidiaries and branches. All entities in the international network adhere to ABN AMRO's principles of risk governance and a moderate risk profile.

International governance is in place which meets the requirements of our international organisation and both the home and host regulators. An annual review was performed in 2015 to ensure alignment with the international growth plans and changes in the regulatory environment, and measures have been implemented to further improve such alignment. These measures include changes to the second line of defence reporting lines and budget approval processes for ABN AMRO's international branches and subsidiaries (which became effective on 1 January 2016). The primary objective is to strengthen the reporting lines between Group Functions at the head office and Functions in the international branches and subsidiaries.

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Legal structure

Global structure of ABN AMRO Group

The full list of subsidiaries and participating interests as referred to in Article 414, Book 2 of the Dutch Civil Code has been filed with the Trade Register.

ABN AMRO Group N.V.

An overview of ABN AMRO's main operating companies (other than ABN AMRO Bank, for which a separate annual report is issued) and a description of their activities is

provided below. A more comprehensive overview of ABN AMRO's subsidiaries is provided in the Other Information section of the Annual Financial Statements. Introduction

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Governance Report / Corporate governance / Legal structure

Retail Banking

The Retail Banking business of ABN AMRO is supported by the following subsidiaries (this list is not exhaustive): ABN AMRO Hypotheken Groep B.V. offers all ABN AMRO labelled residential mortgage products, including Direktbank, Florius and MoneYou brands.

ALFAM Holding N.V. provides consumer loans via intermediaries under four different labels: Alpha Credit Nederland, Credivance, Defam and GreenLoans.

International Card Services B.V. (ICS) issues, promotes, manages and processes more than 25 different credit cards in partnership with companies, including credit card transactions and offers other financial services, such as revolving credit facilities.

MoneYou B.V. operates as an internet bank offering savings accounts and mortgages and is active in the Netherlands, Belgium, Germany and Austria.

Delta Lloyd ABN AMRO Verzekeringen Holding B.V. (ABN AMRO Verzekeringen) is an associate of ABN AMRO Bank N.V (49%). Delta Lloyd N.V. holds a 51% interest. ABN AMRO Verzekeringen offers life and non-life insurance products under the ABN AMRO brand.

APG-ABN AMRO Pensioeninstelling N.V. (ABN AMRO Pensions) is a joint venture of ABN AMRO (70%) and APG (30%), the largest pension institution in the Netherlands. ABN AMRO Pensions is a premium pension institution (PPI) which offers pension schemes without insurance based on long life or death.

Private Banking

The Private Banking business of ABN AMRO is supported in France and Germany by the following subsidiaries (this list is not exhaustive):

Banque Neuflize OBC S.A. offers a private banking model based on an integrated approach to private and commercial wealth articulated around dedicated advisory and product offers.

Bethmann Bank AG is a private bank and enjoys a strong local heritage and brand recognition in the German market. Bethmann covers all major regions of Germany and offers all Private Banking and Private Wealth Management related services.

Neuflize Vie S.A. is a joint venture of Banque Neuflize OBC (60%) and AXA (40%). Neuflize Vie is a life insurance company that offers life insurance products to (ultra) high net-worth individuals and has developed customised solutions with a focus on unit-linked contracts.

Corporate Banking

The Corporate Banking business of ABN AMRO is supported by the following subsidiaries (this list is not exhaustive):

ABN AMRO Clearing Bank N.V. is a global leader in derivatives and equity clearing. It is one of the few players currently able to offer global market access and clearing services on more than 85 of the world's leading exchanges and operates from several locations across the globe.

ABN AMRO Commercial Finance Holding B.V. is active via subsidiaries in the Netherlands, France, Germany and the United Kingdom, providing working capital funding on debtors and inventory.

ABN AMRO Lease N.V. delivers asset-based solutions (equipment lease and finance) and is active in the Netherlands, Belgium, Germany and the United Kingdom.

Group Functions

The Functions business of ABN AMRO is supported by the following subsidiaries (this list is not exhaustive): ABN AMRO Funding USA LLC is active in the US market, issuing ABN AMRO's US Dollar Commercial Paper funding for clients operating in the US and for clients with US dollar loans.

Stater N.V. offers administrative services related to mortgage loans. Stater works for ABN AMRO and other parties supplying mortgage loans.

Supervisory Board report

Supervisory Board report

The Supervisory Board is pleased to present the Supervisory Board report for 2015. In this report, the Supervisory Board provides an overview of the focus areas and the most important activities covered in 2015, including those of its committees.

Overview

The Supervisory Board held seven plenary meetings, four executive meetings, four additional meetings and conferred twice by conference call in 2015. Focus areas included the composition and succession planning of the Supervisory Board, the impact of laws and regulations on the organisation, contacts with regulators, the public debate on remuneration, and the preparations for the IPO, resulting in the listing of the first tranche of depositary receipts for shares on the Amsterdam stock exchange on 20 November 2015. The committees of the Supervisory Board discussed various topics in order to prepare the decision-making process of the Supervisory Board, such as ABN AMRO's capital structure and funding strategy, the effectiveness of risk management and control systems, the appointment of the external auditor, topics with regard to remuneration, selection and appointment, and various human resources-related topics.

A description of the duties, responsibilities and current composition of the Supervisory Board as well as the procedures for appointment, suspension and dismissal of its members is provided in the Corporate Governance section of this Annual Report. The same applies to the gender, age, profession, nationality, principal position, other positions insofar they are relevant to the performance of their duties, the date of initial appointment and the current term of office of the members of the Supervisory Board, as well as to the current composition of its committees. The principal points of the remuneration report concerning the bank's remuneration policy are included in the Remuneration Report of this Annual Report. These subjects are deemed to be incorporated by reference into this Supervisory Board report.

Supervisory Board meetings

The Supervisory Board held seventeen meetings in 2015, seven of which were scheduled plenary meetings. All of these scheduled plenary meetings were held in the presence of members of the Managing Board (depending on the agenda, either all members or only the relevant members) and the Company Secretary. Other members of the Management Group and the external accountant were regularly invited to present on specific topics. The Supervisory Board also held four scheduled plenary internal meetings with only the members of the Supervisory Board and the Company Secretary being present ('executive meetings'). The Chairman of the Managing Board attended some parts of these meetings.

The Supervisory Board conferred twice by conference call. Eleven resolutions of the Supervisory Board were adopted outside a meeting. Four additional meetings were scheduled in anticipation of the IPO in 2015, which were attended by members of the Supervisory Board and the Managing Board, the Company Secretary and special invitees. All Supervisory Board members were present at the scheduled plenary meetings held in 2015, with the exception of one member who was absent one meeting. All Supervisory Board members were present at the executive meetings held in 2015, with the exception of one member who was absent two meetings and one member who was absent one meeting. In 2015 four informal sessions were scheduled with members of the Supervisory Board, Managing Board and the Managing Directors. All members of the Supervisory Board were

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present at these sessions with the exception of one member who was absent one session. This attendance rate illustrates the fact that the members of the Supervisory Board are highly engaged in ABN AMRO.

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Members of the Supervisory Board and the Managing Board were also in contact on a regular basis outside of the Supervisory Board meetings. The Chairman of the Managing Board and Chairman of the Supervisory Board met on a regular basis. Various formal consultation meetings and informal theme sessions between the Supervisory Board, the Managing Board and the Group's Employee Council attributed to a strong and substantive relationship. The Chairman of the Supervisory Board and the Company Secretary prepared the agenda for all meetings of the Supervisory Board in 2015.

Focus areas in 2015

In performing its supervising and advising duties and related activities, the Supervisory Board, guided by the interests of the organisation and the undertaking connected with it, kept close track on the positioning and the performance of the bank also in 2015, taking into account the fast-changing economic, regulatory and digitising environment in which the bank operates. In addition to recurring topics, the Supervisory Board devoted special attention to the following topics in 2015.

Composition of the Supervisory Board

On 31 March 2015, Mr Wakkie decided to resign as a member of the ABN AMRO Supervisory Board with immediate effect. Mr Wakkie considered himself to be particularly responsible for the decision to pay out the statutory temporary fixed allowance to six Managing Board members and the public commotion that ensued over that decision.

On 2 April 2015 the General Meeting, following the nomination of the Supervisory Board, reappointed Mr De Haan as Supervisory Board member for a period of one year (until the General Meeting in 2016). Mr De Haan was also appointed to succeed Mr Wakkie as Vice-Chairman of the Supervisory Board with effect from 2 April 2015. The Employee Council rendered a positive advice regarding the nomination of Mr De Haan and the Dutch central bank indicated that the

reappointment of Mr De Haan as such did not necessitate a reassessment of his suitability.

Ms Zoutendijk succeeded Mr De Haan as Vice-Chairman of the Supervisory Board from 20 Augustus 2015. Ms Oudeman stepped down as a member of the Supervisory Board with effect from 30 September 2015. Her decision was related to other positions she held and the time required to fulfil these positions, also taking into consideration the new phase the bank was entering.

The Supervisory Board considers all of its members to be independent pursuant to the Dutch Corporate Governance Code.

Succession planning of the Supervisory Board

The composition and succession planning of the Supervisory Board were discussed extensively within the Supervisory Board, with NLFI and with the Joint Supervisory Team of ABN AMRO in various meetings. Discussion subjects included the desired diversity of expertise and experience. The importance of having sufficient banking knowledge and expertise to ensure a balanced composition of the Supervisory Board was acknowledged during these meetings. The Supervisory Board is pleased to nominate Mr Dorland, Ms Leeflang and Mr Tiemstra for appointment to the Supervisory Board of ABN AMRO for a period of four years. The Supervisory Board considers their extensive knowledge and experience in financial management, IT, digital innovation and legal affairs to be a great asset to the Supervisory Board in its supervision of ABN AMRO's activities. The nominations of Mr Dorland, Ms Leeflang and Mr Tiemstra have been approved by the supervisory authorities. To enable an efficient start as members of the Supervisory Board, Mr Dorland, Ms Leeflang and Mr Tiemstra are participating in meetings as passive observers and are following a tailor-made introduction programme.

Mr De Haan will resign from the Supervisory Board on 18 May 2016, in accordance with the rotation schedule. In addition, Mr Van Slingelandt has announced that he will not be available for reappointment at the end of his current term at the General Meeting in May 2016. The Chairman to be appointed by the Supervisory Board as of the General Meeting will be announced prior to that meeting as soon as all regulatory approvals have been

Business Report

obtained. In addition, ABN AMRO is in the regulatory approval process to add further banking expertise to the Supervisory Board.

Regulators and regulations

The Supervisory Board met with representatives of the Dutch central bank and the European Central Bank on several occasions in 2015. During a regular meeting in April, the Single Supervisory Mechanism (SSM) Framework and approach to supervision were set out and a range of supervisory topics were discussed, such as the SSM supervisory priorities for 2015. During one of these meetings the European Central Bank's feedback on the Supervisory Review and Evaluation Process (SREP) was considered and was subsequently discussed in-depth in the Supervisory Board. The Supervisory Board felt comfortable with the draft results, but at the same time expressed its concerns about the significant impact of implementation of the various regulatory requirements on the organisation. In response to the draft SREP letter, the Supervisory Board welcomed the initiatives of various business lines to further strengthen the second line of defence functions.

A delegation of the Dutch central bank and the European Central Bank discussed the major findings of the European Central Bank on risk governance and risk appetite, as set out in the Thematic Review on Risk Governance and Appetite (RIGA) with the Chairmen of the Supervisory Board and the Managing Board. The Supervisory Board devoted detailed attention in its meetings to the various findings and recommendations concerning its own functioning and the bank's corporate governance in general. Follow-up on the recommendations and the actions already taken were among the issues discussed. The supervisory priorities and thematic reviews for 2016 were discussed during the semi-annual meeting held with the Joint Supervisory Team and a delegation of the Supervisory Board on 12 November 2015.

The Supervisory Board was regularly updated by the Risk & Capital Committee on developments relating to the preparations for the application for the Basel II programmes Advanced Measurement Approach (AMA), an operational risk management and measurement methodology, and Internal Model Approach (IMA), a methodology for the measurement of market risk.

The Supervisory Board was informed of the IPO-critical functioning of the AMA framework and on the optimisation of the AMA controls. The Supervisory Board was informed on a regular basis about the progress of the IMA application. The Supervisory Board critically examined the progress of the various processes. The Supervisory Board also recognised the importance of further strengthening the risk management organisation and regularly discussed with the Managing Board the timelines and impact on the organisation of the timeconsuming preparations required for the applications for both programmes.

The Supervisory Board was notified by the Managing Board of whistleblower reports on its Private Banking office in Dubai regarding violations of internal rules and the subsequent investigations started by both the bank and the regulators (the Dutch central bank and the Dubai Financial Services Authority (DFSA)). The Supervisory Board closely followed developments in the file. The Supervisory Board expressed its concern and periodically monitored and assessed the effectiveness of the steps taken by the Managing Board. The Supervisory Board ascertained that the regulators were informed promptly and that a remediation programme covering the entire portfolio was started without delay. The Supervisory Board welcomed further tightening of the client acceptance procedures and the Managing Board's efforts to strengthen reporting lines to head office of the second line of defence functions globally and to improve both employee awareness and behaviour in order to get all files in order. The fines imposed by the Dutch central bank and DFSA after their investigations were completed were discussed in its November meeting. The Supervisory Board appreciates that both regulators mitigated their fines on account of ABN AMRO's cooperative stance during the investigations and the proactive measures the bank had already taken.

Remuneration discussion

In line with a decision in 2012 endorsed by the shareholder, it was decided to pay out as of 1 January 2014 the statutory temporary fixed allowance to six Managing Board members. This resulted in a major commotion in March 2015, both within and outside the

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Governance Report / Supervisory Board report

organisation, after which the relevant Managing Board members decided to waive their entitlement to the allowance.

IPO

An important topic on the Supervisory Board's agenda in 2015 was the preparation for the IPO, resulting in the listing of the first tranche of depositary receipts for shares in ABN AMRO Group on the stock exchange on 20 November 2015.

On 22 May 2015, Dutch Parliament decided, based on the proposal of the Dutch Minister of Finance, to start preparations for an IPO. To prepare ABN AMRO for a possible IPO, the Managing Board and the IPO Office regularly briefed the Supervisory Board on the progress of the preparatory activities during the seven regular Supervisory Board meetings. In 2015, four additional meetings were held by the Supervisory Board in the presence of the Managing Board, the Company Secretary and the head of the IPO Office in anticipation of the possible IPO in 2015 to monitor the progress made.

The IPO Special Committee, appointed in 2014 by the Supervisory Board from amongst its members, advised the Supervisory Board also in 2015 on recurring topics regarding the IPO and prepared related decisions. The IPO Special Committee, and in particular Mr Wakkie, played an important and proactive role in challenging the effectiveness of the options for defence measures against hostile situations in combination with the required issuance of the Declaration of No Objection by the European Central Bank. During the meetings on the IPO, the Supervisory Board closely monitored and challenged the various consultations of, among others, the members of the Managing Board with NLFI on the adequate protection of defence mechanisms as from the date of the IPO. Particular attention was paid to the moment of activation of these mechanisms, which the Supervisory Board deemed to be of great importance to the continuity of ABN AMRO.

The Supervisory Board was kept closely abreast of developments in the proposed amendments to the Articles of Association of ABN AMRO Group as well as to other IPO-related governance documents in preparation for the IPO, including negotiations on the Relationship Agreement. With a view to the forthcoming IPO, the Supervisory Board was updated on ABN AMRO's communication plan, and six members attended a valuation workshop. The workshop provided insight into the different valuation methods that are generally used for banks, the main drivers in valuation, the market context and the method of determining a price range for a company.

Furthermore, the Supervisory Board actively monitored developments in the issuance of the Declarations of No Objection by the Dutch central bank and the European Central Bank and was closely involved in preparations of and developments relating to the drafting of the prospectus. Given the organisation's ongoing focus on the IPO, the Supervisory Board repeatedly emphasised that execution of the bank's long-term strategy should be the guiding principle in decision-making processes. The Supervisory Board welcomed the fact that the Dutch Parliament gave the IPO the green light and that the regulators issued the Declarations of No Objection. The Supervisory Board was also pleased with the joint announcement of NLFI and ABN AMRO on 27 October 2015 of the intention to proceed with an initial public offering of ABN AMRO on Euronext Amsterdam. The Supervisory Board followed the IPO process very closely and, notwithstanding its critical role, experienced its involvement by the Managing Board in general as timely and the cooperation as pleasant. Interactions with the Employee Council in light of the possible IPO were also conducted in an open and constructive manner in 2015.

Monthly topics

In addition to the important topics mentioned above, the following topics were also discussed during the various meetings held throughout the year.

In January the Supervisory Board discussed the Yearly Strategic Review. The Supervisory Board recognises the importance not only of safeguarding clients' ongoing confidence in the bank's services, and especially assurance of the value chain in the longer term, but also acknowledges the importance of innovation and trends within the context of the rapidly changing technical and digital environment. The Supervisory Board values the

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discussions it has with the Managing Board on strategic issues, helping it to pursue clear strategic choices and to establish priorities and conditions for the long term, and concluded that developments were still substantially in line with the bank's long-term strategy.

In its February meeting, the Supervisory Board extensively reviewed, discussed and subsequently agreed on the updated business plan and the proposed financials until 2018. The Supervisory Board evaluated and discussed with KPMG (the independent external auditor) and the Managing Board the independent auditor's report that KPMG issued on the 2014 consolidated financial statements. Furthermore, the proposal for the final dividend over 2014 to the annual General Meeting and the proposed dividend policy were discussed and approved by the Supervisory Board. The Supervisory Board approved the fourth-quarter 2014 results and the accompanying press release and was informed of the draft agenda for the Annual General Meeting. Following the advice of the Managing Board, the Supervisory Board decided to nominate EY as its external auditor for the financial audit of ABN AMRO and its subsidiaries for the financial years 2016 to 2018.

The Supervisory Board was updated on the new Banking Code which came into force on 1 January 2015. On that occasion, the Supervisory Board was satisfied with how ABN AMRO structured the introduction of the Banker's Oath throughout the organisation. The Supervisory Board approved the results of the 2014 organisation-wide financial and non-financial targets, in connection with the review of the Managing Board member's performances over 2014.

The consolidated Annual Report 2014, the consolidated Annual Financial Statements 2014 and all annexed information of ABN AMRO Group were reviewed and discussed in March with the Managing Board, Group Audit and KPMG and subsequently approved by the Supervisory Board on 19 March 2015. The Supervisory Board approved the issuing of these documents on 20 March 2015 and took note of the Management Control Statement 2014, including the process followed for its preparation. To ensure consistency to amendments in laws and regulations in respect of remuneration, the Supervisory Board approved the revised Global Reward Policy and

approved the targets and assessment standards for the organisation-wide 2015 financial and non-financial targets and for the Managing Board. Two members of the Supervisory Board visited the business of ABN AMRO Hypotheken Groep in Amersfoort (Netherlands), a subsidiary of the bank, to obtain sufficient insight into developments within mortgages, such as the interest rate trend, volumes and margins, and their impact on the business. Also in March, the entire Supervisory Board adopted the rules of conduct for the banking sector.

The Annual General Meeting took place in April and was attended by all of the members of the Supervisory Board. Important topics were the reappointment of Mr De Haan, the remuneration discussion and the update on the whistleblowing files in Dubai. Apart from the Annual General Meeting, the Chairman of the Supervisory Board regularly met with the Board of Directors of NLFI, at the time the sole shareholder of the bank. Also in April the Supervisory Board visited TOPS IT Computer Centre in Amstelveen (Netherlands). The visit consisted of deep dives on information security and data management, an explanation of cloud computing, related developments, and a visit to the data centre where the members of the Supervisory Board experienced the different channels. Furthermore, three members of the Supervisory Board shared views with four participants of the Employee Council on the bank's governance model.

In May the Supervisory Board received a report on the review process of the files of SME clients who had long-term interest rate derivatives with ABN AMRO. To obtain an in-depth update on interest rate derivatives, four members of the Supervisory Board attended an educational session devoted to this topic in 2015. The workshop covered interest derivatives in general, duty of care, the recent and ongoing re-evaluation of interest derivatives and lessons learned. The Supervisory Board approved the first-quarter 2015 results and the related press release. Also in May the Supervisory Board reviewed, discussed and subsequently approved the 2015-2018 financials and agreed to the proposed Internal Capital Adequacy Assessment Process (ICAAP) and Liquidity Adequacy Assessment Process (ILAAP). Also, several IPO-related draft governance documents in preparation for the IPO were brought to the attention of

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the Supervisory Board, and the Supervisory Board challenged the bank's external communication strategy with the Managing Board.

Due to a vacancy (and therefore the lack of quorum) in the Remuneration, Selection & Nomination Committee, the Supervisory Board decided in June outside of a meeting to approve, among other things, the expansion of the list of Identified Staff 2015, a 'good leaver request' as part of the ABN AMRO Variable Compensation Plan, the non-cash instrument to be awarded following the IPO pursuant to the terms and conditions of the Variable Compensation Plan, and the establishment of the updated mandate of the Remuneration, Selection & Nomination Committee in consideration of amendments in laws and regulations.

In July, the yearly tripartite consultative meeting between the Supervisory Board, the Managing Board and the Employee Council took place and was attended by six members of the Supervisory Board. A diversified and open dialogue on remuneration affairs was conducted at this event.

In August, after a review and discussion with the Managing Board, the Supervisory Board approved the second-quarter 2015 results and the Interim Report 2015 for ABN AMRO Group, including the related press release, as well as the abbreviated financial report of ABN AMRO Bank. The Supervisory Board furthermore agreed with the proposed adjustments to the Bank Risk Appetite 2015 and the proposed Bank Risk Appetite for 2016. In August the Supervisory Board approved the proposal to declare an interim dividend to the sole shareholder at that time.

To ensure compliance with the risk governance requirements of the CRD IV regulation and to follow up on SREP recommendations, the Supervisory Board discussed in detail, challenged, and subsequently approved the proposals for amending the risk policy governance structure, the list containing the critical risk policies and ABN AMRO's charters, and the blueprint model for international governance of compliance. The Supervisory Board also agreed with the proposed amendments to the rules of procedure of the Supervisory Board and the Managing Board, including incorporation of the procedure for the appointment and resignation of the Global Head of Compliance & Conduct.

In September the Supervisory Board extensively discussed and approved the Managing Board's proposals on international governance of the second line of defense functions at ABN AMRO.

In October the Supervisory Board adopted, outside a meeting, a proposal to adjust the Variable Compensation Plan regarding replacement of the non-cash instrument to be awarded following the IPO. Furthermore, the Supervisory Board paid special and extensive attention to the application of the Act on the Remuneration Policy for Financial Undertakings (Wet beloningsbeleid financiële ondernemingen, Wbfo) with regard to the 20% variable compensation limit as proposed by the Managing Board.

Introduction

Other

In November, the Supervisory Board approved the third-quarter 2015 results and the related press release. A deep dive with regard to developments at ECT Clients, presented by both the first and second line of defence, provided more insight into the ECT Clients market, its clients, relevant market developments and the way risk management is performed. The yearly meeting of members of the Supervisory Board and trainees of the Next Generation Network, the bank's trainee network, also took place in November. Topics such as the role of the Supervisory Board in restoring trust in the bank, and the contribution of the Banker's Oath to rebuilding trust in the financial sector, were discussed in an interactive session. In November the Chairman of the Supervisory Board attended a recurring annual meeting organised by the Netherlands Authority for the Financial Markets for chairmen of supervisory boards of large banks, during which the subject of client centricity was discussed.

In its December meeting, the Supervisory Board approved the bank's Risk Governance Charter. It discussed the outcome of the annual Employee Engagement Survey, which revealed that 76% of the bank's employees feel engaged with ABN AMRO. The Supervisory Board was pleased with the outcome and with the response rate of 83%. The Managing Board presented an action plan to the Supervisory Board relating to the evaluation of the long-term strategy. Furthermore, the Supervisory Board extensively discussed the proposed policy regarding transactions in the bank's financial instruments by members of the Managing Board.

Also in December the Supervisory Board approved the framework of the financial and non-financial targets for 2016 for the Managing Board and members of the Management Group with a direct reporting line to the Supervisory Board, the revised Global Reward Policy and the Global Reward Governance Matrix, as well as the Managing Board's proposed approach to application of the Act on the Remuneration Policy for Financial Undertakings (Wet beloningsbeleid financiële ondernemingen, Wbfo) for the year 2015.

Other topics

The Supervisory Board received quarterly updates in 2015 on material compliance matters and the effectiveness of compliance procedures, the main legal files and proceedings, and the handling of claims. These are recurring topics on the agenda. Furthermore, the Supervisory Board reviewed the Enterprise Risk Management Reports regularly. In these reports the actual and forecasted risk profile is benchmarked against the bank's risk appetite. The Supervisory Board reviewed and discussed the correspondence with the Dutch central bank, the European Central Bank and the Netherlands Authority for the Financial Markets on a regular basis and was frequently updated on pending regulatory topics by Group Audit and the Compliance & Conduct department. The Supervisory Board was updated quarterly on important topics within the organisation by the Chairman of the Managing Board and informed of the corporate, private and retail banking activities and the developments in the field of information technology, digital innovation and business process change by the members of the Managing Board responsible for these activities.

In 2015 the Supervisory Board was also kept closely abreast of ABN AMRO's capital structure and funding strategy and periodically approved the bank's most recent Capital and Funding Plans. The Supervisory Board regularly received detailed updates from the Chief Financial Officer of the Managing Board on the current figures and projections of the bank's financial results, including developments regarding loan impairments. The Supervisory Board used the Quarterly Execution Monitoring tool to discuss with the Managing Board on a quarterly basis the main results with respect to realisation of the strategic objectives, the progress of activities, initiatives and guiding principles, and the progress made on the long-term strategic goals, performance targets and alignment of the strategic priorities with the bank's long-term strategy.

Performance evaluation

The Supervisory Board reviews its performance and that of the Supervisory Board committees on an ongoing basis. The self-assessment for 2014 was completed in the first quarter of 2015 and action points were defined. The Supervisory Board carried out a review of its own performance, the performance of its committees and of its individual members over full-year 2015, which was completed in the first quarter of 2016. The selfassessments include an evaluation of the effectiveness of the introductory and lifelong learning programmes. Important topics covered in the evaluation are the Supervisory Board's role with respect to strategy, risk management and internal control, culture and behaviour within the organisation, the dynamics between the Supervisory Board members, the composition and expertise of the Supervisory Board, the functioning of the members of the Supervisory Board and of the Committees and their members and the search process used for new members to the Supervisory Board. The effectiveness of the procedures for the meetings of the Supervisory Board are also part of the evaluation. The self-assessments are supported by an independent corporate advisory firm.

Annual accounts 2015 and dividend

The Supervisory Board reviewed the Annual Report 2015, the Annual Financial Statements 2015 and all annexed information of ABN AMRO Group. These documents were evaluated and discussed with the Managing Board, Group Audit and KPMG (the independent external auditor) and the Supervisory Board took note of the independent auditor's report that KPMG issued on the Annual Financial Statements 2015. The Supervisory Board was provided with sufficient assurance regarding the information provided by the Managing Board in the annual Management Control Statement. The Supervisory Board is satisfied that the Annual Report and the Annual Financial Statements 2015 comply with all relevant requirements. The Annual Report 2015, the Annual Financial Statements 2015 and all annexed information of ABN AMRO Group were approved by the Supervisory Board on 15 March 2016. The Supervisory Board furthermore approved the Managing Board's proposal to the Annual General Meeting on the final dividend over 2015.

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Governance Report / Supervisory Board report / Supervisory Board Committees

Supervisory Board Committees

Remuneration, Selection & Nomination Committee

The Remuneration, Selection & Nomination Committee (the 'Committee') held four regular meetings in 2015. In addition, an extra meeting was scheduled in September to allow the Committee to discuss among other things the impact of the Act on the Remuneration Policy for Financial Undertakings (Wet beloningsbeleid financiële ondernemingen, Wbfo) on the organisation. All members attended the regular meetings and also the extra meeting in September. The Chairman of the Managing Board, the Managing Board member responsible for People, Regulations & Identity, representatives of HR and the Company Secretary also joined these meetings.

Mr Wakkie stepped down as Chairman of the Committee with effect from 31 March 2015 and was succeeded in that capacity on 30 April 2015 by Mr Ten Have. Due to the departure of Mr Wakkie, the Committee consisted of three Supervisory Board members for the remainder of the year instead of the required number of four, which resulted in a lack of quorum. The Supervisory Board adopted the required decisions relying upon the Committee's advice during that period. Mr Meerstadt joined the Committee as a member with effect from 1 October 2015 and filled in the vacancy created by the departure of Ms Oudeman as a member of the Supervisory Board (and consequently as a member of the Committee) from 30 September 2015.

Important focus areas of the Committee in 2015 were, among other things, succession planning and the recruitment and selection procedure for the Chairman, Vice-Chairman and members of the Supervisory Board. The Committee, and in particular the Committee Chairman, played a key role in the search processes, supported by external executive search expertise. In addition, the Chairman maintained close contacts with the relevant stakeholders and closely involved the other members of the Committee and the Supervisory Board. Another focus area concerned the changes and succession planning within the Management Group. The Committee was furthermore updated regularly on the negotiations for a new collective labour agreement, challenged the Managing

Board on its approach and kept track of the progress of these negotiations.

During the regular and extra meetings of the Committee, a range of subjects were discussed and decided upon. In February, the Committee extensively discussed and approved the results of the 2014 organisation-wide financial and non-financial targets and issued positive advice to the Supervisory Board in connection with the review of the Managing Board's performance over 2014. The Committee also agreed with the final list of Identified Staff for 2014 and the proposed Net Asset Value growth of the performance certificates for 2014. The Committee furthermore discussed and approved the performance ratings, variable compensation and proposed salaries for the members of the Management Group with a direct reporting line to the Supervisory Board, as well as the pool for variable compensation for 2014. Also in February the Committee approved three waivers under the Global Reward Policy.

In March the Committee issued positive advice on the adjustments to the Global Reward Policy in order to ensure compliance with recent changes in laws and regulations, such as the Wbfo and the Supervisory Regulation on Sound Remuneration Policies 2014 (Regeling Beheerst Beloningsbeleid 2014). The Committee issued positive advice on the targets and assessment standards for the organisation-wide 2015 financial and non-financial targets and consented to the provisional list of Identified Staff for 2015.

The Committee consented in June to the proposal to expand the list of Identified Staff for 2015 and agreed to provide a positive advice on the proposal to the Supervisory Board. The Committee also issued positive advice on both a good leaver request as part of the ABN AMRO Variable Compensation Plan and a proposal on the treatment of the non-cash instrument to be awarded to Identified Staff members in case of the IPO pursuant to the terms and conditions of the Variable Compensation Plan. Furthermore, the Committee extensively discussed the proposals related to the job market allowance policy. Due to the EBA guidelines and

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the entry into force of the Wbfo, the division of mandates including decision-making processes, between the Committee and the Supervisory Board, that had been in place since March 2012 was subject to review. The related proposal received the Committee's positive advice in June and was subsequently adopted by the Supervisory Board.

In September the Committee issued positive advice on the proposal to adjust the Variable Compensation Plan with regard to the replacement of the non-cash instrument portion from performance certificates into depositary receipts representing shares in the capital of ABN AMRO Group following the IPO. Furthermore the Committee received information on the proposed application of the Wbfo regarding the 20% variable compensation limit and on the organisation-wide impact and reputational consequences. The Committee discussed the proposal, which led to several amendments.

The Committee issued positive advice in November on the framework of the financial and non-financial targets for 2016, including the organisation-wide KPIs as well as the KPIs for the members of the Management Group with a direct reporting line to the Supervisory Board. The Committee advised positively on the proposed update of the Global Reward Policy and the Managing Board's approach to the 20% variable compensation limit under the Wbfo, following the decision in September. These proposals were subsequently adopted by the Supervisory Board. The Committee also actively discussed the results of the Employee Engagement Survey 2015.

Audit Committee

In 2015, the Audit Committee (the 'Committee') held seven regular meetings to discuss the financial results, quarterly reports, the interim and annual accounts, quarterly press releases and key audit matters as reported by internal and external audit. All regular meetings of the Audit committees were attended by the chairman of the Managing Board, the CFO, the CRO, Head of Group Audit and the independent external auditor. In addition to the Audit Committee meeting, the Chairman of the Audit Committee regularly held separate sessions with the independent external auditor, the head of Group Audit and the CFO. All matters discussed in a meeting of the Audit Committee and which were relevant for the Supervisory

Board were directly verbally reported in the next meeting of the Supervisory Board. The Chairman of the Audit Committee met with the independent auditor four times in 2015 focusing on the progress of the external audit and other subjects relevant to the meeting of the Audit Committee. Directly after the meeting in which the annual accounts were discussed, the Audit Committee met with the independent external auditor to seek confirmation that all relevant matters from the audit came to the attention of the Audit Committee.

The Committee held four executive meetings in 2015, without members of the Managing Board or the external auditor being present, which took place immediately prior to the regular meeting of the Committee. In these executive meetings, the Committee reviewed, among other things, the independence of the external auditor, status updates and updates on improvement programmes with regard to financial and regulatory reporting and data quality, topics related to the IPO readiness of ABN AMRO, and the performance of Group Audit. The Chairman of the Audit Committee and other members of the Committee occasionally had contact with the Head of Group Audit to discuss the progress of the execution of the audit plan and audit issues.

In the meetings the Committee discussed, among other things, financial reporting, internal controls over financial reporting, the role, performance and reports from Group Audit, reports from the external auditor, the auditor's independence, adherence to laws and regulations governing financial reporting, regulatory matters concerning financial and regulatory reporting, and signals from clients suggesting possible internal control issues. The Audit Committee closely monitored the financial and regulatory reporting improvement programmes in 2014, and continued to do so in 2015. The Committee was regularly updated on the progress of these programmes by the Managing Board, Group Audit and the external auditor. The Committee was informed on, and discussed, all letters from the ECB and DNB that were of interest to the Committee.

In February the Committee received the report of the external auditor regarding the 2014 Consolidated Financial Statements and subsequently discussed, approved, and advised the Supervisory Board to approve the quarterly

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report for Q4 2014. Furthermore, the dividend policy and the 2014 dividend proposal, the financial projections up until 2018 and the correlated scenario and sensitivity analyses, the Group Audit medium-term audit plan and modifications to the Auditor Independence Policy were approved. Also, the Audit Committee advised the Supervisory Board to nominate EY at the General Meeting as the external auditor for the reporting years 2016 to 2018. Lastly, the Audit Committee discussed the Group Audit Opinion Q4 and its performance in 2014 and the focal points for the annual reporting and General Meeting highlighted by NLFI.

In March 2015 the Committee took notice of the Annual Reports 2014 of ABN AMRO Group N.V. and ABN AMRO Bank N.V., the Management Control Statement, and took note of the auditor independence assessment by Group Audit. Lastly, the Committee discussed the minutes of various audit committees abroad.

In May, and in addition to the regular agenda items, theAudit Committee discussed and made additional recommendations on the audit plan 2015 of the external auditor. A proposal was discussed on making improvements to regulatory reporting. Furthermore, the Audit Committee discussed the newly designed Group Audit Opinion reporting form, which provides a more transparent view on the follow-up of audit issues.

In August the Committee discussed the status of the project 'the calculation of impairments in line with EU IFRS', the development of interest and fee income, core Tier 1, the cost/income ratio and Basel IV developments. Furthermore, the Committee discussed the SME Interest Derivatives provision. The Committee agreed an interim dividend and advised the Supervisory Board accordingly. Furthermore, the Group Audit Performance Report was discussed. Lastly the plan for the transition of the external audit from KPMG to EY was discussed. The Audit Committee was kept updated on the progress of the transition.

The Committee meeting in November was primarily focused on the upcoming IPO. The Committee agreed on the Quarterly Report for the third quarter, after discussing the internal financial reporting and the Q3 report of the independent external auditor. The Supervisory Board was advised accordingly. In addition, the progress report

concerning the Finance & Risk Alignment Architecture Initiative was discussed. In December, the Committee received and discussed the yearly update from the Group Tax department.

The Committee discussed internal control, governance, risk and compliance, based on the quarterly internal and external audit reports. A focus area in this respect is the procedures for financial reporting, including the procedure for the establishment of loan impairments and the timelines in which impairments are established. The Committee extensively discussed the performance and audit ratings of the bank's first and second line departments on a quarterly basis. During each meeting it devoted attention to the robustness and development of the financial results and ratios, including the level of loan impairments. The Committee also discussed financial reports issued to supervisory authorities, such as the COREP and FINREP reports. The Chairman met with the ECB and DNB two times in 2015.

Furthermore, Committee members met managers of different departments to remain well informed about the subject to be supervised by the Audit Committee. Among other things, Committee members visited TOPS, mainly discussing safety, data security and in-house cloud developments.

The Audit Committee reviewed and discussed the Annual Report 2015 and the Annual Financial Statements 2015 of ABN AMRO Group N.V. and all annexed information in March 2016.

Risk & Capital Committee

The Risk & Capital Committee (the 'Committee') held four scheduled meetings in 2015. One extra meeting was used to discuss a business deep dive and specific lessons learned. All Committee members were present at the scheduled meetings held in 2015, with the exception of one member who was absent one meeting. All relevant issues discussed in the Risk & Capital Committee were reported to the Supervisory Board.

Mr Wakkie stepped down as a member of the Risk & Capital Committee with effect from 31 March 2015. Ms Oudeman stepped down as a member of the

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Committee with effect from 30 September 2015. Both vacancies are expected to be filled as of the General Meeting at 18 May 2016.

A regular item on the Committee's agenda is the Enterprise Risk Management (ERM) Report, which provides insight into the state of affairs of all risk types identified in the risk taxonomy. The ERM report aims to identify cross-risk type issues and/or effects and to provide a single integrated view on the bank's risk profile, benchmarked against the bank's risk appetite (which is defined annually by the Managing Board and approved by the Committee, the Supervisory Board and the General Meeting) and its strategy.

Other important subjects included the bank's top individual exposures and lessons learned with regard to specific impairments. Based on the ERM Report, the Committee also held in-depth discussions on operational risks, market risks and credit concentration risks. Furthermore, in most meetings an update was provided on the applications for the Advanced Measurement Approach and the Internal Models Approach.

Other recurring agenda items included the quarterly legal and compliance updates. Based on these reports the Committee discussed major individual legal and compliance files, the performance of the compliance and legal functions, compliance policies and procedures, an improvement programme with regard to the Compliance & Conduct organisation, the relationship with the supervisory authorities, and the impact of national and international laws and regulations.

The bank's capital and funding plan was also a recurring item on the Commitee's agenda. Each quarter the Committee approved the most recent capital and funding plan and was updated on the bank's capital and funding positions. The Committee discussed the bank's target capital ratios, also in view of the long-term strategy, and the plans for raising capital and funding, including the timing. Particular attention was paid to the leverage ratio and the liquidity coverage ratio, including the exact regulatory definition of these ratios and the national and international discussions in this respect.

Another agenda item was the correspondence with the Dutch central bank, the ECB and other supervisory authorities. The Committee was informed on these matters in quarterly reports prepared by the internal auditor and Compliance & Conduct. The Committee also discussed letters and reports received from and sent to the Dutch central bank and the European Central Bank concerning risk and capital-related subjects.

In addition to the abovementioned recurring agenda items, in its meeting of February 2015 the Committee was informed of a quick scan with regard to the oil and gas market, the impact of the strengthening Swiss franc and the exposure regarding Russia and Ukraine.

In May, the Committee was updated on the AQR lessons learned and approved the concept ILAAP and ICAAP. Furthermore, the Committee was updated on the way the business handles higher regulatory requirements. The projects encourage a more proactive culture, higher risk awareness and discipline, and control acceptance and preparedness.

In August, the Committee discussed the validation and reassessment of the Bank Risk Appetite 2015 on the basis of current insights and subsequently agreed with the proposed adjustments to the Bank Risk Appetite 2015. The proposed Bank Risk Appetite for 2016, as a coherent set of statements expressing the moderate risk profile, was also discussed, challenged and agreed upon. The Committee advised the Supervisory Board to approve both proposals. Furthermore, the preliminary SREP assessment by the ECB was discussed. A number of changes to corporate governance, in anticipation of the IPO, were approved.

In November, in a non-scheduled meeting, a deep dive on ECT Clients was presented and discussed. In December the Committee discussed changes to the Risk Governance Charter and advised the Supervisory Board to approve these.

More information on the risk, capital, liquidity and fundingrelated topics discussed in the Risk & Capital Committee is provided in the Risk, funding & capital Report.

Remuneration report

Remuneration report

This report provides an overview of the remuneration principles at ABN AMRO, including those of the Managing Board and Identified Staff.

Overview

After various changes to the applicable guidelines for financial institutions with respect to remuneration became effective in 2014, more changes followed in 2015. These new regulations specify more limitations to variable remuneration for all employees in the Dutch financial industry and an extension of the bonus prohibition for a specific group of senior employees. All relevant guidelines

have been timely incorporated into ABN AMRO's own policies and practices. This report sets out our remuneration philosophy and principles for all ABN AMRO employees. The remuneration policy and practices for the Managing Board, Supervisory Board and so-called Identified Staff are discussed in greater detail in the subsequent sections of this report.

Philosophy, policies and principles

Remuneration compass

As a bank with Dutch roots, we have an enterprising spirit and a strong drive to succeed, while being prudent and pragmatic. We set high standards and expect our employees to be professional, passionate about their work and to have a strong moral compass. Reward is one of the instruments in a balanced set of instruments we use to attract, retain and develop the best people.

We offer meaningful work, a climate in which people can master their profession and personalised working conditions.

ABN AMRO's corporate strategy is based on five strategic priorities (see the Strategic Report in this Annual Report). Our reward philosophy centres around these priorities.

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Remuneration philosophy
Strategic priorities	reflected in remuneration philosophy
Enhance client centricity	1. Reflected in the type of KPIs that are being used (what type of performance is being rewarded?)
Invest in our future	2. Being able to attract and retain the best people by being a Top Class Employer
Moderate risk profile	3. Adhere to all applicable rules and regulations on compensation
International ambition	4. Remuneration policies should be in line with local market practice and ABN AMRO's international strategy
Improve profitability	5. Reward performance against defined objectives while at the same time encouraging cost-conscious objectives

Client centricity: We put our clients' interests centre stage in our performance management cycle

ABN AMRO wants to be a bank that creates sustainable value and that puts its clients' interests centre stage. In pursuing this goal, we use a set of core values and business principles, which we include in our performance management cycle in Key Performance Indicators (KPIs). We use both financial and non-financial targets, which are always aligned with and serve to strengthen our strategy.

Our business principles guide us in how we engage with each other and with our clients. The principles are derived from our core values, our aim to put clients' interests centre stage and the competencies we require of our people.

We use one appraisal philosophy based on a uniform model and process for all employees. Accountability for performance is one of the starting points. This means that our employees take responsibility for, and commit themselves to, the bank's targets and the framework in which it operates. The bank devotes extra effort to

ensuring that the KPIs and performance assessments take into account not only financial and non-financial results, but also how the results are achieved. This refers to the employee's behaviour, their alignment with business principles and their leadership qualities. Mid-year and end-of-year performance appraisals are held by managers with their staff.

Invest in our future: We attract and retain the best people

One of the key elements of ABN AMRO's long-term corporate strategy is our ambition to become a Top Class Employer. Our HR and Reward strategies are designed to help us attract and retain the best people over the coming years.

Moderate risk profile: We adhere to applicable rules and regulations and use appropriate risk adjustments

We contribute to our bank's moderate risk profile by complying with applicable rules and regulations that regulate remuneration in the financial sector. In the Netherlands, these include:

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Governance Report / Remuneration report

• Å the Dutch Banking Code;
• Å Guidelines on Remuneration Policies and Practices as formally adopted on 10 December 2010 by the Committee of European Banking Supervisors (CEBS Guidelines);
• Å the fourth amended European Capital Requirements Directive (CRDIV), which replaced the former Directive (CRD III) on 1 January 2014;
• Å as a result of the implementation of CRD IV, the Dutch Regulation on Sound Remuneration Policies pursuant to the Financial Supervision Act 2011 was replaced by an updated Remuneration Policy Regulation (Regeling Beheerst Beloningsbeleid 2014 – RBB). Together with the Remuneration Policy Decree (Besluit beheerst beloningsbeleid, Wft) these form the specific Dutch framework;
• Å the Dutch act on limitation of liability DNB and AFM and bonus prohibition for state-supported enterprises (Wet aansprakelijkheidsbeperking DNB en AFM en bonusverbod staatsgesteunde ondernemingen, or Bonus Prohibition Act); and
• Å as from 7 February 2015, the Act on the Remuneration Policy for Financial Undertakings (Wet beloningsbeleid financiële ondernemingen, Wbfo)

In addition, we adhere to rules and guidelines in other countries where the bank is active, while always aiming to strike a good balance between local market practice and the bank's international strategy. We also make sure that we use appropriate risk adjustments in our remuneration process, in part by:

• Å safeguarding an adequate focus on performance by means of our remuneration schemes;
• Å striking the right balance between financial and non-financial KPIs as well as qualitative and quantitative KPIs;
• Å including KPIs relating to risk mitigation measures;
• Å following strict governance processes and setting a cap on maximum remuneration.

International ambition: We are flexible and in control

Our strategic ambition to selectively grow our international business implies that we need to attract, motivate, develop and retain high-performing, engaged staff in markets that differ from the Netherlands. Factors we take into account include the labour market and applicable rules and regulations in the various countries in which we operate. Our remuneration policy, while remaining constrained and sound, gives us enough flexibility to operate effectively in each local market.

We aim to align our reward programmes across organisational and country boundaries, while acknowledging the need for variation to accommodate local differences. This provides flexibility to local business in adapting reward policies to local situations varying according to relative size, competitive positioning (dominant player, growth strategy, new entrant) and external market situations.

Improving profitability: We are cost conscious

Our annual performance management cycle creates a link between performance (realistic, sustainable results) and reward in such a way that costs change in line with employees' and the bank's performance. More information on this subject is provided in the Our People section of this report.

In principle, we position pay packages around the median of the relevant labour market. We focus strongly on keeping labour costs under control. Where relevant, we take account of remuneration benchmarks. These benchmarks are, however, only used to support decisions, not to determine them. This allows us to respond effectively to changes in the financial markets and economic circumstances.

Remuneration policy

Global reward policy

The remuneration principles described above are embedded in ABN AMRO's Global Reward Policy. This policy is designed to support ABN AMRO's business strategy, objectives, values and long-term interests. It provides a framework to effectively manage reward and performance across the bank.

The Supervisory Board approves the general remuneration principles laid down in the Global Reward Policy and assesses the general principles and exceptions that relate to the applicable governance and/or international structures. As a result of the many changes in the

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applicable guidelines and regulations within the financial sector, the Global Reward Policy must be kept aligned with all relevant developments. All changes in applicable rules and regulations need to be implemented in the Global Reward Policy. The Supervisory Board therefore reviews the policy regularly, considering the company's strategy, risk awareness, targets and corporate values as well as relevant market practice. It also takes into account external requirements with respect to governance, the international context and relevant market data.

The Global Reward Policy applies globally within ABN AMRO at all levels and in all countries (including branch offices). The Global Reward Policy also specifies rules with respect to those staff whose professional activities could have a material impact on the bank's risk profile. Within ABN AMRO this group is referred to as Identified Staff. A separate Reward Policy, adopted in 2010, applies to members of the Managing Board as agreed by the Supervisory Board and the then shareholder.

Changes in 2015

Collective labour agreement

Following negotiations, the bank reached agreement with the trade unions on both a new collective labour agreement and a new collective social plan (redundancy scheme) on 17 December 2015 in the Netherlands. Both agreements focus more on employability. The new collective labour agreement (effective from 1 January 2016 to 1 January 2018) specifies a freeze on salaries during 2016 and an increase on salaries of 1.5% on 1 January 2017. The new collective social plan (effective from 1 January 2016 to 1 January 2020) specifies a reduction of time in the Redeployment Centre from twelve months to six months and a reduction in the level of redundancy pay, both with effect from 1 January 2017.

New regulations

European Remuneration Guidelines such as CRD IV became effective and relevant Dutch regulations such as the Remuneration Policy Decree (Besluit beheerst beloningsbeleid, Wft) and the Remuneration Policy Regulation (Regeling beheerst beloningsbeleid, Wft 2011- RBB 2011) were updated with effect from 2014 (RBB 2014). CRD IV introduced further restrictions with respect to remuneration in the financial sector, such as the introduction of a bonus maximum of 100% (or, under certain conditions, 200%) of the annual fixed income.

The Dutch government has introduced further restrictions on remuneration in the financial industry by means of the Act on the Remuneration Policy for Financial Undertakings (Wet beloningsbeleid financiële ondernemingen, Wbfo), which came into force on 7 February 2015 and which amended the Financial Markets Supervision Act (Wet op het financieel toezicht). These new restrictions include the introduction of a new maximum variable remuneration and an extension of the provisions and target group of the Bonus Prohibition Act for State-supported Enterprises. The Wbfo has a broader scope than the European remuneration rules under CRD IV. For example, the bonus cap introduced by the Wbfo does not only apply to Identified Staff, but to all people working at ABN AMRO. With respect to the maximum variable remuneration, the Wbfo is stricter than CRD IV in the Netherlands, where variable remuneration is limited to (an average of) 20%.

We updated the Global Reward Policy in 2015 in response to internal developments and the external remuneration restrictions described above.

Expected changes in 2016

In alignment with the remuneration guidelines ABN AMRO's Variable Compensation Plan for Identified Staff provides for a non-cash instrument portion in the form of performance certificates. As from the 2016 performance year and as a result of ABN AMRO being a listed company again, the Variable Compensation Plan will provide for depositary receipts (DRs) instead of performance certificates in order to achieve shareholder alignment. The use of the non-cash instrument portion in the form of performance certificates will be continued until 2016. All outstanding performance certificates will be phased out over time.

Further guidelines from supervisors such as the ECB and DNB are expected. The EBA has issued an update of the Guidelines on Sound Remuneration policies that will become effective as from 1 January 2017. During 2016 we will amend our remuneration policies and practices to bring them in line with the new guidelines.

Remuneration principles for Managing Board and Identified Staff

The following section provides details on the remuneration principles for the Managing Board and for employees that qualify as Identified Staff.

Managing Board remuneration policy

The Global Reward Policy principles apply to all employees of the bank worldwide. A different governance applies to the Managing Board. The Supervisory Board is responsible for proposing the policy and principles, which are subject to shareholder approval. In addition to setting policy, the Supervisory Board executes the remuneration policy for the Managing Board members.

For the Managing Board, ABN AMRO has always aimed for a level of total compensation slightly below the median of the relevant markets. ABN AMRO used to define a peer group of companies, i.e. both financial and non-financial companies in the Netherlands and Europe, against which remuneration proposals for the Managing Board were assessed. Developments in previous years, however, make it difficult to properly assess the Managing Board's remuneration packages considering the many changes that have occurred in the banking industry in the Netherlands. These changes have not necessarily impacted companies in the general industry or financial institutions outside the Netherlands. This currently makes benchmark comparisons difficult, if not impossible.

As mentioned in the 2012 Remuneration Report and pursuant to the Bonus Prohibition Act that became effective as from 2011, remuneration restrictions for the members of the Managing Board have become applicable. As a result, Managing Board members would not be eligible to receive the contractually agreed variable remuneration during the period of government ownership.

After careful consideration and with due observance of the one-off transition arrangement included in the Bonus Prohibition Act, the Supervisory Board decided in 2012 to award the members of the Managing Board, except for the Chairman, a temporary fixed allowance. This allowance of EUR 100,000 (gross) which represents 16.67% of the 2011 annual salary, applies effectively as from 1 January 2012 for as long as the Bonus Prohibition Act is applicable to

ABN AMRO. For the calendar years 2012 and 2013, respectively, all eligible Managing Board members waived their entitlement to this allowance. In 2014 the Supervisory Board decided to pay out this allowance, effective from 1 January 2014, to the six eligible Managing Board Members. On 29 March 2015 the members of the Managing Board decided to waive their entitlement to the allowance and the related pension contributions irrevocably for the year 2014 and beyond.

Details on remuneration of Managing Board

Details on the remuneration of the individual Managing Board members are provided in note 35 to the Annual Financial Statements.

Annual fixed remuneration 2015

The annual base salary for the Managing Board follows the developments in the collective labour agreement for the banking industry (CAO Banken). This resulted in a 1% increase for 2015. The annual base salary in 2015 amounted to EUR 613,575 for the members of the Managing Board and EUR 766,969 for the Chairman of the Managing Board.

Variable remuneration

Although the remuneration package for the members of the Managing Board provides for a variable compensation component, the Bonus Prohibition Act, which became effective in 2011, does not allow such compensation for board members of financial institutions that fall under the scope of this Act during the period of state support through shareholding by the Dutch State. The members of the Managing Board are therefore not entitled to receive variable compensation with respect to the 2015 performance year. As a consequence, Board members do not participate in the Variable Compensation Plan that applies to all Identified Staff within ABN AMRO.

Benefits

The Chairman and members of the Managing Board participate in the ABN AMRO pension schemes as applicable to all Dutch employees. The changes made to the pension arrangement as agreed between the collective labour agreement partners in 2014 therefore also apply to all seven Managing Board members. The pensionable salary includes frozen compensation for

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pension contribution for all employees that were employed before 2011. For pensionable salary up to EUR 100,000, a collective defined contribution (CDC) pension scheme applies. The standard retirement age is 67 years, the average income accrual is 1.875% and the employee pension contribution is 5.5%. For pensionable salary in excess of EUR 100,000, employees will receive an allowance which can be used to build up a net pension in a defined contribution (DC) plan. The allowance in 2015 amounted to 30% and will be set annually using the year-end interest of the preceding calendar year.

In addition to pension benefits, the Managing Board members are eligible for benefits such as the use of a company car and a chauffeur.

Severance

In the event of redundancy, a severance payment equal to one gross annual salary will apply.

Appointment period

All Managing Board members, except for Kees van Dijkhuizen, who was appointed on 1 May 2013, were re-appointed for a four-year term with effect from 10 April 2014.

Managing Board 2015 performance

ABN AMRO's performance management framework supports the performance of the Managing Board. In 2015, three company-wide financial and three non-financial targets were set for all Managing Board members. All six targets have an equal weight and form 80% of the total target framework. The remaining 20% of KPIs are linked to individual performance and are also divided into financial and non-financial components relating to the Managing Board member's area of responsibility, their individual leadership and cooperation between business lines.

The Supervisory Board assessed the Managing Board members' performance and decided that all members delivered on-target performance in 2015. As a consequence of the Bonus Prohibition Act, the members of the Managing Board are not eligible to receive a variable remuneration linked to their 2015 performance.

Details on remuneration of Identified Staff

Remuneration restrictions apply not only to the Managing Board, but also to those staff whose professional activities could have a material impact on the bank's risk profile (Identified Staff). Within ABN AMRO the group of Identified Staff consists of:

• Å Members of the Managing and Supervisory Boards;
• Å Members of the Management Group;
• Å Staff responsible for independent control functions;
• Å Other risk takers. The definition of the group of other risk takers follows from credit, market and liquidity risk analyses as undertaken annually by the Group Risk Management Team on the basis of RWA thresholds, membership of certain Risk Committees, the level of P&L budget and responsibilities;
• Å Other employees whose total remuneration takes them into the same remuneration bracket as senior managers and risk takers;
• Å Employees who qualify on the basis of the additional qualitative and quantitative criteria as laid down in the EBA Guideline that has applied since 1 January 2014.

Composition of remuneration package for Identified Staff

In general, the remuneration packages for Identified Staff employees have have been structured in accordance with the various regulations and restrictions for the financial sector as described above. A typical remuneration package for Identified Staff consists of the following components:

• Å Annual base salary
• Å Annual variable remuneration (with deferred payout);
• Å Benefits and other entitlements.

ABN AMRO strives to position the level of total direct compensation for Management Group members just below market median levels. With effect from 2014, the variable compensation for Management Group members was capped at 20% of base salary in anticipation of the Act on the Remuneration Policy for Financial Undertakings (Wbfo), which came into force in 2015. With effect from 2015, the remuneration restrictions under the Bonus Prohibition Act were extended to senior management as defined in the Wbfo. Accordingly, these senior managers, being people who have leading positions immediately below the echelon of the day-to-day policymakers and who are responsible for natural persons whose work may have a material impact on the risk profile of the bank in

Introduction

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Business Report

the period in which support is or was received, may also not be granted any variable compensation. For the Managing Board members and the senior management described above, the prohibition on payment of variable remuneration will apply until the Dutch State no longer has an interest in ABN AMRO.

ABN AMRO's collective labour agreement governs the remuneration packages for Identified Staff based in the Netherlands who are not Management Group members. For Identified Staff outside the Netherlands, ABN AMRO takes the relevant business dynamics (e.g. market conditions, local labour and tax legislation) into account when deciding on the composition of the reward packages. For the last two categories of employees, the total direct compensation is aimed to be positioned around market median levels.

Performance is measured during a one-year performance period at three levels: group, business unit and individual level, and by means of (partly) risk-adjusted financial and non-financial performance indicators.

Performance indicators Identified Staff

	Weight Managing Board	Weight Management Group (Commercial business lines1 )	Weight Management Group (Group Functions)	Weight non-Management Group (Commercial business lines1 )	Weight non-Management Group (Group Functions)
Financial: RARORAC, C/I ratio, Common Equity Tier 1 ratio	40%	10%	10%	10%	10%
Non-financial: Net Promoter Score, Enhance Client Centricity, Employee engagement	40%	10%	10%	10%	10%
Personal financial: Financial performance business line	10%
Personal financial: RARORAC business line		5%		5%
Personal financial: Cost ceiling business line		5%	10%	5%	10%
Personal non-financial: No specific KPIs prescribed		10%	10%	10%	10%
Individual: No specific KPIs prescribed, individual leadership2	10%	60%	60%	60%	60%
Total	100%	100%	100%	100%	100%

¹ Commercial business segments consist of Retail Banking, Private Banking and Corporate Banking.

² For all categories with the exception of the Managing Board: minimum weight individual leadership 30%

All variable remuneration awards for Identified Staff are subject to, and structured in accordance with, the Variable Compensation Plan. Before any variable remuneration is granted, ABN AMRO applies an ex-ante risk assessment consisting of collective quantitative risk adjustment mechanisms (such as the solvability check) and a qualitative individual check (the gatekeeper). The gatekeeper procedure forms part of the performance management framework and provides for an assessment of each individual Identified Staff member by the Control Functions (Risk, Compliance and Audit) on the basis of several behavioural elements. This assessment results in advice to the Managing Board, which ultimately decides on whether variable compensation can indeed be granted

to the Identified Staff member concerned. The Managing Board's decision must be formally approved by the Supervisory Board based on the advice by the Remuneration, Selection & Nomination Committee. Furthermore, the variable remuneration is awarded over time and split between an up-front portion (60%) and a deferred portion (40%), with all portions equally divided between a cash and a non-cash instrument as shown in the following scheme.

Business Report

Variable remuneration

2

1 The up-front payment (60% in total) is awarded in March following the relevant performance year.

The deferred award (40% in total) vests in three separate tranches respectively 1, 2 and 3 years after the end of the relevant performance year.

3 All non-cash awards are subject to a two year retention period.

Up-front variable remuneration is awarded in the first quarter of the year following the relevant performance year.

Deferred variable remuneration vests in equal instalments in the three years following the first payment. Furthermore, this remuneration will only vest after an explicit ex post risk-assessment: the 'malus assessment' (see the Malus paragraph).

Specific conditions are attached to the non-cash instrument. Firstly, it fluctuates in line with the net asset value of ABN AMRO. Secondly, a two-year retention period is applied to the non-cash instrument, so that any unconditional instrument will need to be retained for an additional two years. For a specific group of Identified Staff, the settlement in cash of the non-cash instruments can be capped.

As from 2016, as a consequence of ABN AMRO being a listed company, the non-cash instrument portion will be expressed in the form of DRs. The value then fluctuates with the market price of the DRs and its use will result in an increased alignment between remuneration and shareholder value for all participants in the Variable Compensation Plan. The applicable retention periods will continue to apply.

Ex post risk adjustment tools

ABN AMRO also makes use of several ex post riskadjustment tools, which are described below.

Malus

The malus assessment is conducted by the control functions Risk, Compliance, HR, Finance and Audit and any outcome is subject to the approval of the Managing Board and Supervisory Board. During the malus assessment, it is determined whether any new information is available which should prevent the vesting of deferred parts, e.g. relating to:

• Å Evidence of misconduct or serious error by the staff member (e.g. breach of code of conduct or other internal rules, especially concerning risks);
• Å The institution and/or the business unit subsequently suffers a significant downturn in its financial performance (specific indicators are to be used);
• Å The institution and/or the business unit in which the staff member works suffers a significant failure of risk management;
• Å Significant changes in the institution's economic or regulatory capital base.

The Supervisory Board decided that on the basis of the reassessment as performed by the Control Functions there was no reason to apply a collective or individual malus with respect to the vesting of:

• Å The third tranche of deferred variable compensation with respect to the 2012 performance period;
• Å The second tranche of the deferred variable compensation with respect to the 2013 performance period
• Å The first tranche of the deferred variable compensation with respect to the 2014 performance period.

This means that one-third of each of the deferred variable compensation awards with respect to the three performance years mentioned above will now be granted to the relevant Identified Staff members.

Clawback

The Supervisory Board has discretionary power to adjust any variable compensation downwards to a suitable amount if, in its opinion, payment of the compensation would be unacceptable under the principle of reasonableness and fairness. The Supervisory Board is also authorised to reclaim any variable remuneration over any performance period if the award, calculation or payment was based on incorrect data or if the performance conditions were not achieved in hindsight. The recipient will then be obliged to repay the amount to the bank.

Personal hedging or insurance

Personal hedging or insurance linked to remuneration and liability in order to circumvent the risk control effects that have been embedded in the variable compensation plan are not permitted.

Remuneration of Supervisory Board members

The remuneration of members of the Supervisory Board is set by the General Meeting of Shareholders based on a proposal of the Supervisory Board. The remuneration of Supervisory Board members is proportional to the time required to perform their duties linked to the membership of the Supervisory Board and the relevant Board committees and is independent of ABN AMRO's financial results. ABN AMRO does not grant any variable remuneration or shares or options to Supervisory Board members in lieu of remuneration. The remuneration has not changed since 2010. Since 10 April 2014, remuneration for Supervisory Board committee memberships is limited to two such memberships. Details on the remuneration of members of the Supervisory Board in 2015 are provided in note 35 to the Annual Financial Statements.

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Governance Report / Remuneration report / Details of Remuneration

Details of Remuneration

The following tables provide more information on the remuneration over 2015.

Aggregated total compensation over 2015 per business segment as at 31 December 2015

This table applies to all Identified Staff.

		2015		2014
(in thousands)	Number of FTEs (Identified Staff)	Aggregated compensation1	Number of FTEs (Identified Staff)	Aggregated compensation1
Retail Banking	13	3,687	13	3,575
Private Banking	45	19,317	48	19,376
Corporate Banking	143	42,552	94	28,739
Group Functions2	128	30,314	123	29,434
Total	329	95,871	278	81,124

¹ Compensation comprises fixed and variable compensation, sign-on bonus and severance pay over 2015.

² Managing and Supervisory Board members are reported under Group Functions.

Details of aggregated total compensation over 2015

The following table applies to all Identified Staff.

	Number of FTEs (Identified Staff)
(in thousands)	Management Group	Non-Management Group	Aggregated compensation1
Fixed compensation over 2015	126	203	75,654
Variable compensation over 2015	94	196	20,217
- of which in cash			6,507
- of which in performance certificates			5,876
- of which unconditional (up-front payment)			12,383
- of which conditional (deferred payment)			7,834
Sign-on bonus over 20152		1
Severance pay over 20152	1
Highest severance pay over 20152

¹ Compensation comprises fixed and variable compensation, sign-on bonus and severance pay over 2015.

² Sign on bonus/severance pay not disclosed for confidentiality reasons. Amounts are included in the aggregated amount of fixed compensation 2015.

For certain employees, variable compensation comprises a component that is not subject to deferral and which, based on the 'EBA opinion on remuneration and allowance', was discontinued in the course of 2015.

Variable compensation over 2015 as awarded to all employees, including Identified Staff, amounted to EUR 180 million.

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Employees with total remuneration higher than EUR 1 million per business segment as at 31 December 2015

The following table applies to all employees.

						Remuneration in millions1
(in FTE)	1-1.5	1.5-2	2-2.5	2.5-3	3-3.5	3.5-4	4.5-5	>5
Retail Banking Private Banking
Corporate Banking	1
Group Functions	1

¹ Remuneration comprises fixed and variable compensation, sign-on bonus, severance pay and pension contribution over 2015.

Details of total remuneration higher than EUR 1 million

over 2015

The following table applies to all employees.

							Remuneration in millions1
(in FTE)	1-1.5	1.5-2	2-2.5	2.5-3	3-3.5	3.5-4	4.5-5	>5
Managing Board Management Group	1
Non-Management Group Identified Staff	1

¹ Remuneration comprises fixed and variable compensation, sign-on bonus, severance pay and pension contribution over 2015.

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Introduction

Strategic Report

Business Report

Employee representation

Employee representation

Listening and connecting

ABN AMRO's employees are represented by work councils at all levels of its group. Under Dutch law, the managing board of any company running an enterprise where a works council has been established must seek the non-binding advice of the works council before taking certain decisions with respect to the enterprise. Decisions in this respect are related to a major restructuring, a change of control, or the appointment or dismissal of a member of the managing board. Certain other decisions involving employment matters that apply either to all employees or certain groups of employees may only be taken with the works council's consent. The Works Councils Act provides the legal foundation for how ABN AMRO's employee representation is organised.

At ABN AMRO, employee representation is all about employees doing their part to help build the bank. Equally important, however, is the ability to listen. Listening to one another allows us to connect, formulate well-informed opinions and take decisions more effectively.

Employee Council election campaign

Elections for the new bank's employee participation councils were held in November 2015. A campaign designed to encourage staff to stand as candidates challenged them to get involved, to use their talents and network, and to develop and grow as members of the councils. The campaign was a huge success, with almost 80 people running for 46 council seats. Almost half of the elected members are new, the average age is sharply lower and the make-up of the council is more diverse. Together with participants – employees who participate in the council on a project basis – the new councils are a more accurate representation of the bank's workforce, equipping them even better to listen and connect.

Main subjects discussed in 2015

The IPO was one of the main topics on the Employee Council's agenda in 2015, an event that had a big impact on the organisation. The fact that ABN AMRO was listed just seven years after being nationalised is an important first step towards full independence. Many employees across the organisation worked hard in the past few years to achieve this milestone.

For the Employee Council, the most important condition for an IPO had always been an adequate protective structure from the moment of listing. And while the details of this structure changed during the years of preparation, we held on to this condition. This led to an intensive and interesting period of consultations and negotiations with all parties involved. The result was that in October 2015, the Employee Council finalised its advice to proceed with an IPO.

The IPO was a success and we would like to congratulate the Managing Board on this achievement. The Employee Council is very pleased with the right of inquiry granted to us, giving employees a voice in assessing whether a given event is undesirable or in conflict with ABN AMRO's interests.

Other issues this year included the views of the employee representation councils on the corporate governance structure, the bank's identity in relation to sustainability, innovation, optimisation of the mortgage chain, restoring trust in the bank and, of course, the bank's social policy.

The employee representation councils of the different businesses were occupied with a large number of restructurings which placed – and continue to place – heavy demands on staff. Among the developments that took place in 2015 are the comprehensive reorganisation of the branch network whereby, under the SPRING project, a large number of jobs were reduced; the reorganisation of Corporate Banking, transforming this business into a sector-based bank; the changing IT landscape to which TOPS must respond; and the dynamic legal and regulatory environment, which requires a good deal of flexibility from the Group Functions departments.

323

Signing the Works Council Covenant granting the right at enquiry.

Constructive consultations with the Managing Board and Supervisory Board

The Employee Council meets with members of the Managing Board and Supervisory Board on various occasions throughout the year. Besides these formal meetings, there were numerous occasions on which members of the Managing Board, Supervisory Board and Employee Council informally met to discuss topics, thereby enhancing each other's knowledge and understanding. We found both boards to be interested in our opinions on the IPO, on alternatives for the bank's governance, and on the issue of restoring trust. By participating in this manner, we were able to make a constructive and meaningful contribution to the bank's strategic descision-making.

The Employee Council experienced its collaboration with the Supervisory Board in 2015 as extremely constructive and open. Our impression is that the Supervisory Board has greatly enhanced its insight into the organisation's strengths and weaknesses – a highly important development

Our relationship with the Managing Board was once again good in 2015. We conducted meaningful and respectful

discussions together. As one member of the Board said, 'It is the Employee Council's job to say things we'd rather not hear.'

Employee representation in 2016

In the year ahead, we will continue to dialogue with the Managing Board on developments within and outside the bank. We see challenges for the bank in its market position and earnings model. We also believe we need to work together to enhance the bank's agility and innovative HR policy. It is more important than ever for the bank to innovate in a wide range of areas in order to increase its market share and retain the best people.

We will impress upon the new councils that we need to continue to secure a good balance between the interests of the bank's various stakeholders. If we succeed in striking the right balance, and if we keep listening to one another and making connections, we believe we will be able to help move the bank forward in the coming year.

Margot van Kempen

Chair of the Employee Council

Senior Managing Directors

Senior Managing Directors

The following provides an overview of the Senior Managing Directors at 31 December 2015.

Name	Responsibility
Frans Woelders	Retail Banking
Jos ter Avest	Private Banking Netherlands
Jeroen Rijpkema	Private Banking International
Ruut Meijer	Commercial Clients
Rutger van Nouhuijs	International Clients
Rutger Schellens	Capital Markets Solutions
Pieter van Mierlo	Central Risk Management
Daphne de Kluis	Financial Restructuring & Recovery
Fred Bos	IPO, Strategy & Corporate Development
Frans van der Horst	IT
Gert-Jan Meppelink	Business Services
Hilde Garssen	Human Resources

Company Secretary

Ruud van Outersterp

Strategic Report

Introduction

Annual Financial Statements

"Financial and social capital creation are the key elements that impact the bank as a whole. This varies from ABN AMRO's own income to enabling clients to make profit, to accumulate wealth, to buy a home or to save without worries."

Other

Other

ABN AMRO's main contribution to society consists of creating financial and social capital.

One way that ABN AMRO understands the scope and complexity of its impact on society is by analysing the Integrated Profit & Loss (IP&L) account.

The IP&L attributes a financial value to non-financial effects, such as carbon emissions, a sense of community and well-being. The IP&L recognises the six capitals as defined by the International Integrated Reporting Council (IIRC).

This is in line with ABN AMRO's current reporting approach. Together with True Price, a social enterprise that helps companies quantify and improve their societal impact, we started three IP&L pilot projects in 2015. True Price supported us in our first attempt to measure the impact of our mortgage services, our investments in the cocoa chain and the bank as a whole. The pilot projects produced a first indication of key value drivers, risks, opportunities and actions that could improve our impact on society. For more information on our cooperation with True Price, see our website abnamro.com/en/sustainable-banking/policy-and-reporting/publications Who Adrian de Groot Ruiz, True Price

Financial capital Human capital Intellectual capital Social and relationship capital Natural capital Technological capital

Insight in integrated profit and loss

ABN AMRO Group Annual Report 2015

Governance Report

Annual Financial Statements 2015

Consolidated income statement	330
Consolidated statement of comprehensive income	331
Consolidated statement of financial position	332
Consolidated statement of changes in equity	333

Consolidated statement of cash flows 336

Notes to the Annual Financial Statements 338

Annual Financial Statements 2015

1	Accounting policies	338
2	Segment reporting	346
3	Overview of financial assets and liabilities by
	measurement base	360
4	Net interest income	362
5	Net fee and commission income	364
6	Net trading income	365
7	Other income	366
8	Personnel expenses	367
9	General and administrative expenses	367
10	Income tax expense, tax assets and tax liabilities	368
11	Earnings per share	376
12	Cash and balances at central banks	377
13	Financial assets and liabilities held for trading	377
14	Derivatives	379
15	Hedge accounting	381
16	Financial investments	387
17	Securities financing	391

18	Fair value of financial instruments carried
	at fair value	392
19	Loans and receivables - banks	403
20	Loans and receivables - customers	404
21	Fair value of financial instruments not carried
	at fair value	406
22	Group structure	408
23	Property and equipment, goodwill
	and other intangible assets	418
24	Other assets	424
25	Due to banks	425
26	Due to customers	425
27	Issued debt and subordinated liabilities	426
28	Provisions	428
29	Pension and other post-retirement benefits	432
30	Other liabilities	437
31	Equity attributable to shareholders
	and other components of equity	437
32	Transferred, pledged, encumbered
	and restricted assets	439
33	Commitments and contingent liabilities	443
34	Related parties	452
35	Remuneration of Managing Board
	and Supervisory Board	455
36	Employee share option and share purchase plans	457
37	Statutory financial statements of
	ABN AMRO Group N.V.	457
38	Post balance sheet events	461
	Other information	462
	Provisions of the Articles of Association concerning

profit appropriation 464

Independent auditor's report on financial statements 465

Certain IFRS disclosures in the Risk, funding & capital information section are labelled as 'Audited' in the respective headings. These disclosures are an integral part of these Annual Financial Statements and are covered by the Audit opinion.

Consolidated income statement

(in millions)	Note	2015	2014	2013
Income
Interest income		13,207	13,376	13,383
Interest expense		7,130	7,353	8,003
Net interest income	4	6,076	6,023	5,380
Fee and commission income		3,061	2,693	2,639
Fee and commission expense		1,233	1,002	996
Net fee and commission income	5	1,829	1,691	1,643
Net trading income	6	99	174	106
Share of result in equity accounted investments		1	51	46
Other operating income	7	450	117	149
Operating income		8,455	8,055	7,324
Expenses
Personnel expenses	8	2,492	2,684	2,357
General and administrative expenses	9	2,559	2,450	2,171
Depreciation and amortisation of tangible and
intangible assets	23	177	204	242
Operating expenses		5,228	5,338	4,770
Impairment charges on loans and other receivables		505	1,171	983
Total expenses		5,734	6,509	5,753
Operating profit/(loss) before taxation		2,722	1,546	1,571
Income tax expense	10	798	412	411
Profit/(loss) for the year		1,924	1,134	1,160
Attributable to:
Owners of the company		1,919	1,134	1,162
- Of which available for AT 1 capital securities		11
Non-controlling interests		5		-2
Earnings per share (in euros)	11
Basic earnings per ordinary share1		2.03	1.21	1.24

¹ Earnings per share consist of Profit for the period excluding coupons attributable to AT 1 Capital securities and results attributable to non-controlling interests divided by the average outstanding and paid-up ordinary shares.

Consolidated statement of comprehensive income

(in millions)	2015	2014	2013
Profit/(loss) for the year	1,924	1,134	1,160
Other comprehensive income:
Items that will not be reclassified to the income statement
Remeasurement gains/(losses) on defined benefit plans	-6	-179	-291
Items that will not be reclassified to the income statement
before taxation	-6	-179	-291
Income tax relating to items that will not be reclassified to the income
statement	-4	-44	-73
Items that will not be reclassified to the income statement after taxation	-2	-135	-218
Items that may be reclassified to the income statement
Currency translation reserve	101	96	-68
Available-for-sale reserve	189	360	45
Cash flow hedge reserve	222	326	541
Share of other comprehensive income of associates	11	17	4
Other changes	-4	5	-4
Other comprehensive income for the period before taxation	519	804	518
Income tax relating to components of other comprehensive income	101	168	146
Other comprehensive income for the period after taxation	418	636	372
Total comprehensive income/(expense) for the period
after taxation1	2,340	1,635	1,314
Total comprehensive income attributable to:
Owners of the company	2,335	1,635	1,316
- Of which available for AT 1 capital securities	11
Non-controlling interests	5		-2

¹ Including EUR -4 million related to Other reserves in 2015 (2014: EUR 5 million; 2013: EUR -4 million).

Consolidated statement of financial position

(in millions)	Note	31 December 2015	31 December 2014	31 December 2013
Assets
Cash and balances at central banks	12	26,195	706	9,523
Financial assets held for trading	13	1,706	9,017	12,019
Derivatives	14	19,138	25,285	14,271
Financial investments	16	40,542	41,466	28,111
Securities financing	17	20,062	18,511	18,362
Loans and receivables - banks	19	15,680	21,680	23,967
Residential mortgages	20	150,009	151,998	153,439
Consumer loans	20	14,587	15,398	15,629
Corporate loans	20	88,367	87,866	85,268
Other loans and receivables - customers	20	6,357	6,648	2,692
Equity accounted investments	22	778	1,136	1,082
Property and equipment	23	1,366	1,412	1,426
Goodwill and other intangible assets	23	263	255	195
Tax assets	10	345	504	910
Other assets	24	4,925	4,986	5,128
Total assets		390,317	386,867	372,022
Liabilities
Financial liabilities held for trading	13	459	3,759	4,399
Derivatives	14	22,425	30,449	17,227
Securities financing	17	11,372	13,918	12,266
Due to banks	25	14,630	15,744	11,626
Demand deposits	26	119,109	109,753	100,151
Saving deposits	26	92,472	88,655	87,448
Time deposits	26	18,555	17,459	19,638
Other due to customers	26	160	144	347
Issued debt	27	76,207	77,131	88,682
Subordinated liabilities	27	9,708	8,328	7,917
Provisions	28	1,256	1,003	1,550
Tax liabilities	10	650	175	90
Other liabilities	30	5,729	5,473	7,113
Total liabilities		372,733	371,990	358,454
Equity
Share capital		940	940	940
Share premium		12,970	12,970	12,970
Other reserves (incl. retained earnings/profit for the period)		3,059	1,769	4,554
Other comprehensive income		-394	-814	-4,909
Equity attributable to owners of the parent company	31	16,575	14,865	13,555
Capital securities		993
Equity attributable to non-controlling interests		17	12	13
Total equity		17,584	14,877	13,568
Total liabilities and equity		390,317	386,867	372,022
Committed credit facilities	33	21,559	16,164	13,764
Guarantees and other commitments	33	13,868	15,335	16,103

Consolidated statement of changes in equity

(in millions)	Share capital	Share premium reserve	Other reserves including retained earnings	Other compre hensive income	Net profit/ (loss) attributable to shareholders	Total	Capital securities	Non- con trolling interests	Total equity
Balance at 1 January 2013	1,015	13,105	2,658	-5,067	1,153	12,864		19	12,883
Total comprehensive income1			-4	158	1,162	1,316		-2	1,314
Transfer			1,153		-1,153
Dividend			-412			-412			-412
Increase/(decrease) of capital	-75	-135	-3			-213			-213
Other changes in equity								-4	-4
Balance at 31 December 2013	940	12,970	3,392	-4,909	1,162	13,555		13	13,568
Total comprehensive income1			5	496	1,134	1,635			1,635
Transfer			1,162		-1,162
Dividend			-325			-325			-325
Reclassification post-employment benefit plan2			-3,599	3,599
Other changes in equity
Balance at 31 December 2014	940	12,970	635	-814	1,134	14,865		12	14,877
Total comprehensive income1			-4	420	1,919	2,335		5	2,340
Transfer			1,134		-1,134
Dividend			-625			-625			-625
Increase/(decrease) of capital							993		993
Other changes in equity								-1	-1
Balance at 31 December 2015	940	12,970	1,140	-394	1,919	16,575	993	17	17,584

¹ Including EUR -4 million related to Other reserves in 2015 (2014: EUR 5 million; 2013: EUR -4 million)

² Reclassification of EUR 3,599 million (EUR 4,799 million gross and EUR 1,200 tax) from Remeasurement gains/(losses) to Other reserves including retained earnings following the change of pension scheme.

Other comprehensive income is specified as follows:

(in millions)	Remeasure ment gains/ (losses) on post-retirement benefit plans	Currency translation reserve	Available for-sale reserve	Cash flow hedge reserve	Share of OCI of associates and joint ventures	Total
Balance at 1 January 2013	-3,284	5	24	-1,873	61	-5,067
Net gains/(losses) arising during the period	-291	-68	88	416	4	149
Less: Net realised gains/(losses) included in income statement			43	-125		-82
Net gains/(losses) in equity	-291	-68	45	541	4	231
Related income tax	-73	1	10	135		73
Balance at 31 December 2013	-3,502	-64	59	-1,467	65	-4,909
Reclassification post-employment benefit plan1	3,599					3,599
Net gains/(losses) arising during the period	-179	96	357	274	17	566
Less: Net realised gains/(losses) included in income statement			-2	-52		-54
Net gains/(losses) in equity	-179	96	360	326	17	620
Related income tax	-44	-3	89	81		124
Balance at 31 December 2014	-38	36	329	-1,223	82	-814
Net gains/(losses) arising during the period	-6	101	206	190	11	502
Less: Net realised gains/(losses) included in income statement			17	-32		-15
Net gains/(losses) in equity	-6	101	189	222	11	517
Related income tax	-4		45	55		97
Balance at 31 December 2015	-41	137	473	-1,056	93	-394

¹ Reclassification of EUR 3,599 million (EUR 4,799 million gross and EUR 1,200 tax) from Remeasurement gains/(losses) to Other reserves including retained earnings following the change of pension scheme.

2015

Total comprehensive income includes EUR 1,924 million profit for 2015.

Transfer includes the allocation of the profit/loss of the prior period to the other reserves.

A final dividend of EUR 275 million was paid out to ordinary shareholders, bringing the total dividend for full-year 2014 to EUR 400 million. An interim dividend of EUR 350 million was paid to ordinary shareholders in August 2015.

334

Strategic Report

2014

Total comprehensive income includes EUR 1,134 million profit for 2014.

Transfer includes allocation of the profit/loss of the prior period to the other reserves.

A final dividend of EUR 200 million was paid out to the shareholder, bringing the total dividend for full-year 2013 to EUR 350 million. An interim dividend of EUR 125 million was paid to the shareholder in November 2014.

2013

In 2013, a final dividend of EUR 250 million for the year 2012 was paid to the shareholder and EUR 12 million to holders of preference shares A. An interim dividend of EUR 150 million was paid to the shareholder in 2013.

In the first half of 2013, EUR 210 million of class A non-cumulative preference shares were repurchased and cancelled, resulting in a decline in share capital and share premium of EUR 75 million and EUR 135 million respectively. In addition, EUR 3 million was paid to preference share A holders for accrued rights in the first half of 2013 due to the repurchase of the preference shares.

Share of Other comprehensive income of associates and joint ventures is related to the movement in Other comprehensive income of the associates and joint ventures of ABN AMRO.

Consolidated statement of cash flows

(in millions)	2015	2014	2013
Profit/(loss) for the period	1,924	1,134	1,160
Adjustments on non-cash items included in profit:
(Un)realised gains/(losses)	-101	152	-591
Share of profits in associates and joint ventures	-29	-73	-55
Depreciation, amortisation and accretion	314	357	372
Provisions and impairment losses	993	1,334	1,128
Income tax expense	798	412	411
Changes in operating assets and liabilities:
Assets held for trading	7,409	3,150	-4,995
Derivatives - assets	6,053	-10,994	7,072
Securities financing - assets	-159	1,258	9,940
Loans and receivables - banks	6,880	-1	9,715
Residential mortgages	2,032	1,310	4,833
Consumer loans	926	326	158
Corporate loans	214	-1,361	-118
Other loans and receivables - customers	664	-3,721	-1,596
Other assets	15	-17	872
Liabilities held for trading	-3,490	-872	747
Derivatives - liabilities	-8,014	13,209	-10,276
Securities financing - liabilities	-3,359	818	-6,963
Due to banks	-1,220	4,018	-5,007
Demand deposits	8,462	7,844	6,864
Saving deposits	3,765	1,147	6,085
Time deposits	806	-2,575	-6,394
Other due to customers	17	-210	21
Liabilities arising from insurance and investment contracts	-142	-140	-263
Net changes in all other operational assets and liabilities	849	-1,428	1,795
Dividend received from associates	56	104	58
Income tax paid	-268	-56	73
Cash flow from operating activities	25,395	15,121	15,046

continued >

Other

Introduction Strategic Report

Business Report

Risk, funding & capital Report

(in millions)	2015	2014	2013
Investing activities:
Purchases of financial investments	-17,123	-22,986	-14,308
Proceeds from sales and redemptions of financial investments	18,446	12,206	7,150
Acquisition of subsidiaries (net of cash acquired), associates and joint
ventures	-25	241	-95
Divestments of subsidiaries (net of cash sold), associates and joint ventures	132	82	-187
Purchases of property and equipment	-282	-258	-238
Proceeds from sales of property and equipment	127	73	110
Purchases of intangible assets	-42	-120	-21
Cash flow from investing activities	1,233	-10,762	-7,589
Financing activities:
Proceeds from the issuance of debt	35,244	23,890	43,881
Repayment of issued debt	-37,126	-39,108	-47,919
Proceeds from subordinated liabilities issued	2,839
Repayment of subordinated liabilities issued	-1,740	-51	-1,497
Proceeds from capital securities	993
Preference shares settlement			-210
Dividends paid to the owners of the parent company	-625	-325	-412
Repayment of capital (including non-controlling interests)	-1		-3
Cash flow from financing activities	-416	-15,595	-6,160
Net increase/(decrease) of cash and cash equivalents	26,212	-11,235	1,297
Cash and cash equivalents as at 1 January	4,212	15,319	14,091
Effect of exchange rate differences on cash and cash equivalents	127	128	-69
Cash and cash equivalents as at 31 December	30,551	4,212	15,319
Supplementary disclosure of operating cash flow information
Interest paid	6,904	7,519	7,697
Interest received	14,024	13,259	12,466
Dividend received from investments	55	71	38

The following table shows the determination of cash and cash equivalents at 31 December.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Cash and balances at central banks	26,195	706	9,523
Loans and receivables banks (less than 3 months)1	4,357	3,506	5,796
Total cash and cash equivalents	30,551	4,212	15,319

¹ Loans and receivables - banks with an original maturity less than 3 months is included in Loans and receivables - banks. See note 19 Loans and receivables - banks.

Notes to the Annual Financial Statements

Notes to the Annual Financial Statements

1 Accounting policies

The notes to the Consolidated Annual Financial Statements, including the audited sections in the Risk, funding & capital Report, are an integral part of these Annual Financial Statements.

This section describes ABN AMRO Bank's significant accounting policies and critical accounting estimates or judgements relating to the Annual Financial Statements. If an accounting policy or a critical accounting estimate relates to a specific note, it is included within the relevant note.

Corporate information

ABN AMRO Group N.V. (referred to as ABN AMRO Group) is the parent company of ABN AMRO Bank N.V. and a related consolidated group of companies (referred to as the Group or ABN AMRO). ABN AMRO Group is a public limited liability company, incorporated under Dutch law on 18 December 2009, and registered at Gustav Mahlerlaan 10, 1082 PP Amsterdam, the Netherlands.

As at 31 December 2015, all shares in the capital of ABN AMRO Group are held by two foundations: NLFI and STAK AAG. On that date, NLFI held 77% and STAK AAG held 23% of the shares in the issued capital of ABN AMRO Group. Both foundations have issued depositary receipts for shares in ABN AMRO Group. Only STAK AAG's depositary receipts are issued with the cooperation of ABN AMRO Group and traded on Euronext Amsterdam.

ABN AMRO provides a broad range of financial services to retail, private and corporate banking clients. These activities are conducted primarily in the Netherlands and selectively abroad.

The Consolidated Annual Financial Statements of ABN AMRO Group for the annual period ended 31 December 2015 incorporate financial information of ABN AMRO Group N.V., its controlled entities, interests in associates and joint ventures. The Annual Financial Statements were prepared by the Managing Board and authorised for issue by the Supervisory Board and Managing Board on 15 March 2016.

Statement of compliance

The Consolidated Annual Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as endorsed by the European Union (EU). They also comply with the financial reporting requirements included in Title 9 of Book 2 of the Dutch Civil Code, as far as applicable.

Basis of preparation

The Consolidated Annual Financial Statements are prepared on the basis of a mixed valuation model as follows:

• Å Derivative financial instruments;
• Å Financial assets and liabilities held for trading or designated as measured at fair value through profit or loss;
• Å Available-for-sale financial assets and investments in associates of a private equity nature are valued at fair value;
• Å Other financial assets (including loans and receivables) and liabilities are valued at amortised cost less any impairment, if applicable;
• Å The carrying value of assets and liabilities measured at amortised cost included in a fair value hedge relationship is adjusted with respect to fair value changes resulting from the hedged risk;
• Å Non-financial assets and liabilities are generally stated at historical cost;
• Å Associates and joint ventures are accounted for using the net equity method.

The Annual Financial Statements are prepared under the going concern assumption. The Annual Financial Statements are presented in euros, which is the reporting currency of ABN AMRO, rounded to the nearest million (unless otherwise stated).

Disclosures

To combine disclosures where possible and to reduce duplication, we have integrated some IFRS disclosures into our Managing Board report. These are:

• Å IFRS 7 Risk disclosures of financial instruments. These are disclosed in the Risk, funding and capital section;
• Å IAS 1 Risk and financial instrument disclosures. These are part of the Risk, funding and capital section.

IFRS disclosures in the Risk, funding and capital section on pages 123-269 are labelled as 'audited'. These disclosures are an integral part of the Consolidated Annual Financial Statements and are covered by the Audit opinion.

Changes in accounting policies

In 2015 ABN AMRO adopted the following amendments to IFRS:

IAS 19 Defined Benefit Plans: Employee Contributions. The amendments apply to contributions from employees or third parties to defined benefit plans. The objective of the amendment is to simplify the accounting for these contributions. The standard became effective on 1 July 2014 and was adopted by the EU on 1 February 2015. The amendments have no significant impact on the Annual Financial Statements.

Annual Improvements to IFRSs 2010-2012 Cycle. This cycle of annual improvements comprises a total of eight amendments related to seven standards. The amendments to IFRS 3 Business Combinations: Accounting for Contingent Consideration in a Business Combination, IFRS 8 Operating Segments: Aggregation of Operating Segments. Reconciliation of the total of reportable segments' assets to the entity's assets, and IFRS 13 Fair Value Measurement: Short-term Receivables and Payables, are the most relevant for ABN AMRO. These amendments have no significant impact on the Annual Financial Statements. The requirements of this set of amendments are to be applied for annual periods beginning on or after 1 July 2014 and were endorsed by the EU on 1 February 2015.

339

Other

Annual Financial Statements

340

Annual Financial Statements 2015 / Notes to the Annual Financial Statements

Annual Improvements to IFRSs 2011-2013 Cycle. This cycle of annual improvements consists of amendments to four standards. Two of these are relevant for ABN AMRO. These are the amendments to IFRS 3 Business Combinations: Scope Exceptions for Joint Ventures and IFRS 13 Fair Value Measurement: Scope of Paragraph 52 (portfolio exception). None of these amendments has a significant impact on the Annual Financial Statements. The effective date of this cycle of improvements is 1 July 2014 and the improvements were endorsed by the EU on 1 January 2015.

New standards, amendments and interpretations not yet effective

The following amendments to IFRSs are issued by the IASB and endorsed by the EU, but are not yet effective. The amendments are required to be applied from 1 January 2016. Note that only the amendments to IFRSs that are relevant for ABN AMRO are discussed below.

IAS 27 Separate Financial Statements: Equity Method in Separate Financial Statements. The objective of this amendment is to include the option to use the equity method of accounting in separate financial statements. Since ABN AMRO values participating interests in group companies at net asset value in accordance with Book 2, title 9 of the Dutch Civil Code option 3 in the statutory financial statements, this amendment has no impact.

IAS 1 Presentation of Financial Statements: Disclosure Initiative. This amendment is part of the Disclosure Initiative of the IASB. A portfolio of projects with the objective to improve the effectiveness of disclosures in financial statements. The amendments to IAS 1 are a further clarification of concepts such as aggregation, materiality, and understandability and comparability of information. The amendment does not have a significant impact on the Annual Financial Statements.

IFRS 11 Joint arrangements: Accounting for Acquisitions of Interests in Joint Operations. The amendments add new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business. The amendment does not have a significant impact on the Annual Financial Statements.

Annual improvements to IFRSs 2012-2014 Cycle. This cycle of improvements contains amendments to four standards of which two are relevant for ABN AMRO. These are IFRS 7 Financial Instruments: Disclosures: 'Continuing Involvement' for Servicing Contracts and Offsetting Disclosures in Condensed Interim Financial Statements, IAS 34 Interim Financial Reporting: Disclosure of Information 'Elsewhere in the Interim Financial Report'. None of these amendments has a significant impact on the Annual Financial Statements.

New standards, amendments and interpretations not yet endorsed

The following new or revised standards and amendments have been issued by the IASB, but are not yet endorsed by the European Union and are therefore not open for early adoption. Note that only the amendments to IFRSs that are relevant for ABN AMRO are discussed below.

IFRS 9 Financial Instruments: In July 2014 the IASB published the final version of the new standard that replaces IAS 39 Financial instruments: Recognition and Measurement. The mandatory effective date of IFRS 9 will be for annual periods beginning on or after 1 January 2018. IFRS 9 has changed requirements for Classification and measurement, Impairment and Hedge accounting, in addition to containing extensive new disclosure requirements. During the year 2015 ABN AMRO put considerable effort into interpreting and implementing IFRS 9. A project was established with work

streams that focus on the three areas of IFRS 9 (Classification & Measurement, Impairment and Hedge Accounting). Although significant steps have been taken in implementing IFRS 9, ABN AMRO still has several key steps to take. ABN AMRO expects that the main impact of implementing IFRS 9 arises from the significant changes to the impairment model. IFRS 9 replaces the 'incurred loss' model with the 'expected credit loss model'. The main difference is that IFRS 9 requires entities to recognise expected credit losses in profit and loss for all financial assets not measured at fair value through profit and loss, even for those that are newly originated or acquired. IAS 39 only allows the recognition of a loss if a loss event has occurred. The main impact of implementing this new impairment model is that credit risk losses will be recognised earlier and that forward-looking information will be incorporated in the loss calculation. This difference in approach will result in higher loan loss impairments and corresponding lower equity.

IFRS 15 Revenue from contracts with customers. This new standard establishes a comprehensive framework for determining when to recognise revenue and how much revenue to recognise. It is effective for annual periods beginning on or after 1 January 2018. ABN AMRO is currently assessing the impact of the new standard.

IFRS 16 Leases. The new standard on leases was issued by the IASB in January 2016 and will become effective on 1 January 2019. IFRS 16 replaces IAS 17 Leases and removes the distinction between 'Operational' and 'Financial' lease for lessees. The requirements for lessor accounting remain largely unchanged. ABN AMRO will start its impact assessment in 2016.

IAS 12 Income taxes: Recognition of Deferred Tax Assets for Unrealised losses. The amendment clarifies how to account for deferred tax assets related to debt instruments measured at fair value. ABN AMRO will start its impact assessment in 2016.

IAS 7 Statement of Cash Flows: Disclosure Initiative. The objective of the amendment is to improve information provided about financing activities and disclosure that help to understand the liquidity of an entity. The amendment does not have a significant impact on the Annual Financial Statements.

Critical accounting estimates and judgements

The preparation of financial statements requires management to exercise its judgement in the process of applying ABN AMRO's accounting policies and to make estimates and assumptions concerning the future. Actual results may differ from those estimates and assumptions. Accounting policies for most significant areas requiring management to make judgements and estimates that affect reported amounts and disclosures are made in the following sections:

Impairment losses on loans and receivables	Risk, funding & capital Report
Fair value of financial instruments	note 18
Income tax expense, tax assets and tax liabilities	note 10
Impairment of available-for-sale instruments	note 16
Provisions	note 28

Assessment of risk and rewards

Whenever ABN AMRO is required to assess risks and rewards, when considering the recognition and derecognition of assets or liabilities and the consolidation and deconsolidation of subsidiaries,

ABN AMRO may sometimes be required to use judgement. Although management uses its best knowledge of current events and actions in making assessments of expected risk and rewards, actual risks and rewards may ultimately differ.

Significant accounting policies

Basis of consolidation

The Consolidated Financial Statements of ABN AMRO Group N.V. include the financial statements of the parent company and its controlled entities. It incorporates the assets, liabilities, revenues and expenses of ABN AMRO Group N.V. and its subsidiaries. Non-controlling interests (held by third parties) in both equity and results of group companies are presented separately in the Consolidated Financial Statements.

Subsidiaries are included using the same reporting period and consistent accounting policies. Intercompany balances and transactions, and any related unrealised gains and losses, are eliminated in preparing the Consolidated Financial Statements.

Unrealised gains arising from transactions with associates and jointly controlled entities are eliminated to the extent of ABN AMRO's interest in the entities. Unrealised losses are also eliminated unless the transaction provides evidence of impairment in the asset transferred.

Foreign currency

The Consolidated Financial Statements are stated in euros, which is the presentation and functional currency of ABN AMRO.

Foreign currency differences

ABN AMRO applies IAS 21 The effect of changes in foreign exchange rates. Transactions in foreign currencies are translated into euros at the rate prevailing on the transaction date. Foreign currency balances of monetary items are translated into euros at the period end exchange rates. Exchange gains and losses on such balances are recognised in the income statement. The Group's foreign operations may have different functional currencies. The functional currency is the currency that best reflects the economic substance of the underlying event and circumstances relevant to that entity. Prior to consolidation (or equity accounting), the assets and liabilities of non-euro operations are translated at the closing rate and items of the income statement and other comprehensive income are translated into euros at the rate prevailing on the transaction dates. Exchange differences arising on the translation of foreign operations are included in the currency translation reserve within equity. These are transferred to the income statement when the Group loses control, joint control or significant influence over the foreign operation.

Financial assets and liabilities

ABN AMRO classifies financial assets and liabilities based on the business purpose of entering into these transactions.

Introduction

342

Classification of financial assets

Financial assets are classified as assets held for trading, financial investments or loans and receivables and are based on the criteria in IAS 39 Financial Instruments: Recognition and measurement.

Their measurement and income recognition depends on the classification of the financial assets. The following four groups are identified:

• Å Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They generally arise when money or services are directly provided to a customer with no intention of trading or selling the loan. They are initially measured at fair value (including transaction costs) and subsequently measured at amortised cost using the effective interest method, with the periodic amortisation recorded in the income statement.
• Å Held-to-maturity investments are non-derivative financial assets that consist of instruments quoted on an active market with fixed or determinable payments and fixed maturity for which the positive intent and ability to hold to maturity is demonstrated. They are initially measured at fair value (including transaction costs) and subsequently measured at amortised cost using the effective interest method, with the periodic amortisation recorded in the income statement.
• Å Financial assets at fair value through profit or loss include:
  • Å financial assets held for trading;
  • Å financial assets that ABN AMRO irrevocably designated at initial recognition as held at fair value through profit or loss when the instruments are held to reduce an accounting mismatch, are managed on the basis of its fair value or include terms that have substantive derivative characteristics in nature.
• Å Available-for-sale financial assets are those assets that are otherwise not classified as loans and receivables, held-to-maturity investments or financial assets designated at fair value through profit or loss. They are initially measured at fair value with subsequent changes recognised in other comprehensive income.

If ABN AMRO reclassifies a financial asset out of held for trading, the financial asset is reclassified at its fair value and this fair value becomes the new amortised cost. On the same date a new effective interest is calculated.

Classification of financial liabilities

Financial liabilities are classified as liabilities held for trading, due to banks, due to customers, debt certificates, subordinated liabilities and other borrowings. Their measurement and recognition in the income statement depends on the classification of the financial liabilities.

• Å Financial liabilities at fair value through profit or loss include:
  • Å financial liabilities held for trading;
  • Å financial liabilities that ABN AMRO has irrevocably designated at initial recognition as held at fair value through profit or loss when the instruments are held to reduce an accounting mismatch are managed on the basis of its fair value or include terms that have substantive derivative characteristics in nature.

Other financial liabilities are initially measured at fair value (including transaction costs). Subsequent changes are measured at amortised cost using the effective interest rate method with the periodic amortisation recorded in the income statement.

343

Other

Annual Financial Statements

Annual Financial Statements 2015 / Notes to the Annual Financial Statements

Classification of assets and liabilities held for trading

A financial asset or financial liability is classified as held for trading if it is:

• Å acquired or incurred principally for the purpose of selling or repurchasing it in the near term;
• Å part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit taking;
• Å a trading derivative (except for a derivative that is a designated and effective hedging instrument).

Recognition and derecognition

Traded instruments are recognised on the trade date, defined as the date on which ABN AMRO commits to purchase or sell the underlying instrument. In the event that settlement terms are non-standard, the commitment is accounted for as a derivative between trade and settlement date. Loans and receivables are recognised when they are acquired or funded by ABN AMRO and derecognised when settled. Issued debt is recognised when issued and deposits are recognised when the cash is deposited with ABN AMRO. Other financial assets and liabilities, including derivatives, are recognised in the Statement of financial position when ABN AMRO becomes a party to the contractual provisions of the asset or liability.

Financial assets are generally derecognised when ABN AMRO loses control and the ability to obtain benefits over the contractual rights that comprise that asset. This occurs when the rights are realised, expire or substantially all risk and rewards are transferred. Financial assets are also derecognised in the case that the bank has neither transferred nor retained substantially all risks and rewards of ownership but control has passed to the transferee.

Financial instruments continue to be recognised in the balance sheet, and a liability recognised for the proceeds of any related funding transaction, unless a fully proportional share of all or specifically identified cash flows are transferred to the lender without material delay and the lender's claim is limited to those cash flows and substantially all the risks and rewards and control associated with the financial instruments have been transferred, in which case that proportion of the asset is derecognised.

On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in the income statement.

ABN AMRO has protected assets through synthetic securitisations. Through a synthetic securitisation a substantial part of the credit risk related to these assets is transferred, while actual ownership of the assets remains with ABN AMRO.

A restructuring of a financial asset with the same lender on substantially different terms, qualitative and quantitative - generally a 10% difference in the present value of the cash flows - is accounted for as an expiration of the financial asset and recognition of a new financial asset. The difference between the former carrying amount and the carrying amount of the new financial asset is included is recognised in the income statement.

Financial liabilities are derecognised when the liability has been settled, has expired or has been extinguished. An exchange of an existing financial liability for a new liability with the same lender on substantially different terms, qualitative and quantitative - generally a 10% difference in the present

value of the cash flows - is accounted for as an extinguishment of the original financial liability and recognition of a new financial liability. The difference between the former carrying amount and the consideration paid is recognised in the income statement. Any subsequent resale is treated as a new issuance.

Client Clearing

As a general clearing member, ABN AMRO provides clearing and settlement services to its clients. During 2015, ABN AMRO reconfirmed its accounting treatment of exchange traded derivatives cleared on behalf of clients. A comprehensive analysis was performed focusing on the extent to which ABN AMRO becomes party to one or more derivative instrument(s) and to the specific legal and economic facts and circumstances around its clearing operations in different jurisdictions.

In its capacity as clearing member, ABN AMRO guarantees the fulfilment of obligations towards CCPs of clients' transactions. ABN AMRO is not liable to clients for the non-performance of the CCP. In the event of a client defaulting, ABN AMRO has the legal obligation to settle all the clients' positions with the relevant CCPs, possibly at a loss. Possible losses arising from this guarantee might relate not only to the clients' current positions but also to the future trades of the client. Unlike a financial guarantee contract as defined in IAS 39 Financial Instruments, the guarantee provided by ABN AMRO does not relate to specific debt instruments. Therefore, we consider this guarantee to be in the scope of IAS 37 Provisions since the possible outflow of resources stem from the clearing arrangement with the CCP. ABN AMRO receives and collects (cash) margins from clients, and remits these margins to the relevant CCP in whole or in part. Given the stringent margin requirements set by the CCPs, possible future outflows of resources for new clearing transactions are considered close to zero.

As a consequence, ABN AMRO does not reflect the exchange traded derivatives cleared on behalf of clients in its financial statements. Under normal circumstances, the guarantee has no fair value and is not recognised in the financial statements. The loss recognition in case of non-performance of a client will be in the scope of IAS 37 including disclosures.

Offsetting

Financial assets and liabilities are offset and the net amount reported on the Statement of financial position if there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

Statement of cash flows

For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, freely available balances with central banks and other banks, net credit balances on current accounts with other banks, with less than three months maturity from the date of acquisition. The Statement of cash flows, based on the indirect method of calculating operating cash flows, gives details of the source of cash and cash equivalents which became available during the year and the application of these cash and cash equivalents over the course of the year. The cash flows are analysed into cash flows from operations, including banking activities, investment activities and financing activities. Movements in loans and receivables and interbank deposits are included in the cash flow from operating activities. Investment activities are comprised of acquisitions, sales and redemptions in respect of financial investments, as well as investments in, and sales of, subsidiaries and associates,

property and equipment. The issuing of shares and the borrowing and repayment of long-term funds are treated as financing activities. Cash flows arise from foreign currency transactions are translated into euros using the exchange rates at the date of the cash flows.

2 Segment reporting

Accounting policy for segment reporting

The segment reporting is in accordance with IFRS 8 Operating Segments. The segments are reported in a manner consistent with the internal reporting provided to the Managing Board, which is responsible for allocating resources and assessing performance and has been identified as chief operating decision-maker. All transactions between segments are eliminated as intersegment revenues and expenses in Group Functions.

Geographical data is presented according to management view.

In 2014 ABN AMRO has made a number of changes to its client segmentation in order to better cater to clients' needs, resulting in four reporting segments: Retail Banking, Private Banking, Corporate Banking and Group Functions. The comparative figures of 2013 have been adjusted accordingly.

Segment assets, liabilities, income and results are measured based on our accounting policies. Segment assets, liabilities, income and results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Transactions between segments are conducted at arm's length.

Interest income is reported as net interest income as management primarily relies on net interest income as a performance measure, not gross income and expense.

There was no revenue from transactions with a single external client or counterparty exceeding 10% of the bank's total revenue in 2015, 2014 or 2013.

Retail Banking

Retail Banking serves Mass Retail, Preferred Banking and YourBusiness Banking clients (SME clients with turnover up to EUR 1 million) and offers a wide variety of banking and insurance products and services through our branch network, online, via contact centres and through subsidiaries. In addition, ABN AMRO Hypotheken Groep, Alfam, ICS and MoneYou are part of Retail Banking.

Private Banking

Private Banking provides total solutions to its clients' global wealth management needs and offers a rich array of products and services designed to address their individual requirements. Private Banking operates under the brand name ABN AMRO MeesPierson in the Netherlands and internationally under ABN AMRO Private Banking, as well as local brands such as Banque Neuflize OBC in France and Bethmann Bank in Germany.

Introduction

Corporate Banking

Corporate Banking consists of the sub-segments Commercial Clients, International Clients and Capital Markets Solutions.

• Å Commercial Clients serves business clients with revenues from EUR 1 million up to EUR 250 million, and clients active in Commercial Real Estate (excluding publicly listed companies, which are served by the International Clients sub-segment). Our Lease and Commercial Finance activities are also part of this sub-segment;
• Å International Clients serves business clients with revenues exceeding EUR 250 million, as well as Energy, Commodities & Transportation (ECT) Clients, Diamond & Jewellery Clients, Financial Institutions and Listed Commercial Real Estate clients;
• Å Capital Markets Solutions serves clients by providing products and services related to financial markets. This sub-segment includes ABN AMRO Clearing.

Group Functions

Group Functions supports the business segments and consists of Technology, Operations & Property Services (TOPS), Finance, Risk Management & Strategy, People, Regulations & Identity (PR&I), Group Audit and the Corporate Office. The majority of the Group Functions costs are allocated to the businesses. Group Functions' results include those of ALM/Treasury and the Securities financing activities.

Other

347

Segment income statement for the year 2015

						2015
(in millions)	Retail Banking	Private Banking	Corporate Banking	Group Functions	Special items and divest ments	Total
Net interest income	3,302	589	2,142	44		6,076
Net fee and commission income	527	619	751	-68		1,829
Net trading income	7	58	127	-92		99
Share of result in equity accounted investments	21	17	-40	3		1
Other operating income	-3	27	141	286		450
Operating income	3,853	1,310	3,120	172		8,455
Personnel expenses	487	501	676	828		2,492
General and administrative expenses	445	287	408	1,420		2,559
Depreciation and amortisation of tangible and intangible
assets	7	24	19	127		177
Intersegment revenues/expenses	1,167	238	837	-2,242
Operating expenses	2,106	1,050	1,940	133		5,228
Impairment charges on loans and other receivables	99	-4	419	-8		505
Total expenses	2,205	1,046	2,358	125		5,734
Operating profit/(loss) before taxation	1,649	264	762	48		2,722
Income tax expense	423	49	165	160		798
Underlying profit/(loss) for the period	1,226	214	596	-112
Special items and divestments
Profit/(loss) for the year	1,226	214	596	-112		1,924
Attributable to:
Owners of the company	1,226	214	592	-113		1,919
Non-controlling interests			5			5

Retail Banking

Net interest income, at EUR 3,302 million, declined by EUR 77 million compared with 2014. This was largely driven by provisions related to legal claims (including Euribor mortgages) and inconsistencies in interest calculations between the bank and its business partners with respect to one of the mortgage products in 2015 and positive one-off results in 2014.

Margins on residential mortgages improved as a result of the gradual repricing of the mortgage book. This was partly offset by lower average residential mortgages volumes. Consumer lending volumes and margins decreased in 2015. Interest income on deposits remained stable. Higher average savings volumes were offset by lower margins as market rates declined at a faster pace than client savings rates.

Net fee and commission, at EUR 527 million in 2015, was marginally higher than in the previous year.

Personnel expenses decreased by EUR 73 million or 13% due mainly to a restructuring provision of EUR 60 million in 2014. Excluding this provision, personnel expenses were EUR 13 million lower due to lower average FTE levels following a further reduction of the number of branches. This was partly offset by higher pension expenses.

348

General and administrative expenses rose EUR 49 million, due mainly to EUR 48 million higher regulatory levies.

Intersegment revenues/expenses rose by EUR 96 million, which is mainly attributable to higher external staffing costs due to increased mortgage production and higher allocation of project costs related to enhancing client centricity and continuous improvement of products, services and IT processes (including the TOPS 2020 and Retail Digitalisation programmes).

Impairment charges on loans and other receivables fell by EUR 361 million, compared with 2014, to EUR 99 million in 2015. The decline in impairments is visible in both the consumer loan portfolio and the mortgage portfolio. Mortgage impairments decreased on the back of improved conditions in the housing market, and the recovery of the Dutch economy contributed to a lower inflow of mortgages in the impaired portfolio, increased outflow and an improvement of the portfolio's risk profile. Consumer loans also benefited from improved economic conditions and active risk management of the portfolio of clients in arrears, leading to sharply lower loan impairments. In addition, impairment charges benefited from releases of the IBNI allowances (EUR 85 million in 2015). Included in 2014 were EUR 50 million of IBNI additions.

Private Banking

Net fee and commission increased by EUR 75 million, or 14%, to EUR 619 million in 2015. Net fees increased due to higher average client assets, almost fully attributable to the stock market performance. Private Banking also generated additional fee income in 2015 from the full-year contribution of the acquired German activities.

Personnel expenses increased by EUR 41 million to EUR 501 million in 2015. The increase in the international entities was mainly attributable to the acquired German activities, the restructuring provision for the announced integration of Jersey into ABN AMRO Guernsey and FTE growth.

Impairment charges on loans and other receivables showed a net release of EUR 4 million, versus EUR 23 million impairment additions in 2014. The release in impairments is partially explained by a EUR 12 million IBNI release in 2015.

Corporate Banking

Net interest income increased by EUR 123 million to EUR 2,142 million.

Commercial Clients posted a modest rise in net interest income of EUR 30 million to EUR 1,305 million. Margins on loans and average deposit volumes increased, while deposit margins decreased compared with 2014. Average loan volumes decreased partly due to the reallocation of a portfolio to Group Functions.

Net interest income in International Clients increased by EUR 61 million to EUR 709 million, benefiting from growth in the ECT Clients loan portfolio which was partly due to the depreciation of the euro. This was partly offset by lower margins on deposits.

Net interest income in Capital Markets Solutions improved by EUR 31 million to EUR 127 million, mainly in Clearing.

Net fee and commission increased by EUR 105 million compared with the same period in 2014 to EUR 751 million. Fee growth was mainly driven by higher transaction volumes in Capital Markets Solutions and higher fees received from Group Functions related to Securities Financing activities.

Net trading income went up by EUR 10 million. The increase was driven by a EUR 116 million higher CVA/DVA/FVA impact compared with 2014 (EUR 49 million positive in 2015 versus EUR 67 million negative in 2014), which included first-time application of the FVA. This was largely offset by a provision for possible derivative-related issues for a group of SMEs.

Other operating income went up by EUR 54 million due largely to increased tax-exempt results on the Equity Participations portfolio on the back of improved market conditions in 2015. Clearing recorded a EUR 40 million gain in 2014 on the partial sale of the share in Holland Clearing House.

Personnel expenses amounted to EUR 676 million in 2015, up by EUR 58 million compared with 2014. Personnel expenses increased due to pension expenses, restructuring provisions and increased personnel expenses for our international activities driven by growth in the number of FTEs and the depreciation of the euro. General and administrative expenses were up EUR 110 million due partly to EUR 73 million higher regulatory levies. Intersegment revenues/expenses grew by EUR 37 million mainly due to higher project costs for continuous improvement of products, services and IT processes (including TOPS 2020).

Impairment charges amounted to EUR 419 million, down by EUR 298 million compared with 2014. The decrease of impairment charges at Commercial Clients in 2015 was partly offset by the increase at International Clients. In 2015 an IBNI release of EUR 125 million was included for Corporate Banking, compared with a EUR 25 million release in 2014.

Group Functions

Net interest income increased by EUR 16 million compared with 2014. The increase was mainly driven by lower funding costs due to lower spread levels paid on funding. This was partly offset by a higher cash level in the liquidity buffer, higher client funding volumes and a tax-exempt non-recurring provision related to the part of the Securities Financing activities discontinued in 2009.

Personnel expenses, at EUR 828 million in 2015, went up by EUR 70 million compared with 2014. This increase was driven by an increase in the number of FTEs and higher additions to restructuring provisions, and the fact that 2014 was positively impacted by adjustments to employee benefits. General and administrative expenses increased by EUR 117 million. This was due to higher project costs related to enhancing client centricity and continuous improvement of products, services and IT processes (including the TOPS 2020 and Retail Digitalisation programmes). In addition, a lower release related to the Deposit Guarantee Scheme provision for DSB was recorded in 2015 compared with 2014 (EUR 35 million release in 2015 versus EUR 66 million release in 2014). Expenses in 2015 were also impacted by a considerable VAT refund, which was the result of discussions with the tax authorities related to the period 2007-2014. This was partly offset by the EUR 55 million settlement with Vestia. These costs were, however, largely allocated to the commercial segments.

Special items and divestments

In 2015 there were no special items or divestments.

350

Segment income statement for the year 2014

						2014
(in millions)	Retail Banking	Private Banking	Corporate Banking	Group Functions	Special items and divestments	Total
Net interest income	3,379	597	2,019	28		6,023
Net fee and commission income	522	544	646	-21		1,691
Net trading income	7	40	117	10		174
Share of result in equity accounted investments	51	19	-30	11		51
Other operating income	-16	-8	87	54		117
Operating income	3,942	1,193	2,839	82		8,055
Personnel expenses	560	460	618	758	288	2,684
General and administrative expenses	396	251	298	1,303	201	2,450
Depreciation and amortisation of tangible and intangible assets	8	48	18	131		204
Intersegment revenues/expenses	1,071	205	800	-2,075
Operating expenses	2,035	964	1,734	117	489	5,338
Impairment charges on loans and other receivables	460	23	717	-28		1,171
Total expenses	2,495	986	2,450	89	489	6,509
Operating profit/(loss) before taxation	1,447	206	388	-7	-489	1,546
Income tax expense	368	46	91	-21	-72	412
Underlying profit/(loss) for the period	1,079	160	298	14	-417
Special items and divestments				-417	417
Profit/(loss) for the year	1,079	160	298	-402		1,134
Attributable to:
Owners of the company	1,079	160	298	-402		1,134
Non-controlling interests

Retail Banking

Net interest income increased by EUR 264 million to EUR 3,379 million driven by margins on deposits and, to a lesser extent, increased deposit volumes. Net interest income on mortgages improved due to gradual repricing of the mortgage book at higher margins as mortgages originated pre-crisis had lower margins. In addition, 2013 was negatively impacted by a correction for interest accruals. Net interest income on consumer lending decreased as lower average lending volumes more than offset the higher margins.

Net fee and commission showed a limited decline of EUR 25 million to EUR 522 million. The decline was largely attributable to the switch to an all-in fee model for investment products in the Netherlands.

Personnel expenses increased by EUR 44 million to EUR 560 million due to a restructuring provision of EUR 60 million. Excluding the restructuring provision, personnel expenses decreased modestly resulting from a decline in the number of FTEs following a further reduction in the number of branches in the Netherlands.

351

Annual Financial Statements 2015 / Notes to the Annual Financial Statements

Intersegment revenues/expenses rose by EUR 44 million, which is mainly attributable to higher allocation of IT project costs incurred for the planned improvement of core IT systems and processes in the coming years.

Impairment charges on loans and other receivables were considerably lower, dropping EUR 219 million to EUR 460 million. The decline was driven by lower impairments on mortgages and, to a lesser extent, lower impairments on the consumer lending portfolio. The improved conditions in the housing market and recovery of the Dutch economy contributed to lower inflow of clients in the impaired portfolio, increased outflow of clients to the performing portfolio and more final settlements of impaired exposures, all of which had a positive impact on the impairment level of mortgages in 2014.

Private Banking

Net interest income amounted to EUR 597 million, up by 13%. This increase was largely driven by higher volume and improved margins on deposits in the Netherlands. Margins of the international activities improved as well.

Net fee and commission rose by 2% to EUR 544 million. Net fees internationally increased mainly as a result of the acquisition of private banking activities in Germany and higher assets under management. Net fees in the Netherlands declined primarily due to the switch to an all-in fee model for investment products, despite the growth in assets under management.

Personnel expenses increased by EUR 18 million and general and administrative expenses increased by EUR 30 million. The increase was mainly related to the integration of the private banking activities in Germany. Depreciation and amortisation of tangible and intangible assets rose by EUR 28 million, mainly due to a goodwill impairment of EUR 28 million. Intersegment revenues/expenses increased by EUR 30 million, partly due to higher allocation of IT costs incurred for the improvement of the core IT systems and processes in the coming years.

Impairment charges at EUR 23 million improved sharply compared with 2013. In 2013, the international portfolio was impacted by several large impairment charges.

Corporate Banking

Net interest income showed a marked increase of EUR 167 million to EUR 2,019 million. Commercial Clients grew due to margin improvements from repricing abilities on both loans and deposits. Average lending volumes showed a limited decline, while average deposit volumes were virtually flat. International Clients benefited from growth in the ECT Clients loan portfolio. Capital Markets Solutions grew, among other things, at Clearing.

Net fee and commission increased by EUR 46 million to EUR 646 million mainly due to higher commitment fees at ECT Clients and Commercial Clients as well as higher M&A fees at Corporate Finance.

Net trading income decreased to EUR 117 million. The FVA impact, recorded for the first time this year, amounted to EUR 52 million negative. CVA/DVA results were EUR 18 million lower compared with 2013 (EUR 3 million positive in 2013 and EUR 15 million negative in 2014). Other operating income increased to EUR 87 million driven by Clearing recording a gain of EUR 40 million resulting from the partial sale of its share in Holland Clearing House.

Personnel expenses came to EUR 618 million, rising by EUR 18 million mainly due to a restructuring provision following the strategic review of Capital Markets Solutions. Intersegment revenues/ expenses showed an increase of EUR 57 million mainly due to higher allocated IT project costs.

Impairment charges on loans and other receivables amounted to EUR 717 million, a significant decrease of 16%, or EUR 134 million. Commercial Clients recorded substantially lower loan impairments at small clients (turnover of EUR 1 million to EUR 30 million), while loan impairments on medium-sized and large clients (turnover of EUR 30 million to EUR 250 million) increased. Loan impairments at International Clients increased and loan impairments at Capital Markets Solutions remain negligible.

Group Functions

Net interest income increased sharply by EUR 143 million compared with 2013. The rise was largely attributable to the improved ALM interest result, in part as a result of reallocation of the liquidity buffer costs (approximately EUR 80 million mainly allocated to Corporate Banking and for a small part to Retail Banking).

Personnel expenses remained virtually stable compared with 2013. General and administrative expenses increased by EUR 17 million partly due to expenses incurred in connection with the Asset Quality Review. This was offset by a higher release related to the DSB deposit guarantee scheme (EUR 66 million release in 2014 versus EUR 31 million release in 2013).

Depreciation and amortisation of tangible and intangible assets decreased by EUR 64 million, mainly due to accelerated depreciations in 2013 of EUR 52 million. Intersegment revenues grew by EUR 129 million. The increase was mainly driven by a change in allocation method of IT costs, as all IT costs are now allocated to the business segments (approximately EUR 100 million, of which 50% is allocated to Retail Banking, 40% to Corporate Banking and 10% to Private Banking).

Special items and divestments

Special items in 2014 included a EUR 288 million charge for the transition to a new pension scheme, and the levy for the nationalisation of SNS Reaal amounted to a total of EUR 201 million in operating expenses.

Segment income statement for the year 2013

						2013
(in millions)	Retail Banking	Private Banking	Corporate Banking	Group Functions	Special items and divestments	Total reported
Net interest income	3,115	529	1,852	-115		5,380
Net fee and commission income	547	532	600	-37		1,643
Net trading income		30	219	-21	-122	106
Share of result in equity accounted investments	39	14	-9	3		46
Other operating income	-10	13	68	77		149
Operating income	3,691	1,118	2,730	-93	-122	7,324
Personnel expenses	516	442	600	762	37	2,357
General and administrative expenses	376	221	288	1,286		2,171
Depreciation and amortisation of tangible and intangible assets	9	20	18	195		242
Intersegment revenues/expenses	1,027	175	743	-1,946
Operating expenses	1,929	858	1,649	297	37	4,770
Impairment charges on loans and other receivables	679	141	851	-4	-684	983
Total expenses	2,608	998	2,500	293	-647	5,753
Operating profit/(loss) before taxation	1,082	119	230	-386	525	1,571
Income tax expense	282	16	83	-87	117	411
Underlying profit/(loss) for the period	800	104	147	-299	408
Special items and divestments			-109	517	-408
Profit/(loss) for the year	800	104	38	218		1,160
Attributable to:
Owners of the company	800	104	40	218		1,162
Non-controlling interests			-2			-2

Introduction

354

Selected assets and liabilities by segment

					31 December 2015
	Retail	Private	Corporate	Group
(in millions)	Banking	Banking	Banking	Functions	Total
Assets
Financial assets held for trading			1,706		1,706
Derivatives		94	15,340	3,704	19,138
Securities financing		20	4,591	15,451	20,062
Residential mortgages	143,525	3,072	12	3,401	150,009
Consumer loans	8,105	5,858	624		14,587
Corporate loans	2,615	7,671	73,816	4,265	88,367
Other loans and receivables - customers	-1		6,143	215	6,357
Other	1,553	7,457	15,125	65,958	90,092
Total assets	155,797	24,171	117,355	92,994	390,317
Liabilities
Financial liabilities held for trading			459		459
Derivatives		85	13,560	8,780	22,425
Securities financing		8	1,155	10,209	11,372
Demand deposits	23,579	41,435	53,784	311	119,109
Saving deposits	69,952	18,498	4,022		92,472
Time deposits	5,142	6,533	4,884	1,996	18,555
Other due to customers			160		160
Other	57,123	-42,387	39,331	54,112	108,180
Total liabilities	155,797	24,171	117,355	75,410	372,733

					31 December 2014
(in millions)	Retail Banking	Private Banking	Corporate Banking	Group Functions	Total
Assets
Financial assets held for trading			9,115	-98	9,017
Derivatives		90	20,543	4,652	25,285
Securities financing		8	3,981	14,522	18,511
Residential mortgages	144,424	3,426	14	4,134	151,998
Consumer loans	8,795	5,830	773		15,398
Corporate loans	2,758	7,460	77,625	22	87,866
Other loans and receivables - customers		9	6,630	9	6,648
Other	1,638	6,112	14,897	49,498	72,145
Total assets	157,614	22,935	133,579	72,739	386,867
Liabilities
Financial liabilities held for trading			3,759		3,759
Derivatives		70	20,493	9,886	30,449
Securities financing		16	1,302	12,600	13,918
Demand deposits	22,619	38,338	48,479	317	109,753
Saving deposits	68,638	17,957	2,060		88,655
Time deposits	4,658	6,606	4,057	2,137	17,459
Other due to customers			144		144
Other	61,699	-40,053	53,285	32,922	107,854
Total liabilities	157,614	22,935	133,579	57,862	371,990

(in millions)	Retail Banking	Private Banking	Corporate Banking	Group Functions	Total
Assets
Financial assets held for trading			12,138	-119	12,019
Derivatives	39	171	11,710	2,351	14,271
Securities financing		8	3,024	15,330	18,362
Residential mortgages	146,670	3,221	17	3,531	153,439
Consumer loans	9,437	5,291	901		15,629
Corporate loans	2,851	6,975	75,290	152	85,268
Other loans and receivables - customers		9	2,678	5	2,692
Other	1,633	4,942	12,051	51,716	70,342
Total assets	160,630	20,617	117,809	72,966	372,022
Liabilities
Financial liabilities held for trading			4,399		4,399
Derivatives	38	130	10,636	6,423	17,227
Securities financing		3	1,176	11,087	12,266
Demand deposits	20,933	33,888	44,894	436	100,151
Saving deposits	68,802	17,331	1,315		87,448
Time deposits	3,669	8,245	5,111	2,613	19,638
Other due to customers			346	1	347
Other	67,188	-38,980	49,932	38,838	116,978
Total liabilities	160,630	20,617	117,809	59,398	358,454

31 December 2013

356

Geographical segments

						2015
					Rest of
(in millions)	The Netherlands	Rest of Europe	USA	Asia	the world	Total
Net interest income	5,109	577	156	178	57	6,076
Net fee and commission income	1,186	363	104	163	13	1,829
Net trading income	105	-30	5	20	-1	99
Share of result in equity accounted
investments	-16	17				1
Other operating income	417	26		6		450
Operating income	6,801	953	265	367	69	8,455
Personnel expenses	1,905	354	85	129	19	2,492
General and administrative expenses	2,195	248	41	61	14	2,559
Depreciation and amortisation of tangible
and intangible assets	138	27	5	5	2	177
Intercountry revenues/expenses	-20	-3	8	21	-6
Operating expenses	4,217	626	139	217	29	5,228
Impairment charges on loans and other
receivables	383	29	11	47	35	505
Total expenses	4,600	656	150	264	64	5,734
Operating profit/(loss) before
taxation	2,201	298	115	102	5	2,722
Income tax expense	665	88	34	11	-1	798
Profit/(loss) for the year	1,536	210	81	91	7	1,924
Attributable to:
Owners of the company	1,531	210	81	91	7	1,919
Non-controlling interests	5					5

Strategic Report

						2014
(in millions)	The Netherlands	Rest of Europe	USA	Asia	Rest of the world	Total
Net interest income	5,162	568	103	157	33	6,023
Net fee and commission income	1,115	321	87	153	14	1,691
Net trading income	135	17	3	18		174
Share of result in equity accounted
investments	32	17			2	51
Other operating income	112	1		3		117
Operating income	6,556	925	194	331	48	8,055
Personnel expenses	2,157	338	61	109	19	2,684
General and administrative expenses	2,112	243	31	49	14	2,450
Depreciation and amortisation of tangible
and intangible assets	143	49	4	4	4	204
Intercountry revenues/expenses	-8	-8	4	19	-8
Operating expenses	4,405	623	99	181	30	5,338
Impairment charges on loans and other
receivables	1,085	65	9	8	3	1,171
Total expenses	5,490	688	109	190	33	6,509
Operating profit/(loss) before
taxation	1,066	237	86	141	16	1,546
Income tax expense	286	73	28	20	6	412
Profit/(loss) for the year	780	165	58	121	10	1,134
Attributable to:
Owners of the company	781	165	58	121	10	1,134
Non-controlling interests

Introduction

358

						2013
(in millions)	The Netherlands	Rest of Europe	USA	Asia	Rest of the world	Total
Net interest income	4,639	511	72	132	26	5,380
Net fee and commission income	1,109	306	83	131	14	1,643
Net trading income	138	-55	3	20		106
Share of result in equity accounted
investments	31	13		2		46
Other operating income	119	22	1	1	6	149
Operating income	6,036	797	159	286	46	7,324
Personnel expenses	1,856	328	54	96	23	2,357
General and administrative expenses	1,855	233	29	43	11	2,171
Depreciation and amortisation of tangible
and intangible assets	208	23	4	5	2	242
Intercountry revenues/expenses	-1	-18	4	19	-4
Operating expenses	3,918	566	91	163	32	4,770
Impairment charges on loans and other
receivables	981	-5	-1	6	2	983
Total expenses	4,899	561	90	169	34	5,753
Operating profit/(loss) before
taxation	1,137	236	69	117	12	1,571
Income tax expense	291	81	18	17	4	411
Profit/(loss) for the year	846	155	51	100	8	1,160
Attributable to:
Owners of the company	848	155	51	100	8	1,162
Non-controlling interests	-2					-2

Introduction

359

3 Overview of financial assets and liabilities by measurement base

					31 December 2015
(in millions)	Amortised cost	Fair value through profit or loss - Trading	Fair value through profit or loss - Other	Available for sale financial assets	Total
Financial assets
Cash and balances at central banks	26,195				26,195
Financial assets held for trading		1,706			1,706
Derivatives		15,495	3,644		19,138
Financial investments			770	39,772	40,542
Securities financing	20,062				20,062
Loans and receivables - banks	15,680				15,680
Loans and receivables - customers	259,319				259,319
Other assets			2,543		2,543
Total financial assets	321,255	17,200	6,956	39,772	385,183
Financial Liabilities
Financial liabilities held for trading		459			459
Derivatives		13,725	8,700		22,425
Securities financing	11,372				11,372
Due to banks	14,630				14,630
Due to customers	230,297				230,297
Issued debt	74,492		1,715		76,207
Subordinated liabilities	9,708				9,708
Other liabilities			2,543		2,543
Total financial liabilities	340,499	14,184	12,958		367,641

360

		Fair value through profit or loss -	Fair value through profit or loss -	Available for sale
(in millions)	Amortised cost	Trading	Other	financial assets	Total
Financial assets
Cash and balances at central banks	706				706
Financial assets held for trading		9,017			9,017
Derivatives		20,243	5,043		25,285
Financial investments			589	40,877	41,466
Securities financing	18,511				18,511
Loans and receivables - banks	21,680				21,680
Loans and receivables - customers	261,910				261,910
Other assets			2,453		2,453
Total financial assets	302,807	29,259	8,084	40,877	381,028
Financial Liabilities
Financial liabilities held for trading		3,759			3,759
Derivatives		18,891	11,558		30,449
Securities financing	13,918				13,918
Due to banks	15,744				15,744
Due to customers	216,011				216,011
Issued debt	75,150		1,981		77,131
Subordinated liabilities	8,328				8,328
Other liabilities			2,453		2,453
Total financial liabilities	329,150	22,650	15,991		367,791

31 December 2014

31 December 2013

(in millions)	Amortised cost	Fair value through profit or loss - Trading	Fair value through profit or loss - Other	Available for sale financial assets	Total
Financial assets
Cash and balances at central banks	9,523				9,523
Financial assets held for trading		12,019			12,019
Derivatives		12,208	2,063		14,271
Financial investments			530	27,581	28,111
Securities financing	18,362				18,362
Loans and receivables - banks	23,967				23,967
Loans and receivables - customers	257,028				257,028
Other assets			2,171		2,171
Total financial assets	308,880	24,227	4,764	27,581	365,452
Financial Liabilities
Financial liabilities held for trading		4,399			4,399
Derivatives		10,436	6,791		17,227
Securities financing	12,266				12,266
Due to banks	11,626				11,626
Due to customers	207,584				207,584
Issued debt	86,611		2,071		88,682
Subordinated liabilities	7,917				7,917
Other liabilities			2,171		2,171
Total financial liabilities	326,004	14,835	11,033		351,872

Introduction

Strategic Report

Business Report

Risk, funding & capital Report

Governance Report

4 Net interest income

Accounting policy for net interest income and expense

ABN AMRO applies IAS 39 Financial Instruments: Recognition and Measurement. Interest income and expenses are recognised in the income statement on an accrual basis for all financial instruments using the effective interest rate method except for those financial instruments held for trading. The effective interest rate method allocates interest, amortisation of any discount or premium or other differences, including transaction costs and qualifying fees and commissions over the expected lives of the assets and liabilities. The effective interest method requires the Group to estimate future cash flows, in some cases based on its experience of customer behaviour, considering all contractual terms of the financial instrument, as well as expected lives of the assets and liabilities. Due to the large number of products, there are no individual estimates that are material to the results or financial position. Interest income and expenses of trading balances are included in net trading income.

(in millions)	2015	2014	2013
Interest income	13,207	13,376	13,383
Interest expense	7,130	7,353	8,003
Net interest income	6,076	6,023	5,380

Net interest income

ABN AMRO applies fair value hedge accounting on individual hedged items (micro fair value hedging). As from 2014 these hedged items are based on gross amounts.

Net interest income for full-year 2015 amounted to EUR 6,076 million, an increase of EUR 53 million compared with EUR 6,023 million in 2014.

The underlying increase was primarily driven by improved margins on loans (mainly mortgages and, to a lesser extent, corporate loans) and higher average corporate loan volumes. The average volume of residential mortgages, however, was lower. In addition, lower funding costs due to lower credit spreads were partly offset by higher liquidity buffer costs.

Interest income

The breakdown of Interest income by type of product for the years ended 31 December is shown in the following table.

(in millions)	2015	2014	2013
Interest income from:
Financial investments available-for-sale	692	734	693
Securities financing	295	256	270
Loans and receivables - banks	263	212	194
Loans and receivables - customers	9,770	10,281	10,490
Other	2,186	1,893	1,736
Total interest income	13,207	13,376	13,383

362

Interest income amounted to EUR 13,207 million in 2015, a decrease of EUR 169 million compared with EUR 13,376 million in 2014, mainly due to lower interest income in Loans and receivables - customers.

The decrease in Interest income from Loans and receivables - customers was mainly due to lower interest revenues as a result of a slight decrease in the volume of the mortgage portfolio. In addition, the decrease resulted from several non-recurring interest provisions recorded in 2015.

Other includes interest income on hedging instruments for an amount of EUR 1,855 million (in 2014: EUR 1,621 million).

Interest expense

The breakdown of Interest expenses by type of product for the years ended 31 December is shown in the following table.

(in millions)	2015	2014	2013
Interest expenses from:
Securities financing	187	173	181
Due to banks	242	209	263
Due to customers	1,940	2,328	2,726
Issued debt	1,646	1,819	1,903
Subordinated liabilities	451	374	422
Other	2,664	2,450	2,508
Total interest expense	7,130	7,353	8,003

Interest expense for the full year 2015 amounted to EUR 7,130 million, a decrease of EUR 223 million, or 3.0%, compared with EUR 7,353 million in 2014. This decrease was caused by the lower Interest expense related to Due to customers (EUR 388 million) and to Issued debt (EUR 173 million). This was partly offset by higher Interest expense - Other (EUR 214 million).

The decrease in Interest expense from Due to customers resulted from lower interest paid for client savings following a decrease in the market interest rate in 2015.

Interest expense from Issued debt was lower in 2015 compared with 2014 as a result of lower funding costs determined by lower credit spreads.

Other includes interest expense on hedging instruments for an amount of EUR 2,120 million (in 2014: EUR 1,977 million).

Strategic Report

5 Net fee and commission income

Accounting policy for net fee and commission income

ABN AMRO applies IAS 18 Revenue. Fees and commissions are recognised as the services are provided. The following fee types are identified:

• Å Service fees are recognised on a straight-line basis over the service contract period; portfolio and other management advisory and service fees are recognised based on the applicable service contracts;
• Å Fees arising from negotiating or participating in the negotiation of a transaction for a third party are recognised upon completion of the underlying transaction. Commission revenue is recognised when the performance obligation is complete. Loan syndication fees are recognised as revenue when the syndication has been completed.

Fees and commissions dependent on the outcome of a particular event or contingent upon performance are recognised when the relevant criteria have been met.

(in millions)	2015	2014	2013
Fee and commission income	3,061	2,693	2,639
Fee and commission expense	1,233	1,002	996
Net fee and commission income	1,829	1,691	1,643

Net fee and commission income increased by EUR 138 million in 2015 compared with 2014. The increase was primarily recorded in Private Banking due to favourable stock market performance, and in Corporate Banking as a result of higher transaction volumes at Clearing.

Fee and commission income

Fee and commission income for the years ended 31 December is specified in the following table.

(in millions)	2015	2014	2013
Fee and commission income from:
Securities and custodian services	1,344	1,100	1,144
Payment services	691	667	680
Portfolio management and trust fees	586	521	452
Guarantees and commitment fees	179	171	142
Insurance and investment fees	86	80	79
Other service fees	174	153	142
Total fee and commission income	3,061	2,693	2,639

Securities and custodian services fee income was higher due to market volatility in 2015 resulting in more transactions within the Clearing business (EUR 255 million, or 33%, compared with year-end 2014).

Payment services fees were slightly higher within Retail Banking and Commercial Clients (EUR 25 million).

364

Portfolio management and trust fee income increased mainly following higher client assets volume in the Private Banking business in the Netherlands and France (EUR 34 million). Moreover, this increase was driven by the acquisition of German activities from Credit Suisse in Q3 2014 (EUR 20 million).

Fee and commission expense

The components of Fee and commission expenses for the years ended 31 December are as follows:

(in millions)	2015	2014	2013
Fee and commission expenses from:
Securities and custodian services	953	757	705
Payment services	150	153	162
Portfolio management and trust fees	74	58	68
Guarantees and commitment fees	8	8	8
Insurance and investment fees	28	25	23
Other service fees	20	2	30
Total fee and commission expense	1,233	1,002	996

Securities and custodian services fee expenses were higher due to market volatility in 2015, resulting in more transactions in the Clearing business (EUR 196 million, or 25.9%, compared with 31 December 2014).

Portfolio management and trust fee expenses increased due to an increase in transactions volume in 2015 in the Private Banking business in France (EUR 15 million).

6 Net trading income

Accounting policy for net trading income

In accordance with IAS 39, trading positions are held at fair value and Net trading income includes gains and losses arising from changes in the fair value of financial assets and liabilities held for trading, interest income and expenses related to trading balances, the change in fair value of derivatives used for risk management purposes that do not meet the requirements of IAS 39 for hedge accounting, dividends received from trading instruments and related funding costs. Dividend income from trading instruments is recognised when entitlement is established. Net trading income also includes changes in fair value arising from changes in counterparty credit spreads and changes in own credit spreads where these impact the value of our trading liabilities. The Funding Value Adjustment incorporates the incremental cost of funding into the valuation of uncollateralised and partly collateralised derivatives. The charge related to the write-off of trading instruments is included in Net trading income.

(in millions)	2015	2014	2013
Interest instruments trading	-99	26	148
Equity trading	-84	-9	-200
Foreign exchange transaction results	319	272	239
Other	-37	-116	-81
Total net trading income	99	174	106

Introduction

Net trading income decreased by EUR 75 million at EUR 99 million in 2015 compared with EUR 174 million in 2014.

Interest instruments trading income decreased by EUR 127 million in 2015 compared with 2014 because of higher losses related to the IRS portfolio which was used to hedge the interest component of the cross currency swap positions. Moreover, the decrease was driven by a provision in Corporate Banking for an identified group of SMEs with possible interest rate derivatives-related issues. This was partly offset by the favourable effect of CVA and DVA results (EUR 69 million positive in 2015 versus EUR 6 million negative in the previous year).

Equity trading income was lower in 2015 compared with the previous year mainly as a result of a one-off tax-exempt provision in Group Functions and by the termination of part of the Capital Markets Solutions activities following the strategic review in 2014.

Foreign exchange transaction results increased by EUR 47 million to EUR 319 million in 2015 compared with 2014. This increase was due to higher valuation of cross-currency swaps as a result of the rise in the long-term market interest rate, which positively impacted the interest component of these contracts.

Other trading increased due to improved FVA results in Capital Markets Solutions in 2015 compared with 2014 (EUR 7 million positive in 2015 versus EUR 52 million negative in the previous year). Moreover, realised and unrealised gains on trading book loans were higher in 2015 compared with 2014.

7 Other income

Accounting policy for other income

Other income includes all other banking activities such as leasing activities and results on the disposal of assets. It also includes gains and losses on the sale of non-trading financial assets and liabilities, ineffectiveness of hedging programmes, fair value changes relating to assets and liabilities designated at fair value through profit or loss, and changes in the value of any related derivatives. For liabilities designated at fair value through profit or loss, it includes changes in own credit spreads. Dividend income from non-trading equity investments is recognised when entitlement is established.

(in millions)	2015	2014	2013
Leasing activities	22	22	21
Disposal of operating activities and equity accounted investments	28	60	28
Result from financial transactions	286	-41	-12
Other	114	76	112
Total other income	450	117	149

Total other income increased by EUR 333 million to EUR 450 million in 2015 compared with the previous year, mainly due to a higher Result from financial transactions.

366

Introduction

367

Result from financial transactions increased by EUR 327 million in 2015 compared with 2014 mainly due to favourable hedge accounting-related results at Group Functions. In addition, the increase resulted from gains on Private Investments Products and the revaluation and divestments results at Equity Participations.

8 Personnel expenses

Accounting policy for personnel expenses

Salaries and wages, social security charges and other salary-related costs are recognised over the period in which the employees provide the services to which the payments relate. The accounting policies for pensions and other post-retirement benefits are included in note 29.

(in millions)	2015	2014	2013
Salaries and wages	1,717	1,661	1,661
Social security charges	244	240	227
Pension expenses relating to defined benefit plans	3	405	224
Defined contribution plan expenses	322	170	33
Other	206	208	212
Total personnel expenses	2,492	2,684	2,357

Total personnel expenses for 2015 amounted to EUR 2,492 million, a decrease of EUR 192 million, or 7.1%, compared with EUR 2,684 million in 2014. The total Pension expenses, without taking into consideration the one-off settlement cost in 2014 of EUR 297 million, increased by EUR 46 million, mainly due to a decrease of the discount rate in 2015 compared with 2014 which resulted in higher interest cost.

Other personnel expenses consist mainly of additions and settlements of restructuring staff provisions and a release from the provision for employee benefits.

9 General and administrative expenses

Accounting policy for general and administrative expenses

Costs are recognised in the period in which services have been provided and to which the payment relates.

(in millions)	2015	2014	2013
Agency staff, contractors and consultancy costs	764	643	537
Staff related costs	90	87	81
Information technology costs	950	879	848
Housing	199	199	200
Post, telephone and transport	66	68	77
Marketing and public relations costs	127	130	123
Regulatory charges	241	317	120
Other	123	126	185
Total general and administrative expenses	2,559	2,450	2,171

General and administrative expenses for full-year 2015 grew by EUR 109 million, or 4.5%, to EUR 2,559 million, compared with 2014.

This increase was mainly due to higher Agency staff, contractors and consultancy costs, and an increase in IT expenses related to projects and IT expenses.

Regulatory charges were lower in 2015 compared with the previous year primarily due to the SNS levy recorded in 2014 (EUR 201 million). This decline was partly offset by the contribution to the National Resolution Fund in 2015 (EUR 119 million).

Other was mainly impacted by a VAT refund related to the period 2007-2014. This was partly offset by a lower release with respect to DSB and the settlement of a legal claim with Vestia in the third quarter of 2015.

A specification of the regulatory charges is as follows:

(in millions)	2015	2014	2013
Bank tax	98	91	106
Deposit Guarantee Scheme	3
SNS Levy		201
National resolution funds	119
Other regulatory charges	20	25	14
Total regulatory charges	241	317	120

Fees paid to KPMG are included under Agency staff, contractors and consultancy costs. These fees are specified in the following table.

(in millions)	2015	2014	2013
Financial statements audit fees	7	7	6
Audit related fees	4	4	4
Total auditor's fee	11	11	10

10 Income tax expense, tax assets and tax liabilities

Accounting policy for income tax expense, tax assets and tax liabilities

ABN AMRO applies IAS 12 Income Taxes in accounting for taxes on income.

ABN AMRO is subject to income taxes in numerous jurisdictions. Income tax expense consists of current and deferred tax. Income tax is recognised in the income statement in the period in which profits arise. Income tax recoverable on tax allowable losses is recognised as a current tax asset only to the extent that it is regarded as recoverable by offsetting against taxable profits arising in the current or prior period. Current tax is measured using tax rates enacted at the balance sheet date.

368

Deferred tax is recognised for qualifying temporary differences. Temporary differences represent the difference between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are only offset when there is both a legal right to offset and an intention to settle on a net basis.

(in millions)	2015	2014	2013
Recognised in income statement:
Current tax expenses for the current period	737	282	11
Adjustments recognised in the period for current tax of prior periods	-7	-24	7
Previously unrecognised tax losses, tax credits and temporary differences
increasing (reducing) current tax expenses	-5		2
Total current tax expense	725	257	20
Deferred tax arising from the current period	49	151	399
Impact of changes in tax rates on deferred taxes	-4
Deferred tax arising from the write-down or reversal of a write-down of a
deferred tax asset	-16	14	-6
Previously unrecognised tax losses, tax credits and temporary differences
reducing deferred tax expense	45	-10	-2
Total deferred tax expense	73	155	391
Total income tax expense	798	412	411

Reconciliation of the total tax charge

The effective tax rate was 29.3% in 2015 (2014: 26.7%; 2013: 26.2%) and differs from the theoretical rate that would arise using the statutory tax rate of the Netherlands. This difference is explained as follows:

(in millions)	2015	2014	2013
Profit/(loss) before taxation	2,722	1,546	1,571
Applicable tax rate	25.0%	25.0%	25.0%
Expected income tax expense	680	386	393
Increase/(decrease) in taxes resulting from:
Tax exempt income	26	-43	-37
Share in result of associates and joint ventures	-24	-13	-6
Non deductable Dutch bank tax	25	23	26
Other non deductable expenses	4	53	4
Previously unrecognised tax losses and temporary differences	95	-8	4
Write-down and reversal of write-down of deferred tax assets	-12	11	-6
Impact of changes in tax rates on temporary differences	-4
Foreign tax rate differential	9	18	25
Adjustments for current tax of prior years	-7	-24	7
Other	6	9	1
Actual income tax expense	798	412	411

The effective tax rate in 2015 was mainly affected by our reassessment of our tax position, a significant amount of non-deductible bank tax, non-taxable gains and losses, and adjustments to prior years due to the fact that we continued to settle open issues with the tax authorities.

Tax assets and liabilities

The most significant temporary differences arise from the revaluation of certain financial assets and liabilities including derivative contracts, allowances for loan impairment, provisions for pensions and business combinations and investments.

The following table summarises the tax position at 31 December.

	31 December 2015			31 December 2014	31 December 2013
(in millions)	Assets	Liabilities	Assets	Liabilities	Assets	Liabilities
Current tax	36	627	30	156	165	69
Deferred tax	309	23	473	19	745	21
Total tax assets and liabilities	345	650	504	175	910	90

The significant components and annual movements of deferred tax assets and deferred tax liabilities at 31 December are shown in the following tables.

(in millions)	As at 1 January 2015	Income statement	Equity	Other	As at 31 December 2015
Deferred tax assets:
Assets held for trading and derivatives	410		-55		356
Investments (Available-for-sale)	14	1	1	-1	16
Property and equipment	20	1		1	22
Intangible assets (excluding goodwill)	2				2
Insurance policy and claim reserves	-2	-1			-2
Loans and receivables - customers	4	-1			3
Impairments on loans	22	10			33
Provisions for pensions and post retirement benefits	34	-15	5		24
Accrued expenses and deferred income	54	12		1	68
Unused tax losses and unused tax
credits	11	1	-1		11
Other	36	16		-1	50
Total deferred tax assets before offsetting	605	26	-50	1	581
Offsetting DTA	132				272
Total deferred tax assets	473				309
Deferred tax liabilities related to:
Assets held for trading and derivatives	3			-3
Investments (Available-for-sale)	121	92	47	1	261
Property and equipment	1	-1		2	2
Intangible assets (excluding goodwill)	2				2
Loans and receivables - customers	10	-2			8
Impairments on loans
Issued debt and subordinated liabilities
Deferred policy acquisition costs	1				1
Other	13	8		-1	20
Total deferred tax liabilities before offsetting	151	98	46		295
Offsetting DTL	132				272
Total deferred tax liabilities	19				23
Net deferred tax	454				286
Deferred tax through income statement and equity		73	97

Introduction Strategic Report

Business Report

(in millions)	As at 1 January 2014	Income statement	Equity	Other	As at 31 December 2014
Deferred tax assets:
Assets held for trading and derivatives	501		-81	-9	410
Investments (Available-for-sale)	26	1	-24	11	14
Property and equipment	19	1		1	20
Intangible assets (excluding goodwill)	1	1			2
Insurance policy and claim reserves		-2			-2
Loans and receivables - customers	4				4
Impairments on loans	25	-3			22
Issued debt and subordinated liabilities	1
Provisions for pensions and post retirement benefits	118	-132	48		34
Accrued expenses and deferred income	43	9		2	54
Unused tax losses and unused tax
credits	37	-26	-1		11
Other	31	-4	2	6	36
Total deferred tax assets before offsetting	807	-155	-57	10	605
Offsetting DTA	62				132
Total deferred tax assets	745				473
Deferred tax liabilities related to:
Assets held for trading and derivatives	3				3
Investments (Available-for-sale)	50	2	65	5	121
Property and equipment	3	-1		-1	1
Intangible assets (excluding goodwill)	3	-1			2
Loans and receivables - customers	11	-4		2	10
Issued debt and subordinated liabilities	1
Deferred policy acquisition costs	1				1
Other	10	5	2	-5	13
Total deferred tax liabilities before offsetting	83		67	1	151
Offsetting DTL	62				132
Total deferred tax liabilities	21				19
Net deferred tax	724				454
Deferred tax through income statement and equity		155	124

Strategic Report

(in millions)	As at 1 January 2013	Income statement	Equity	Other	As at 31 December 2013
Deferred tax assets:
Assets held for trading and derivatives	643	1	-143		501
Investments (Available-for-sale)	43		-16	-1	26
Property and equipment	18	1			19
Intangible assets (excluding goodwill)	1				1
Loans and receivables - customers	2	1		1	4
Impairments on loans	66	-41			25
Provisions for pensions and post retirement benefits	396	-352	73	1	118
Accrued expenses and deferred income	77	-34			43
Unused tax losses and unused tax
credits	271	-237		4	38
Other	38	-11	5	-1	31
Total deferred tax assets before offsetting	1,555	-671	-81	4	807
Offsetting DTA	314				62
Total deferred tax assets	1,241				745
Deferred tax liabilities related to:
Assets held for trading and derivatives	2			1	3
Investments (Available-for-sale)	49		1		50
Property and equipment		3			3
Intangible assets (excluding goodwill)	3				3
Loans and receivables - customers	11				11
Issued debt and subordinated liabilities	16	-15			1
Provisions for pensions and post retirement benefits	225	-225
Deferred policy acquisition costs	1	1	-1		1
Other	54	-44		1	11
Total deferred tax liabilities before offsetting	361	-280		2	83
Offsetting DTL	314				62
Total deferred tax liabilities	47				21
Net deferred tax	1,194				724
Deferred tax through income statement and equity		391	81

Deferred tax assets

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will allow the deferred tax asset to be recovered. This is based on estimates of sufficient taxable income by jurisdiction in which ABN AMRO operates, available tax planning opportunities, and the period over which deferred tax assets are recoverable. Management considers this more likely than not. In the event that actual results differ from these estimates in future periods, and depending on the tax strategies that ABN AMRO may be able to implement, changes to the recognition of deferred tax assets could be required, which could impact our financial position and net profit.

373

Other

Tax losses

The total accumulated losses available for carry-forward at 31 December 2015 amounted to EUR 1,542 million (2014: EUR 1,415 million), of which EUR 32 million (2014: EUR 32 million) could be recognised for future tax benefits. The recorded deferred tax asset for tax losses carried forward amounted to EUR 11 million (2014: EUR 11 million).

Unrecognised tax assets

Deferred tax assets of EUR 278 million (2014: EUR 258 million) have not been recognised in respect of gross tax losses of EUR 1,510 million (2014: EUR 1,383 million) because future taxable profits are not considered probable. These deferred tax assets are mainly related to positions outside the Netherlands.

Tax credits and unrecognised tax credits

ABN AMRO had carry-forward tax credits of EUR 3 million at 31 December 2015 (2014: EUR 4 million) which have not been recognised because offset to future tax benefits is not expected.

The following tables show when the operating losses and tax credits as at 31 December 2015 will expire.

Loss carry-forward 2015:

(in millions)	2016	2017	2018	2019	2020	After 5 years	No expiration	Total
Loss carry-forward recognised							32	32
Loss carry-forward not recognised					29	12	1,469	1,510
Total tax losses carry forward (gross)					29	12	1,501	1,542
Tax credits 2015:
(in millions)	2016	2017	2018	2019	2020	After 5 years	No expiration	Total
Tax credits recognised
Tax credits not recognised	2						1	3
Total tax credits carry forward (gross)	2						1	3

As from 31 December 2015, ABN AMRO recognised net deferred tax assets of EUR 13 million (2014: EUR 43 million) that exceed deferred tax liabilities in entities which have suffered a loss in either 2015 or 2014.

Tax related to each component of other comprehensive income and tax related to equity can be found in the Consolidated statement of comprehensive income and in the Consolidated statements of changes in equity. As a result of the amended pension accounting standard IAS 19 in 2014, the total deferred tax impact on equity is not equal to the tax impact on Other comprehensive income as shown in the Consolidated statement of comprehensive income. More information is provided in note 29 Pension and other post-retirement employee benefits.

374

Income tax consequences of dividend

The Managing Board proposes, subject to the approval of the Supervisory Board, a final dividend of EUR 414 million for the ordinary shares. The dividend will be subject to a withholding tax of EUR 62 million.

Country-by-country reporting

The following table provides an overview of total operating income, average number of FTEs, net profit/(loss) for the year, income tax expense and received government grants per country. In addition, the following table shows the principal subsidiary and main activity for each country. The full list of participating interests as referred to in Article 414, Book 2 of the Dutch Civil Code has been filed with the Trade Register.

As this regulation is only applicable as from 1 January 2014, no previous reporting dates are shown in this table.

						31 December 2015
	Principal subsidiary	Main activity	Total operating income (in millions)	Average number of FTEs	Operating profit/(loss) before taxation (in millions)	Income tax expense (in millions)
Netherlands	ABN AMRO Bank N.V.	Retail Banking	6,896	18,112	2,227	671
- of which international activities			95	23	25	6
France	Banque Neuflize OBC S.A.	Private Banking	332	966	77	27
Germany	Bethmann Bank AG	Private Banking	293	730	100	15
Belgium	ABN AMRO Bank N.V. Branch Belgium	Private Banking	90	230	17	11
Great Brittain	ABN AMRO Commercial Finance Plc	Corporate Banking	76	373	44	10
Luxembourg	ABN AMRO Bank (Luxembourg) S.A.	Private Banking	47	166	6	1
Norway	ABN AMRO Bank N.V. Oslo Branch	Corporate Banking	59	28	41	12
Jersey	ABN AMRO Bank N.V. Jersey Branch	Private Banking	43	61	30	2
Guernsey	ABN AMRO (Guernsey) Ltd.	Private Banking	34	93	13	1
United States	ABN AMRO Clearing Chicago LLC	Corporate Banking	265	381	115	34
Brasil	ABN AMRO Brasil Participações	Corporate Banking	24	80	-12	-6
Singapore	ABN AMRO Bank N.V. Branch Singapore	Corporate Banking	178	465	87	12
Hong Kong	ABN AMRO Bank N.V. Branch Hong Kong	Private Banking	127	295	31	4
Japan	ABN AMRO Clearing Tokyo Co. Ltd.	Corporate Banking	17	14	10	2
United Arab Emirates	ABN AMRO Bank N.V. Branch UAE/DIFC	Private Banking	29	92	3
Australia	ABN AMRO Clearing Sydney Pty Ltd.	Corporate Banking	16	54	6	2
Other			-72	2	-72
Total			8,455	22,142	2,722	798

Introduction

375

	Principal subsidiary	Main activity	Total operating income (in millions)	Average number of FTEs	Net profit/(loss) for the year (in millions)	Income tax expense (in millions)
Netherlands	ABN AMRO Bank N.V.	Retail Banking	6,622	18,371	1,111	297
- of which international
activities			66	159	45	11
France	Banque Neuflize OBC S.A.	Private Banking	316	972	68	20
Germany	Bethmann Bank AG	Private Banking	264	590	82	11
	ABN AMRO Bank N.V. Branch
Belgium	Belgium ID&JG	Private Banking	84	236	9	19
	ABN AMRO Commercial
Great Brittain	Finance Plc	Corporate Banking	61	364	-1
	ABN AMRO Bank
Luxembourg	(Luxembourg) S.A.	Private Banking	52	158	10	5
	ABN AMRO Bank N.V. Oslo
Norway	Branch	Corporate Banking	50	22	39	11
	ABN AMRO Bank N.V. Jersey
Jersey	Branch	Private Banking	44	63	24
Guernsey	ABN AMRO (Guernsey) Ltd.	Private Banking	24	93	-17
	ABN AMRO Clearing Chicago
United States	LLC	Corporate Banking	194	352	86	28
	ABN AMRO Brasil
Brazil	Participações	Corporate Banking	13	66	6	3
	ABN AMRO Bank N.V. Branch
Singapore	Singapore	Corporate Banking	149	430	72	10
	ABN AMRO Bank N.V. Branch
Hong Kong	Hong Kong	Private Banking	114	294	37	6
	ABN AMRO Clearing Tokyo Co.
Japan	Ltd.	Corporate Banking	13	13	6	1
	ABN AMRO Bank N.V. Branch
United Arab Emirates	UAE/DIFC	Private Banking	35	85	14
	ABN AMRO Clearing Sydney
Australia	Pty Ltd.	Corporate Banking	16	49	8	3
Other			2	22	-6	-1
Total			8,055	22,179	1,546	412

31 December 2014

No material government grants were received in 2015.

11 Earnings per share

The following table shows the composition of Basic earnings per share at 31 December.

	2015				2014				2013
(in millions)	Profit/ (loss) for the period1	Number of shares	Earnings per share (in euros)	Profit/(loss) for the period1	Number of shares	Earnings per share (in euros)	Profit/(loss) for the period1	Number of shares	Earnings per share (in euros)
Basic earnings1	1,908	940	2.03	1,134	940	1.21	1,162	940	1.24

¹ Earnings consist of reported profit excluding reserved payments for AT 1 Capital securities and results attributable to non-controlling interests.

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ABN AMRO does not have any dilutive potential ordinary shares. Therefore, only basic earnings per ordinary shares is disclosed. Basic earnings per ordinary shares is calculated by dividing the profit attributable to the shareholders of ABN AMRO Group by the weighted average number of ordinary shares outstanding.

The earnings per share in 2015 was EUR 2.03. This is an increase of EUR 0.82 or 69.4% compared with the earnings per share of EUR 1.21 in 2014.

The final proposed dividend 2015 will be EUR 0.44 per share. Together with an interim dividend in August 2015, the total dividend will be EUR 0.81 per share.

12 Cash and balances at central banks

This item includes cash on hand and available demand balances with central banks in countries in which the bank has a presence. Mandatory reserve deposits are disclosed in note 19 Loans and receivables - banks.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Cash on hand and other cash equivalents	535	617	596
Balances with central banks readily convertible in cash other than
mandatory reserve deposits	25,660	89	8,927
Total cash and balances at central banks	26,195	706	9,523

Cash and balances at central banks increased by EUR 25.5 billion to EUR 26.2 billion in December 2015 compared with EUR 706 million in 2014 due to higher outstanding of overnight positions placed at DNB.

13 Financial assets and liabilities held for trading

Accounting policy for financial assets and liabilities held for trading

In accordance with IAS 39, all assets and liabilities held for trading are held at fair value with gains and losses in the changes of the fair value taken to Net trading income in the income statement.

Financial assets held for trading

The following table shows the composition of assets held for trading.

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Annual Financial Statements 2015 / Notes to the Annual Financial Statements

(in millions)	31 December 2015	31 December 2014	31 December 2013
Trading securities:
Government bonds	1,333	2,326	2,906
Corporate debt securities	335	924	873
Equity securities	19	4,946	6,471
Total trading securities	1,686	8,196	10,250
Trading book loans	19	821	1,032
Commodities			737
Total assets held for trading	1,706	9,017	12,019

Financial assets held for trading as at 31 December 2015 amounted to EUR 1.7 billion, down by EUR 7.3 billion compared with 31 December 2014. This decrease was mainly due to the discontinuation of the equity derivatives activities (EUR 4.9 billion), lower Government bonds (EUR 1.0 billion) and a decline in Trading book loans (EUR 0.8 billion).

The decrease in Government bonds was mainly related to Dutch, Belgian and German positions. These portfolios are mainly a result of primary dealership in these countries and for the purpose of client facilitation. Most of these contracts are hedged with short positions in Government bonds (see also decrease in Government bonds in Financial liabilities held for trading).

As a result of the wind-down of activities resulting from the strategic review of Capital Markets Solutions, significant equity security portfolios were sold in 2014 (EUR 4.9 billion). The main portfolios sold were FTSE equities (EUR 2.1 billion) in equities relating to the EURO STOXX 50 index derivatives basket (EUR 1.2 billion) and in equities relating to the closure of the equity derivatives desk in the US (EUR 1.0 billion).

Contracts related to the Trading book loans have been reassessed and reclassified to Corporate loans in 2015.

Financial liabilities held for trading

The following table shows the composition of liabilities held for trading.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Bonds	417	1,710	1,988
Equity securities	19	2,016	1,787
Total short security positions	435	3,725	3,775
Other liabilities held for trading	24	34	624
Total liabilities held for trading	459	3,759	4,399

Financial liabilities held for trading amounted to EUR 0.5 billion at 31 December 2015, a decrease of EUR 3.3 billion compared with 31 December 2014. This decline was mainly due to the wind-down of the equity derivatives portfolio (EUR 2.0 billion) in the US resulting from the strategic review of Capital Markets Solutions. The decrease also resulted from lower short positions in Bonds (EUR 1.3 billion), mainly related to Dutch, Belgian, German and French Government bonds and Corporate debt securities.

The fair value of assets pledged as security is shown in note 32.

Business Report

14 Derivatives

Accounting policy for Derivatives

Derivatives comprise derivatives held for trading and derivatives held for risk management purposes. Derivatives held for trading are closely related to facilitating the needs of our clients. A significant part of the derivatives in the trading portfolio is related to serving clients in their risk management to hedge, for example, currency or interest rate exposures. Furthermore, ABN AMRO offers products that are traded on the financial markets to institutional and individual clients and governments. Derivatives held for risk management purposes include the fair value of all derivatives qualifying as hedging instruments in fair value hedges and in cash flow hedges, hedge accounting derivatives, as well as the fair value of derivatives related to assets and liabilities designated as at fair value through profit or loss, economic hedges. A hedging instrument, for hedge accounting purposes, is a designated derivative whose fair value or cash flows are expected to offset changes in the fair value or cash flows of a designated hedged item. From a risk perspective, the gross amount of trading assets must be associated together with the gross amount of trading liabilities, which are presented separately on the statement of financial position. However, IFRS does not allow netting of these positions in the statement of financial position.

Derivatives comprise the following:

Total
derivatives
9
13
1,770
763,907
19,129
22,412
485,042
19,138
22,425
1,250,719

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	Derivatives held for trading			Economic hedges			Hedge accounting		Total derivatives
(in millions)	Interest	rate Currency	Other	Interest	rate Currency	Other	Interest	rate Currency	Other
Exchange traded
Fair value assets	13		2			21				36
Fair value liabilities	14		5			10				30
Notionals	163	8	205			2,396				2,773
Over-the-counter
Central counterparties
Fair value assets
Fair value liabilities
Notionals	544,841						40,372			585,213
Other bilateral
Fair value assets	15,998	3,346	370	254	215	23	4,591	452		25,249
Fair value liabilities	14,383	3,456	344	191	469	18	11,543	15		30,419
Notionals	213,089	163,334	8,719	3,853	27,794	116	93,890	1,399		512,193
Total
Fair value assets	16,011	3,346	373	254	215	43	4,591	452		25,285
Fair value liabilities	14,398	3,457	348	191	469	28	11,543	15		30,449
Notionals	758,093	163,342	8,923	3,853	27,794	2,512	134,262	1,399		1,100,179

31 December 2014

31 December 2013

Total

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	Derivatives held for trading			Economic hedges			Hedge accounting		derivatives
(in millions)	Interest	rate Currency	Other	Interest	rate Currency	Other	Interest	rate Currency	Other
Exchange traded
Fair value assets	2		144			23				169
Fair value liabilities	2	1	143			30				176
Notionals	115	16	212			391				734
Over-the-counter
Central counterparties
Fair value assets
Fair value liabilities
Notionals	505,461	946					25			506,432
Other bilateral
Fair value assets	10,628	920	154	217	83	37	1,693	370		14,102
Fair value liabilities	8,713	767	223	152	381	24	6,787	4		17,051
Notionals	191,621	79,638	10,489	4,143	12,474	341	123,004	1,534		423,244
Total
Fair value assets	10,630	920	298	217	83	60	1,693	370		14,271
Fair value liabilities	8,715	768	366	152	381	54	6,787	4		17,227

Notionals 697,198 80,600 10,701 4,143 12,474 732 123,029 1,534 930,411

Over-the-counter derivatives are cleared with a CCP and there is no value on our Statement of financial position.

The notional amount of the interest derivatives held for trading as at 31 December 2015 amounted to EUR 885.2 billion, an increase of EUR 127.1 billion, or 16.8 %, compared with EUR 758.1 billion at 31 December 2014. This increase was chiefly due to higher client activity mainly within Financial institutions. As at 31 December 2015, the fair value of these interest rate derivatives decreased compared with year-end 2014, mainly due to the increase in long-term interest rates.

The notional of currency derivatives held for trading at 31 December 2015 amounted to EUR 181.5 billion, an increase of EUR 18.2 billion, or 11.1%, compared with EUR 163.3 billion at 31 December 2014. This increase was mainly due to the growth in client activity caused by increased volatility of the foreign exchange market in anticipation of and following the ECB's Quantitative Easing announcement.

The total notional amount of Derivatives held for trading – other as at 31 December 2015 amounted to EUR 2.2 billion, a decrease of EUR 6.7 billion compared with EUR 8.9 billion at 31 December 2014. This decrease was mainly due to the wind-down of the equity derivatives portfolio resulting from the strategic review of Capital Markets Solutions.

The hedging strategies are explained in greater detail in note 15.

15 Hedge accounting

Accounting policy for hedge accounting (IAS 39)

ABN AMRO enters into various derivative and non-derivative instrument transactions with external parties to hedge risks on assets, liabilities, forecasted cash flows and net investments. The accounting treatment of the hedged item and the hedging instrument depends on whether the hedge relationship qualifies for hedge accounting.

Qualifying hedges may be designated as either fair value hedges, cash flow hedges or hedges of net investments. A non-derivative financial asset or liability may be designated as a hedging instrument for hedge accounting purposes only if it hedges the risk of changes in foreign currency exchange rates.

The hedged item can be an asset, liability, highly probable forecasted transaction or net investment in a foreign operation that (a) exposes the entity to risk of changes in fair value or future cash flows and (b) is designated as being hedged. The risks being hedged (the hedged risks) are typically changes in interest rates or foreign currency rates. ABN AMRO may also enter into credit risk derivatives (sometimes referred to as credit default swaps) for managing portfolio credit risk. However, these are generally not included in hedge accounting relationships.

Both at the inception of the hedge and on an ongoing basis, ABN AMRO formally assesses whether the derivatives used in its hedging transactions have been highly effective in offsetting changes in the fair value or cash flows of the hedged item, by assessing and measuring whether changes in the fair value or cash flows of the hedged item are offset by the changes in the fair value or cash flows of the hedging instrument.

Hedge ineffectiveness and gains and losses on components of a derivative that are excluded from the assessment of hedge effectiveness are recorded directly in Results from financial transactions as part of Other income. ABN AMRO discontinues hedge accounting when the hedge relationship has ceased to be effective or is no longer expected to be effective, or when the derivative or hedged item is sold or otherwise terminated.

Adoption of EU carved out version IAS 39

Micro fair value hedges is hedging of separate hedged items which can be assets and liabilities. For micro fair value hedging, ABN AMRO uses the 'carved out' version of IAS 39 as adopted by the European Union, which means that negative credit spreads are excluded in the hedge relationship for micro fair value hedging.

Macro fair value hedging implies that a group of financial assets is reviewed in combination and jointly designated as the hedged item. However, the portfolio may, for risk management purposes, include assets and liabilities. In this context, the starting difference between the fair value and the carrying value of the hedged item at the designation of the hedging relationship is amortised over the remaining life of the hedged item. For macro fair value hedging, ABN AMRO uses the carved out version of IAS 39 as adopted by the European Union, which removes some of the limitations on fair value hedges and the strict requirements on the effectiveness of those hedges. In this context, the impact of changes in the estimates of the re-pricing dates is only considered ineffective if it leads to over-hedging.

Fair value hedges

Where a derivative financial instrument hedges the exposure to changes in the fair value of the hedged item, the hedged item is adjusted in relation to the risk being hedged. Gains or losses on re-measurement of both the hedging instrument and the hedged item are recognised in the Income statement within Results from financial transactions as part of Other income. Hedge effectiveness for fair value hedges is measured as the amount by which the changes in the fair value of the hedging instrument are different from changes in the fair value of the hedged item. When a fair value hedge of interest rate risk is terminated, any value adjustment to the carrying amount of the hedged item is amortised to profit or loss over the original designated hedging period, or taken directly to income if the hedged item is derecognised.

Cash flow hedges

When a derivative financial instrument hedges the exposure to variability in the cash flows from a hedged item, the effective part of any gain or loss on re-measurement of the hedging instrument is recognised directly in equity. Hedge effectiveness for cash flow hedges is measured as the amount by which the changes in the fair value of the derivative are in excess of changes in the fair value of the expected cash flow in the cash flow hedge. Any ineffective part of the cash flow

382

hedge is recognised in Other income immediately. When a cash flow hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or loss recognised in equity remains in equity.

The cumulative gains or losses recognised in equity is transferred to the income statement at the time when the hedged transaction affects net profit or loss and is included in the same line item as the hedged transaction. In the exceptional case that the hedged transaction is no longer expected to occur, the cumulative gains or losses recognised in equity are recognised in the Income statement immediately.

Forecasted transactions

When the hedging instrument effectively hedges a forecasted transaction or firm commitment, the changes in fair value of the hedging instrument are recognised in equity. Amounts deferred in equity are transferred to the income statement and classified as profit or loss in the periods during which the hedged firm commitment or forecasted transaction affects the income statement. If the hedge no longer meets the criteria for hedge accounting or is otherwise discontinued, but the hedged forecasted transactions or firm commitments are still expected to occur, hedge accounting is discontinued prospectively.

Hedging of net investments in foreign operations

ABN AMRO may enter into foreign currency derivatives and currency borrowings to hedge various net investments in foreign operations. For such hedges, currency translation differences arising on translation of the currency of these instruments to euros are recognised directly in the currency translation reserve in equity, insofar as they are effective. The cumulative gain or loss recognised in equity is transferred to the Income statement on the disposal of the foreign operation.

Hedges not qualifying for hedge accounting

The fair value changes of derivative transactions used to hedge against economic risk exposures that do not qualify for hedge accounting, or for which it is not cost beneficial to apply hedge accounting, are recognised directly through profit or loss.

Derivatives designated and accounted for as hedging instruments

The following results from ineffectiveness are recognised in Other income:

(in millions)	2015	2014	2013
Fair value hedges	63	-62	-5
Cash flow hedges	6	1	9
Net investment hedging	1		1
Total hedging results	71	-62	5

The gain of EUR 63 million for the fair value hedges in 2015 was due to an increase of the hedge ineffectiveness as well as a refined methodology to measure this (in)effectiveness.

Overview of the fair value and notionals of hedging instruments

	Fair value hedges		Cash flow hedges				Economic hedges
	Notional amount		Fair value	Notional amount		Fair value	Notional amount		Fair value
(in millions)		Assets	Liabilities		Assets	Liabilities		Assets	Liabilities
31 December 2015
Derivatives for risk management purposes
Interest rate	94,377	2,265	7,234	53,712	1,074	1,440	4,014	242	136
Currency	560	304	26				26,356	499	604
Other							2,749	19	27
Total	94,937	2,569	7,260	53,712	1,074	1,440	33,118	760	767
31 December 2014
Derivatives for risk management purposes
Interest rate	87,970	2,602	8,594	46,292	1,989	2,949	3,853	254	191
Currency	1,399	452	15				27,794	215	469
Other							2,512	43	28
Total	89,369	3,054	8,609	46,292	1,989	2,949	34,159	513	688
31 December 2013
Derivatives for risk management purposes
Interest rate	84,687	1,190	5,119	38,342	503	1,668	4,143	217	152
Currency	1,414	370	4	120			12,474	83	381
Other							732	60	54
Total	86,101	1,560	5,123	38,462	503	1,668	17,349	360	587

The fair value hedges increased by EUR 5.6 billion to EUR 94.9 billion at 31 December 2015 compared with 2014 due to new funding (fixed), the cash flow hedges increased by EUR 7.4 billion to EUR 53.7 billion due to new steering actions.

In 2015 the fair value of the economic hedges was influenced by changed interest rates, declining USD FX rates and CHF decoupling from the EUR.

Fair value hedge accounting

ABN AMRO applies fair value hedge accounting on individual hedged items (micro fair value hedging) as well as on a portfolio of hedged items (macro fair value hedging).

Micro fair value hedge accounting

Hedging instruments designated in individual fair value hedge relationships principally consist of interest rate swaps, interest rate options and cross-currency interest rate swaps that are used to protect against changes in the fair value of fixed rate assets and fixed rate liabilities due to changes in market interest rates.

For qualifying fair value hedges, all changes in the fair value of the derivative and in the fair value of the hedged item for the risk being hedged are recognised in the income statement.

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385

Net effect of gains/(losses) arising from fair value hedge accounting:

(in millions)	2015	2014	2013
Gains/(losses) on the hedged assets attributable to the fair value hedged risk	-704	1,859	-870
Gains/(losses) on hedging instruments used for the hedged assets	726	-1,947	848
Gains/(losses) on the hedged liabilities attributable to the fair value hedged risk	691	-2,210	1,427
Gains/(losses) on hedging instruments used for the hedged liabilities	-728	2,252	-1,427
Net effect micro fair value hedge	-15	-46	-22

Due to an increase in the long end of the interest curve (from the 5-year bucket and further), the gains and losses on hedged items and hedging instruments in 2015 are opposite to those reported in 2014.

Macro fair value hedge accounting

ABN AMRO hedges interest rate exposures of fixed-rate mortgages on a portfolio basis using interest rate swaps. ABN AMRO applies a portfolio fair value hedge ('macro fair value hedge accounting') in which it designates interest rate swaps as hedging instruments and fixed-rate mortgages as hedged items. The hedge accounting relationship is reviewed and redesignated on a monthly basis.

As a result of the hedge, changes in the hedged item's fair value due to changes in the appropriate benchmark interest rate will be booked to the income statement and will be offset by changes in the fair value of the hedging derivative financial instrument.

Hedged mortgages are fixed-rate mortgages with the following features:

• Å denominated in local currency (euro);
• Å fixed term to maturity or repricing;
• Å pre-payable amortising or fixed principal amounts;
• Å fixed interest payment dates;
• Å no interest rate options;
• Å accounted for on an amortised cost basis.

Mortgages with these features form a portfolio of which the hedged item is designated in a fair value hedge accounting relationship. More than one group (or portfolio) of mortgages can be identified as the hedged item within the fixed-rate mortgage portfolio. Hedged items are designated on a monthly basis to maintain an effective hedge accounting relationship.

Mortgage cash flows are allocated to monthly time buckets based on expected maturity dates. ABN AMRO models the maturity dates of mortgages taking into account a prepayment rate applied to the contractual cash flows and maturity dates of the mortgage portfolio. If the swap notional exceeds 95% of the expected mortgage notional in any given month, then mortgages that mature one month earlier or one month later are designated to the swaps.

Changes in the fair value of mortgages which are attributable to the hedged interest rate risk are recorded under fair value adjustment from hedge accounting in order to adjust the carrying amount of the loan. The difference between the fair value attributable to the hedged interest rate risk and the carrying value of the hedged mortgages at de-designation of the hedge relationship is amortised over the remaining life of the hedged item.

(in millions)	2015	2014	2013
Gains/(losses) on the hedged assets attributable to the fair value hedged risk	-408	948	-1,200
Gains/(losses) on hedging instruments used for the hedged assets	487	-964	1,217
Net effect macro fair value hedge	79	-16	17

The net effect macro hedge fair value increased by EUR 94 million up to EUR 79 million in 2015 compared with 2014 mainly as a result of a refined methodology to measure the ineffectiveness. In addition the gains and losses on hedged items and hedging instruments in 2015 were opposite to those reported in 2014 due to the increase in the long end of the curve (from the 5-year bucket and further).

Cash flow hedge accounting

ABN AMRO applies macro cash flow hedge accounting by which it designates interest rate swaps as hedging instruments and future cash flows on non-trading assets and liabilities as hedged items. The hedge accounting relationship is reviewed on a monthly basis and the hedging instruments and hedged items are de-designated or re-designated if necessary to maintain an effective hedge accounting relationship.

Future cash flows are derived from the projected balance sheet. This projected balance sheet is produced by Asset and Liability Management models and forms the basis for the management of interest rate risk. The model behind the projected balance sheet takes the contractual terms and conditions of financial assets and liabilities and combines these with estimated prepayments, growth rates and interest scenarios, based on statistical market and client data and an economic outlook. The primary interest-sensitive positions in the balance sheet stemming from the non-trading book are Loans and receivables, Liabilities due to banks and customers and Issued debt securities.

Within the projected balance sheet, new assets and liabilities and the future re-pricing of existing assets and liabilities are grouped based on their specific interest rate index on which they reprice (i.e. one month, three months, six months, one year). Per repricing index all assets and liabilities are allocated to monthly clusters in which they reprice up until their maturity. Interest rate swaps are designated to these clusters based on their repricing index and maturity.

The notional amounts of pay- or receive-floating swaps are designated to repricing all or a portion of current and forecasted assets and liabilities, respectively, in the clusters described above. These swap transactions are designated for hedge accounting purposes as a hedge of a gross position of a cluster of projected cash flows. In addition, the swap will only hedge the applicable floating swap rate portion of the interest repricing and reinvestment risk of the cluster. The availability of projected cash flows in the clusters is not constant over time and therefore evaluated on a monthly basis. Changes in cash flow projections could lead to revision of the designation. Furthermore, back testing is performed on the interest rate risk sensitivity models. Historical data are used to review the assumptions applied.

Hedge accounting ineffectiveness recognised in the income statement related to cash flow hedging amounted to a profit of EUR 6 million in 2015 (2014: profit of EUR 1 million).

387

(in millions)	Within 3 months	More than 3 months but within 1 year	More than 1 year but within 5 years	More than 5 years but within 10 years	More than 10 years
31 December 2015
Assets	21,155	21,155	21,155
Liabilities	24,382	18,965	9,135	9,135	2,500
Net assets/liabilities	-3,227	2,190	12,020	-9,135	-2,500
31 December 2014
Assets	21,810	21,810	20,780
Liabilities	24,302	20,835	6,585	6,585	3,500
Net assets/liabilities	-2,492	975	14,195	-6,585	-3,500
31 December 2013
Assets	15,860	15,860	15,830
Liabilities	22,482	22,482	6,585	6,585	3,500
Net assets/liabilities	-6,622	-6,622	9,245	-6,585	-3,500

The maturity profile of forecast principal balances designated in the cash flow hedge is as follows:

Net gains/(losses) on cash flow hedges transferred from equity to the income statement is as follows:

(in millions)	2015	2014	2013
Interest income	493	344	134
Interest expense	525	396	259
Subtotal	-32	-52	-125
Tax expense	-8	-13	-31
Total gains/(losses) on cash flow hedges	-24	-39	-94

Hedges of net investments in foreign operations

ABN AMRO limits its exposure to certain investments in foreign operations by hedging its net investment in its foreign operations with forward contracts.

16 Financial investments

Financial investments are classified as Available-for-sale or as held at fair value through profit or loss.

Accounting policy for available for sale investments

Available-for-sale assets are held at fair value with unrealised gains and losses recognised directly in Other comprehensive income, net of applicable taxes. Interest earned, premiums, discounts and qualifying transaction costs of interest earning available-for-sale assets are amortised to income on an effective interest rate basis. When available-for-sale assets are sold, collected or impaired, the cumulative gain or loss recognised in Other comprehensive income is transferred to other income in the income statement.

Accounting policy for assets designated through profit and loss

Financial investments managed on a fair value through profit or loss basis are designated at fair value through profit or loss when the instruments:

• Å are held to reduce an accounting mismatch;
• Å include terms that have substantive derivative characteristics in nature or;
• Å are investments to which the venture capital exemption applies.

The composition of financial investments is as follows:

(in millions)	31 December 2015	31 December 2014	31 December 2013
Financial investments:
Available-for-sale	39,795	40,898	27,596
Held at fair value through profit or loss	770	589	530
Total, gross	40,564	41,487	28,126
Less: Available-for-sale impairment allowance	23	21	15
Total financial investments	40,542	41,466	28,111

Financial investments amounted to EUR 40.5 billion at 31 December 2015, a decrease of EUR 0.9 billion or 2.2% compared with EUR 41.5 billion at 31 December 2014. This decrease was mainly caused by redemptions and sales of securities issued by financial institutions (EUR 1.0 billion) and Mortgage and other asset-backed securities (EUR 0.8 billion).

An amount of EUR 0.3 billion in venture capital investments was reclassified from Equity accounted associates to Financial investments in 2015. Since initial recognition, these investments are accounted for at fair value through profit or loss by use of the venture capital exemption for investments that otherwise would be classified as associates.

Investments available for sale

The fair value of the Available-for-sale investments (including gross unrealised gains and losses) is specified as follows:

(in millions)	31 December 2015	31 December 2014	31 December 2013
Interest-earning securities:
Dutch government	6,540	6,884	5,666
US Treasury and US government	3,481	1,939	1,495
Other OECD government	20,265	20,779	13,449
Non OECD government	348	471	201
European Union	1,637	1,494	1,282
Mortgage- and other asset-backed securities	2,318	3,243	3,544
Financial institutions	4,805	5,824	1,657
Non-financial institutions	28	37	89
Subtotal	39,422	40,670	27,383
Equity instruments	373	228	213
Total investments available-for-sale	39,795	40,898	27,596

Introduction

Most of these instruments are part of the liquidity buffer and are held for liquidity contingency purposes. More information on the liquidity buffer composition can be found in the Risk, funding and capital review section of this Annual Report

The increase in equity instruments of EUR 145 million is mainly due to the revaluation of Visa Europe Ltd.

Government bonds by country of origin

		31 December 2015	31 December 2014			31 December 2013
(in millions)	Gross unrealised gains/(losses) and fair value hedges gains/ (losses)1	Impair Fair ments value	Gross unrealised gains/(losses) and fair value hedges gains/ (losses)1	Impair Fair ments value	Gross unrealised gains/(losses) and fair value hedges gains/ (losses)1	Impair ments	Fair value
Dutch national government	760	6,540	869	6,884	369		5,666
French national government	334	4,273	402	4,420	184		4,734
German national government	468	4,246	553	4,016	208		1,654
Belgian national government	326	3,077	364	2,672	110		2,006
Finnish national government	212	2,170	233	2,165	25		1,044
Austrian national government	340	1,771	477	1,994	251		1,562
USA national government	-3	3,481	8	1,939	9		1,495
Japanese national government		1,968		1,880			519
European Union bonds	180	1,637	192	1,494	82		1,282
Italian national government	43	408	122	974	29		534
Swiss national government				643			245
Spanish national government		503		500			75
Polish national government	118	442	119	410	54		345
Swedish national government	5	356	6	314			93
Great Britain national government	72	276	79	313	28		245
Danish national government		269		209			205
Hong Kong		60		194			76
Luxembourg national government	17	148	16	148			81
Brazil national government		109		143			64
Singapore national government		178		134			61
Canadian national government	2	356	8	120			107
Total government bonds	2,875	32,271	3,449	31,567	1,349		22,093

¹ Of the total gross unrealised gains (losses), fair value hedge accounting was applied for an amount of EUR 2,5 billion as at 31 December 2015 (2014: EUR 3.1 billion; 2013: EUR 1.4 billion). Gains/losses of EUR 342 million (2014: gains EUR 288 million; 2013: losses EUR 61 million) were recognised in Equity.

No impairment charges were recorded on these government bonds.

More information on country risk positions is provided in the Credit risk section of this Annual Report.

Critical accounting estimates and judgements

Interest-bearing securities and equities classified as available-for-sale investments are assessed at each reporting date to determine whether they are impaired. For equities this review considers factors such as the credit standing and prospects of the issuer, any reduction in fair value below cost, its direction and whether the reduction is significant or prolonged. In general, triggers used for a significant or prolonged decline in the fair value below cost are 20% and 9 months respectively. An interest-bearing security is impaired and an impairment loss incurred if there is objective evidence that an event since initial recognition of the asset has adversely affected the amount or timing of future cash flows from the asset.

If, in a subsequent period, the fair value of a debt security classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the profit and loss account, the impairment loss is reversed through the income statement.

Impairment losses recognised on equity instruments can never be reversed through the income statement.

The following table provides information on impairments on available-for-sale investments.

(in millions)	2015	2014	2013
Balance as at 1 January	21	15	19
Increase in impairments	2		3
Reversal on sale/disposal		-1	-7
Foreign exchange differences and other adjustments		7
Balance as at 31 December	23	21	15

No material movements are recorded in impairments on available-for-sale investments.

Investments designated at fair value through profit or loss

The following table provides information at 31 December 2015 about the investments that are held at fair value and for which unrealised gains or losses are recorded through profit or loss.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Government bonds	134	263	214
Corporate debt securities	4	2	13
Private equities and venture capital	577	246	121
Equity securities	54	78	182
Total investments held at fair value through profit or loss	770	589	530

In Corporate Banking, some private equity investments are measured at fair value through profit or loss, reflecting the business of investing in financial assets to benefit from their total return in the form of interest or dividend and changes in fair value.

The decrease in Government bonds is mainly related to Dutch government bonds, as a result of primary dealership in the Netherlands and of client facilitation.

390

In 2015 an amount of EUR 280 million in investments in venture capital was reclassified to Financial investments from Equity accounted associates. See als note 22 Group structure.

17 Securities financing

Accounting policy for securities financing

Securities financing consists of securities borrowing and lending and sale and repurchase transactions. Securities borrowing and securities lending transactions are generally entered into on a collateralised basis, with securities usually advanced or received as collateral. The transfer of the securities themselves is not reflected in the statement of financial position unless the risks and rewards of ownership are also transferred. If cash is advanced or received, securities borrowing and lending activities are recorded at the amount of cash advanced (included in Loans and receivables) or received (Due to banks or customers). The market value of the securities borrowed or lent is monitored on a daily basis, and the collateral levels are adjusted in accordance with the underlying transactions. Fees and interest received or paid are recognised on an effective interest basis and recorded as interest income or interest expense.

Sale and repurchase transactions involve purchases (or sales) of investments with agreements to resell (or repurchase) substantially identical investments at a certain date in the future at a fixed price. Investments purchased subject to commitments to resell them at future dates are not recognised. The amounts paid are recognised in loans and receivables to either banks or customers and are shown as collateralised by the underlying security.

Investments sold under repurchase agreements continue to be recognised in the Statement of financial position. The proceeds from the sale of the investments are reported as liabilities to either banks or customers. The difference between the sale and repurchase price is recognised over the period of the transaction and recorded as interest income or interest expense, using the effective interest method. If borrowed securities are sold to third parties, the proceeds from the sale and a liability for the obligation to return the collateral are recorded at fair value.

	31 December 2015		31 December 2014		31 December 2013
(in millions)	Banks	Customers	Banks	Customers	Banks	Customers
Assets
Reverse repurchase agreements	2,415	8,185	936	6,518	2,374	3,558
Securities borrowing transactions	4,445	3,970	3,363	6,116	4,570	5,710
Unsettled securities transactions	131	916	163	1,415	299	1,851
Total	6,991	13,071	4,462	14,049	7,243	11,119
Liabilities
Repurchase agreements	1,877	6,153	1,736	7,457	3,032	5,500
Securities lending transactions	1,138	1,536	672	2,779	779	1,690
Unsettled securities transactions	117	552	256	1,018	396	869
Total	3,132	8,240	2,663	11,254	4,207	8,059

Securities financing transactions include balances relating to reverse repurchase activities and cash collateral on securities borrowed. ABN AMRO controls credit risk associated with these activities by monitoring counterparty credit exposure and collateral values on a daily basis and requiring additional collateral to be deposited with or returned to ABN AMRO when deemed necessary.

The increase in securities financing transactions was mainly related to the reverse repurchase agreements with banks as a result of the cyclicality of the business as clients build up their positions in the first quarter.

Items of securities financing transactions which ABN AMRO can repledge or resell are included in note 32 Transferred, pledged, encumbered and restricted assets.

18 Fair value of financial instruments carried at fair value

Accounting policy for fair value of financial instruments

The fair value is defined as the price that would be received when selling an asset or paid when transferring a liability in an orderly transaction between market participants at the measurement date.

For financial instruments that are actively traded and for which quoted market prices or market parameters are readily available, there is high objectivity in the determination of the fair value. However, when observable market prices and parameters do not exist, management judgement is necessary to estimate fair value.

For financial instruments where no active liquid market exists, or quoted prices are unobtainable, recent market transactions are used or the fair value is estimated using a variety of valuation techniques – including reference to similar instruments for which market prices do exist, or to valuation models such as discounted cash flow calculation or option pricing models (e.g. Black Scholes).

If portfolios of financial assets and liabilities are measured on the basis of the net exposure to market risks, then judgements are applied in determining appropriate portfolio level adjustments such as bid-ask spreads. Such adjustments are derived from observable bid-ask spreads for similar instruments and adjusted for factors specific to the portfolio. Similarly, when portfolios of financial assets and liabilities are measured on the basis of the net exposure to the credit risk of a particular counterparty, then any existing arrangements that mitigate the credit risk exposure (e.g. master netting agreements with the counterparty) are taken into account.

Unobservable inputs are estimated using a combination of management judgement, historical data, market practice and benchmarking to other relevant observable market data. The difference between the transaction price and the internal valuation at inception, calculated using a model, is reserved and amortised to profit or loss at appropriate points over the life of the instrument, typically taking account of the ability to obtain reliable external data, the passage of time and the use of offsetting transactions. Where inputs to the valuation of a new transaction cannot be reliably sourced from external providers, the transaction is initially recognised at its transaction price. Subsequent changes in fair value as calculated by the valuation model are reported as profit or loss or in equity.

392

In order to determine a reliable fair value, where appropriate, management applies valuation adjustments to the pricing information derived from the above sources. These adjustments reflect management's assessment of factors that market participants would consider in setting a price, to the extent that these factors have not already been included in the information from the above sources. The main valuation adjustments required to arrive at a fair value are as follows:

• Å Bid-ask adjustments. Bid-ask prices are derived from market sources, such as broker data;
• Å Credit and debit valuation adjustments. In addition to credit valuation for loans valued as at fair value through profit or loss, credit valuation adjustments and debit valuation adjustments are incorporated into derivative valuations to reflect the impact on fair value of counterparty credit risk and own credit quality respectively;
• Å Funding Valuation Adjustment. The Funding Value Adjustment incorporates the incremental cost of funding into the valuation of uncollateralised and partially collateralised derivatives;
• Å Own credit adjustment. An own credit adjustment is applied to positions where it is believed that counterparties will consider ABN AMRO's creditworthiness when pricing trades;
• Å Model valuation adjustments for any known limitations. Management assesses the appropriateness of any model used on an ongoing basis. To the extent that the price provided by internal models does not represent the fair value of the instrument, for instance in highly stressed market conditions, management makes adjustments to the model valuation to calibrate to other available pricing sources.

We believe our estimates of the fair value are adequate. However, the use of different models or assumptions could result in changes to our reported results.

Internal controls over fair value

ABN AMRO has designated controls and processes for determining the fair value of financial instruments. A process has been designed to ensure there are formalised review protocols for independent review and validation of fair values separate from those businesses entering into the transactions. This includes specific controls to ensure consistent pricing policies and procedures, incorporating disciplined price verification for both market and counterparty risk trades.

The business entering into the transaction is responsible for the initial determination and recording of the fair value of the transaction. There are daily controls over the profit or loss recorded by trading and treasury front-office staff.

A key element of the control environment, segregated from the recording of the transaction's valuation, is the independent price verification process. Valuations are first calculated by the business. Such valuations may be current bid or offer prices in an active market, or may be derived using a model and variable model inputs. These valuations are reviewed, and if necessary amended, by the independent price verification process. This process involves a team independent of those trading the financial instruments performing a review of valuations in the light of available pricing evidence. Independent price verification is frequently performed by matching the business valuations with independent data sources. For liquid instruments the process is performed daily. The minimum frequency of review is monthly for trading positions, and six-monthly for non-trading positions. The independent price verification control includes formalised reporting and escalation to management of any valuation differences in breach of defined thresholds. When models are used to value products,

those models are subject to a model review process. This process requires different levels of model documentation, testing and review, depending on the complexity of the model and the size of our exposure to the model.

Valuation techniques

A number of methodologies is used to determine the fair value of financial instruments for which observable prices in active markets for identical instruments are not available.

Values between and beyond available data points are obtained by interpolation and/or extrapolation. When using valuation techniques, the fair value can be significantly impacted by the choice of valuation model and underlying assumptions made concerning factors such as the amount and timing of cash flows, discount rates and credit risk. The principal inputs to these valuation techniques are listed below:

• Å bond prices quoted prices are generally available for government bonds, certain corporate securities and some mortgage-related products;
• Å credit spreads where available, these are derived from prices of credit default swaps (CDS) or other credit-based instruments, such as debt securities. For others, credit spreads are obtained from pricing services;
• Å interest rates these are principally benchmark interest rates such as the interbank rates and quoted interest rates in the swap, bond and futures markets;
• Å foreign currency exchange rates there are observable markets both for spot and forward contracts and futures in the world's major currencies;
• Å equity and equity index prices quoted prices are generally readily available for equity shares listed on the world's major stock exchanges and for major indices on such shares;
• Å commodity prices many commodities are actively traded in spot and forward contracts and futures on exchanges in London, New York and other commercial centres;
• Å price volatilities and correlations volatility is a measure of the tendency of a price to change with time. Correlation measures the degree to which two or more prices or other variables are observed to move together. If they move in the same direction there is positive correlation; if they move in opposite directions there is negative correlation. Volatility is a key input in valuing options and the valuation of certain products such as derivatives with more than one underlying variable that are correlation dependent. Volatility and correlation values are obtained from broker quotations, pricing services or derived from option prices;
• Å prepayment rates the fair value of a financial instrument that can be prepaid by the issuer or borrower differs from that of an instrument that cannot be prepaid. In valuing pre-payable instruments that are not quoted in active markets, ABN AMRO considers the value of the prepayment option;
• Å counterparty credit spreads adjustments are made to market prices (or parameters) when the creditworthiness of the counterparty differs from that of the assumed counterparty in the market price (or parameters);
• Å recovery rates/loss given default -- these are used as an input to valuation models and reserves for asset-backed securities as an indicator of severity of losses on default. Recovery rates are primarily sourced from market data providers or inferred from observable credit spreads.

ABN AMRO refines and modifies its valuation techniques as markets and products develop and as the pricing for individual products becomes more or less readily available. While ABN AMRO believes

its valuation techniques are appropriate and consistent with other market participants, the use of different methodologies or assumptions could result in different estimates of the fair value at the reporting date.

Fair value hierarchy

ABN AMRO analyses financial instruments held at fair value in the three categories as described below.

Level 1 financial instruments are those that are valued using unadjusted quoted prices in active markets for identical financial instruments.

Level 2 financial instruments are those valued using techniques based primarily on observable market data. Instruments in this category are valued using quoted prices for similar instruments or identical instruments in markets which are not considered to be active; or valuation techniques where all the inputs that have a significant effect on the valuation are directly or indirectly based on observable market data.

Level 3 financial instruments are those valued using a valuation technique where at least one input, which has a significant effect on the instrument's valuation, is not based on observable market data. A significant effect on the instrument's valuation is considered to be present when the unobservable input accounts for at least 10% of the total instrument's fair value. The effect of fair value adjustments on the instrument's valuation is included in the assessment.

ABN AMRO recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change occurred.

The following table presents the valuation methods used in determining the fair value of financial instruments carried at fair value.

395

Introduction

31 December 2015

(in millions)	Quoted market prices in active markets	Valuation techniques -observable inputs	Valuation tech niques -significant unobservable inputs	Total fair value
Assets
Financial assets held for trading	1,686	19		1,706
- of which Government bonds and Corporate debt securities	1,667			1,667
- of which Equity securities	19			19
- of which Other financial assets held for trading		19		19
Derivatives held for trading	8	14,708	18	14,735
Derivatives not held for trading	1	4,363	39	4,403
Available-for-sale interest earning securities	37,061	1,086	1,275	39,422
Available-for-sale equities	110	160	79	350
Financial investments designated at fair value through profit or loss	192		577	770
Unit-linked investments	1,639	904		2,543
Total financial assets	40,698	21,241	1,989	63,928
Liabilities
Financial liabilities held for trading	435	24		459
- of which Bonds	417			417
- of which Equity securities	19			19
- of which Other financial liabilities held for trading		24		24
Derivatives held for trading	13	12,945		12,958
Derivatives not held for trading	14	9,414	39	9,466
Issued debt		1,715		1,715
Unit-linked for policyholders	1,639	904		2,543
Total financial liabilities	2,101	25,002	39	27,142

ABN AMRO Group Annual Report 2015

(in millions)	Quoted market prices in active markets	Valuation techniques -observable inputs	Valuation techniques -significant unobservable inputs	Total fair value
Assets
Financial assets held for trading	8,196	821		9,017
- of which Government bonds and Corporate debt
securities	3,250			3,250
- of which Equity securities	4,946			4,946
- of which Other financial assets held for trading		821		821
Derivatives held for trading	15	19,715		19,730
Derivatives not held for trading	21	5,469	66	5,555
Available-for-sale interest earning securities	35,909	3,173	1,588	40,670
Available-for-sale equities	107	20	80	207
Financial investments designated at fair value through profit or loss	315	2	271	589
Unit-linked investments	1,711	741		2,453
Total financial assets	46,275	29,941	2,005	78,221
Liabilities
Financial liabilities held for trading	3,725	34		3,759
- of which Bonds	1,710			1,710
- of which Equity securities	2,016			2,016
- of which Other financial liabilities held for trading		34		34
Derivatives held for trading	20	18,183		18,203
Derivatives not held for trading	10	12,171	64	12,246
Issued debt		1,981		1,981
Unit-linked for policyholders	1,711	741		2,453
Total financial liabilities	5,467	33,111	64	38,642

31 December 2014

Introduction

397

	31 December 2013
(in millions)	Quoted market prices in active markets	Valuation techniques -observable inputs	Valuation techniques -significant unobservable inputs	Total fair value
Assets
Financial assets held for trading	10,987	1,032		12,019
- of which Government bonds and Corporate debt securities	3,779			3,779
- of which Equity securities	6,471			6,471
- of which Other financial assets held for trading	737	1,032		1,769
Derivatives held for trading	146	11,702		11,848
Derivatives not held for trading		2,348	75	2,423
Available-for-sale interest earning securities	25,734	586	1,063	27,383
Available-for-sale equities	119	17	62	198
Financial investments designated at fair value through profit or loss	409		121	530
Unit-linked investments	1,557	614		2,171
Total financial assets	38,952	16,299	1,321	56,572
Liabilities
Financial liabilities held for trading	3,775	624		4,399
- of which Bonds	1,988			1,988
- of which Equity securities	1,787			1,787
- of which Other financial liabilities held for trading		624		624
Derivatives held for trading	146	9,703		9,849
Derivatives not held for trading		7,305	73	7,378
Issued debt		2,071		2,071
Unit-linked for policyholders	1,557	614		2,171
Total financial liabilities	5,478	20,317	73	25,868

Transfers between levels 1 and 2

There were no material transfers between levels 1 and 2.

Transfers from levels 1 and 2 into 3

In 2015, EUR 40 million in OTC derivatives (Derivatives held for trading) were transferred from level 2 to level 3 (see the following table). This transfer took place because one of the unobservable inputs to the fair value measurement became significant.

Other transfers

In 2015, EUR 781 million of loans originally classified as held for trading were reclassified to loans and receivables. As a result of this reclassification these loans are no longer measured at fair value but at amortised cost. For further details of the reclassification and its cause refer to note 20 Loans and receivables - customers.

Movements in level 3 financial instruments measured at fair value

The following table shows a reconciliation of the opening and closing amounts of level 3 financial assets that are recorded at fair value.

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				Assets	Liabilities
(in millions)	Financial investments available for sale	Financial investments designated at fair value through profit or loss	Derivatives held for trading	Derivatives not held for trading	Derivatives not held for trading
Balance at 1 January 2013	1,078	134		103	100
Purchases	6	21
Sales		-7
Redemptions	-8
Unrealised gains/(losses)	26	-27		-28	-27
Other movements	23
Balance at 31 December 2013	1,125	121		75	73
Balance at 1 January 2014	1,125	121		75	73
Purchases	5	174
Sales		-20
Redemptions	-116
Gains/(losses) recorded in profit and loss1		1
Unrealised gains/(losses)	6	-6		-9	-9
Other movements1	648	2
Balance at 31 December 2014	1,668	271		66	64
Purchases	1	68
Sales	-104	-119	-9
Redemptions	-204	-28
Gains/(losses) recorded in profit and loss		24
Unrealised gains/(losses)	-13	59	-12	-26	-26
Transfer between levels	5		40
Other movements2	1	302
Balance at 31 December 2015	1,354	577	18	39	39

¹ During 2014 the interest earning securities were reassessed and consequently an amount of EUR 648 million was transferred from level 2 to level 3.

² In 2015 an amount of EUR 280 million investments in venture capital was reclassified from Equity accounted associates to Financial investments.

Level 3 sensitivity information

The following table present the level 3 financial instruments carried at fair value as at the balance sheet date for which fair value is measured in full or in part using valuation techniques based on assumptions that are not supported by market observable inputs.

There may be uncertainty about a valuation resulting from the choice of the valuation technique or model used, the assumptions embedded in those models, the extent to which inputs are not market observable, or as a result of other elements affecting the valuation technique or model. At 31 December 2015 and 31 December 2014, ABN AMRO performed a sensitivity analysis to assess the range of reasonably possible alternative assumptions that would have a significant impact (i.e. increase or decrease) on the fair value of the instrument.

Equity shares

Equities designated at fair value through profit and loss classified as level 3 mainly comprise private equity investments.

Private equity shares are designated at fair value, for which two calculation techniques apply:

Å Using comparable pricing in accordance with the European Private Equity and Venture Capitalist Association (EVCA) guidelines. This valuation technique is based on earnings multiples of comparable listed and unlisted companies.

The fair value calculation of an investment is strongly linked with movements on the public (share) markets;

Å Net Asset Value (NAV) for Fund Investments and asset backed investments. This is determined by using audited and unaudited company financial statements and any other information available, public or otherwise. As a consequence, the net asset value calculation of an investment is strongly linked with movements in the quarterly performance of the company. No other quantitative information (e.g. future cash flow information) is available and is therefore not included.

New investments are valued at cost for the first year of investment. Thereafter, the fair value technique, either EVCA technique or NAV calculation, will be applied for direct investments.

The sensitivity for using comparable pricing is determined by stressing the earnings multiples in a positive and negative market scenario, whereas sensitivity testing for the NAV calculation based upon the quarterly performance cannot be applied.

Interest earning securities

Government bonds

ABN AMRO has a position in a Polish bond, denominated in euros (in note 16 Financial investments part of Other OECD government), for which the market is relatively illiquid. The bond is valued using a discounted cash flow model. The main inputs are the interest rate curve, liquidity spread and credit spread. The valuation spread is determined using an internal model. The sensitivity analysis is performed by using a range of reasonable valuation spreads.

Other

The debt securities consist of non-listed residential mortgage-backed securities (RMBS). These are structured in such a way that prepayments on the underlying mortgage portfolio are used to repay the holder of the A-note. The fair value is determined using a discounted cash flow model based on inputs such as the interest rate curve, discount spread and prepayment rate. The prepayment rate is identified as a significant unobservable input. The sensitivity analysis is performed by stressing this rate.

Preferred shares are shares for which the dividend is fixed for a period of 10 years, after which the dividend is redetermined and the shares can also be redeemed. The position is valued using a discounted cash flow model for which the relevant inputs are the interest curve, liquidity spread and credit spread. The liquidity spread and credit spread are unobservable inputs and are derived from similar securities. The sensitivity of the preferred shares is determined by using a range of reasonable spreads and by considering the call option that is held by the issuer.

Derivatives

Securitisation swaps linked to the RMBS transactions are valued using a discounted cash flow model for which the behaviour of the underlying mortgage portfolio is also relevant. Inputs used to determine fair value are the interest rate curve and prepayment rate. The latter is the significant unobservable input that classifies these instruments as level 3. The sensitivity analysis is performed by stressing the prepayment rate.

400

Interest rate swaps related to RMBS transactions are valued based on assumptions about the behaviour of the underlying mortgage portfolio and the characteristics of the transaction. Cash flows are forecast and discounted using appropriate forward and discount curves.

A credit valuation adjustment (CVA) reflects counterparty credit risk in the fair value measurement of uncollateralised and partially collateralised OTC derivatives. For counterparties that do not have an observable credit spread ABN AMRO applies a proxied credit spread extracted from counterparties of comparable credit quality that do have an observable credit spread. ABN AMRO performs a probability of default assessment for each counterparty and allocates an appropriate internal credit risk measure known as a Uniform Counterparty Rating (UCR). This UCR, which is significant to the entire fair value measurement of the derivative contracts included in the table of Level 3 sensitivity information shown below, is internally generated and is therefore an unobservable input.

Strategic Report

402

	Valuation technique	Unobservable data	Carrying value			Weighted average		Reasonably possible alternative assumptions
(in millions)				Minimum range	Maximum range		Increase in fair value	Decrease in fair value
31 December 2015
Equity shares	Private equity valuation	EBITDA multiples	47	5.0	6.5	5.9	12	-12
Equity shares	Private equity valuation	Net asset value	609				32	-32
Interest earning securities - Government bonds	Discounted cash flow	Liquidity and credit spread	409	59 bps	90 bps	80 bps	13	-4
Interest earning securities - other	Discounted cash flow	Prepayment rate	865	7.3%	10.1%	9.1%	7	-3
Derivatives held for trading	Discounted cash flow	Probability of default	18	0.6%	100.0%	52.1%		-4
Derivatives not held for trading - assets/liabilities (net)	Discounted cash flow	Prepayment rate	1	7.3%	10.1%	9.1%
31 December 2014
	Private equity	EBITDA
Equity shares	valuation Private	multiples	65	5.0	9.8	7.0	20	-20
Equity shares	equity valuation	Net asset value	286
Interest earning securities - Government bonds	Discounted cash flow	Liquidity and credit spread	410	77 bps	145 bps	111 bps	17	-17
	Discounted	Prepayment
Interest earning securities - other	cash flow	rate	1,178	0.0%	10.0%	8.0%	52	-9
Derivatives not held for trading -	Discounted	Prepayment
assets/liabilities (net)	cash flow	rate	2	0.0%	10.0%	8.0%
31 December 2013
	Private
	equity	EBITDA
Equity shares	valuation Private	multiples	75	5.0	10.0	7.6	21	-21
	equity	Net asset
Equity shares	valuation	value	108
	Discounted	Prepayment
Interest earnings securities	cash flow	rate	1,063	0.0%	10.0%	5.0%	34	-34
Derivatives not held for trading -	Discounted	Prepayment
assets/liabilities (net)	cash flow	rate	2	0.0%	10.0%	5.0%	2	-2

19 Loans and receivables - banks

Accounting policy for loans and receivables from banks and customers

According to IAS 39 Financial Instruments, Loans and receivables from banks and customers are held at amortised cost, i.e. fair value at initial recognition adjusted for repayment and amortisation of coupon, fees and expenses to represent the effective interest rate of the asset or liability.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Interest-bearing deposits	4,841	3,560	15,971
Loans and advances	8,114	11,382	7,621
Mandatory reserve deposits with central banks	313	6,724	221
Other	2,414	15	154
Subtotal	15,682	21,680	23,967
Less: loan impairment allowance	2
Loans and receivables - banks	15,680	21,680	23,967

Loans and receivables - banks decreased by EUR 6.0 billion to EUR 15.7 billion at 31 December 2015, mainly as a result of a decrease in the Mandatory reserve deposits with central banks.

Interest-bearing deposits increased by EUR 1.3 billion to EUR 4.8 billion at 31 December 2015 mainly due to higher outstanding balances held by international financial institutions.

Loans and advances decreased by EUR 3.3 billion to EUR 8.1 billion at 31 December 2015 mainly due to lower pledged cash collateral related to derivatives contracts.

Mandatory reserve deposits with central banks decreased by EUR 6.4 billion to EUR 0.3 billion at 31 December 2015. Mandatory reserve deposits with central banks are not available for use in the bank's day-to-day operations. The excess balance on the Mandatory reserve deposits with central banks is included in Cash and balances at central banks.

Other Loans and receivables - banks increased by EUR 2.4 billion at 31 December 2015 mainly due to a reclassification of trade bills.

20 Loans and receivables - customers

The accounting policy for loans and receivables is included in note 19.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Residential mortgages (excluding fair value adjustment)	146,932	148,402	150,493
Fair value adjustment from hedge accounting on residential mortgages	3,401	4,134	3,531
Residential mortgages, gross	150,333	152,536	154,024
Less: loan impairment allowances - residential mortgage loans	324	538	585
Residential mortgages	150,009	151,998	153,439
Consumer loans, gross	15,147	16,052	16,241
Less: loan impairment allowances - consumer loans	561	654	613
Consumer loans	14,587	15,398	15,628
Corporate loans	84,864	84,694	83,462
Fair value adjustment from hedge accounting on corporate loans	1,448	1,605	891
Financial lease receivables	3,659	3,357	3,184
Factoring	1,866	1,648	1,403
Corporate loans, gross	91,837	91,305	88,940
Less: loan impairment allowances - corporate loans	3,470	3,439	3,672
Corporate loans	88,367	87,866	85,268
Government and official institutions	1,558	1,971	768
Other loans	4,799	4,806	2,030
Other loans and receivables customers, gross	6,357	6,777	2,798
Less: loan impairment allowances - other	1	129	105
Other loans and receivables customers	6,357	6,648	2,693
Loans and receivables - customers	259,319	261,910	257,028

Loans and receivables - customers decreased by EUR 2.6 billion to EUR 259.3 billion at 31 December 2015.

Residential mortgages (excluding fair value adjustment) decreased by EUR 1.5 billion to EUR 146.9 billion at 31 December 2015 as a result of mortgage redemptions and voluntary repayments. This decrease was partly offset by a higher inflow of new Residential mortgages reflecting the improvement of the housing market in the Netherlands.

Consumer loans, gross decreased by EUR 0.9 billion to EUR 15.1 billion, mainly driven by lower volumes held within Retail Banking (EUR 0.8 billion).

Corporate loans increased slightly by EUR 0.5 billion to EUR 88.4 billion. The increase would have been EUR 3.1 billion if the reclassification of Trade bills portfolio to Loans and receivables - banks had not been taken into account. The increase was mainly driven by higher volumes in term loans. Furthermore, part of the Trading book loans initially classified as assets held for trading were reclassified to Corporate loans in 2015.

404

405

The following table shows the reclassified financial assets and their carrying and fair values:

			2015
(in millions)	Amounts reclassified	Carrying value	Fair value
Trading assets reclassified lo loans and receivables
Trading book loans	781	780	770

There were no reclassifications of financial assets in previous reporting periods.

Other loans and receivable customers decreased by EUR 0.3 billion to EUR 6.4 billion, mainly as a result of lower cash collateral pledged within Commercial Clients.

Details on loan impairments are provided in the Risk Management section. See note 15 for details on fair value from hedge accounting.

The following table shows the profit or loss actually recognised in profit or loss for the year ended 31 December 2015 in respect of financial assets reclassified out of the trading category. It also sets out the fair value gains and losses in respect of financial assets reclassified out of the trading category that would have been recognised in profit or loss if no reclassification had taken place:

	2015
(in millions)	Financial assets reclassified in 2015	Financial assets reclassified prior to 2015
Fair value gains or losses recognised in Net trading income	26
Interest income recognised in Net interest income	3
Fair value gains or losses that would have been recognised in Net trading income if the financial
assets had not been reclassified	15

There were no reclassifications of financial assets in previous reporting periods.

With effect from November 2015 the Group reclassified a portfolio of loans originally classified as Held for trading to the Loans and receivables category. The reclassification between both classification categories took place at the fair value of the loans on the date of reclassification. Any gain or loss already recognised in profit or loss has not been reversed. The fair value of the loans on the date of reclassification has become the new amortized cost value.

The reason for this reclassification was that these loans were no longer deemed to be held for trading as a result of a revised governance in which management of the loans has been transferred from the trading department to the central Treasury department. Subsequent to the reclassification of this portfolio to the Loans and receivables category, the Group has applied fair value hedge accounting to minimise the volatility in the income statement.

Until the reclassification of this loan portfolio, ABN AMRO had no reclassifications from the Held for trading category to the Loans and receivables category. The Group does not expect to apply other reclassifications of financial assets from the Held for trading category to the Loans and receivables category.

21 Fair value of financial instruments not carried at fair value

The classification of financial instruments is determined in accordance with the accounting policies set out in note 18.

The following methods and significant assumptions have been applied to estimate the fair values for the disclosures of financial instruments carried at amortised cost:

• Å The fair value of variable rate financial instruments and financial instruments with a fixed rate maturing within six months of the reporting date are assumed to approximate their carrying amounts. The fair value estimate of these financial instruments does not reflect changes in credit quality, as the main impact of credit risk is already recognised separately through the deduction of the allowances for credit losses from the carrying amount. Neither does the fair value of these financial instruments reflect changes in liquidity spreads or bid-ask adjustments. The fair value of fixed-rate loans and mortgages carried at amortised cost is estimated by comparing market interest rates when the loans were granted with current market rates offered on similar loans. The prepayment options are not included in the fair value;
• Å The fair value of demand deposits and savings accounts (both included under Due to customers) with no specific maturity is assumed to be the amount payable on demand at the reporting date;
• Å The fair value of the other loans to customers and loans to banks is estimated by comparing market interest rates when the loans were granted with current market rates offered on similar loans. The carrying amount equals the fair value;
• Å The fair value of issued debt securities and subordinated liabilities is based on quoted prices. If these are not available, the fair value is based on independent quotes from market participants for the debt issuance spreads above average interbank offered rates (at a range of tenors) which the market would demand when purchasing new senior or sub-debt issuances from ABN AMRO. Where necessary, these quotes are interpolated using a curve shape derived from CDS prices.

The following table presents, on the one hand, the valuation methods used in determining the fair value of financial instruments carried at amortised cost and, on the other hand, the carrying amount of financial assets and liabilities recorded at amortised cost to their estimated fair value, based on the abovementioned assumptions.

	Carrying value				Total fair value	Difference
(in millions)		Quoted market prices in active markets	Valuation techniques -observable inputs	Valuation techniques -significant unobservable inputs
Assets
Cash and balances at central banks	26,195		26,195		26,195
Securities financing	20,062		20,062		20,062
Loans and receivables - banks	15,680			15,679	15,679
Loans and receivables - customers	259,319		5,570	263,104	268,674	9,355
Total	321,255		51,827	278,783	330,610	9,355
Liabilities
Securities financing	11,372		11,372		11,372
Due to banks	14,630			14,630	14,630
Due to customers	230,297			230,297	230,297
Issued debt	74,492	31,638	43,810		75,448	-957
Subordinated liabilities	9,708	5,285	4,789		10,074	-366
Total	340,499	36,923	59,972	244,926	341,821	-1,322

						31 December 2014
	Carrying value				Total fair value	Difference
(in millions)		Quoted market prices in active markets	Valuation techniques -observable inputs	Valuation techniques -significant unobservable inputs
Assets
Cash and balances at central banks	706		706		706
Securities financing	18,511		18,511		18,511
Loans and receivables - banks	21,680			21,680	21,680
Loans and receivables - customers	261,910		2,346	266,819	269,164	7,254
Total	302,807		21,563	288,499	310,062	7,254
Liabilities
Securities financing	13,918		13,918		13,918
Due to banks	15,744			15,744	15,744
Due to customers	216,011			216,011	216,011
Issued debt	75,150	18,632	57,961		76,593	-1,443
Subordinated liabilities	8,328	6,588	2,232		8,820	-493
Total	329,150	25,220	74,111	231,754	331,085	-1,935

31 December 2015

407

	Carrying value				Total fair value	Difference
(in millions)		Quoted market prices in active markets	Valuation techniques -observable inputs	Valuation techniques -significant unobservable inputs
Assets
Cash and balances at central banks	9,523		9,523		9,523
Securities financing	18,362		18,362		18,362
Loans and receivables - banks	23,967			23,967	23,967
Loans and receivables - customers	257,028			260,931	260,931	3,903
Total	308,880		27,885	284,898	312,783	3,903
Liabilities
Securities financing	12,266		12,266		12,266
Due to banks	11,626			11,626	11,626
Due to customers	207,584			207,584	207,584
Issued debt	86,611	38,475	48,811		87,286	-675
Subordinated liabilities	7,917	6,023	2,418		8,441	-524
Total	326,004	44,498	63,495	219,210	327,203	-1,199

22 Group structure

Accounting policy for business combinations

The Group accounts for business combinations using the acquisition method when control is transferred to the Group. All items of consideration, including contingent consideration, transferred by ABN AMRO are measured and recognised at fair value as of the acquisition date. Transaction costs incurred by ABN AMRO in connection with the business combination, other than those associated with the issuance of debt and equity securities, do not form part of the cost of the business combination transaction but are expensed as incurred. The excess of the purchase consideration over ABN AMRO's share of the fair value of the identifiable net assets acquired (including certain contingent liabilities) is recorded as goodwill. ABN AMRO measures the identifiable assets acquired and the liabilities assumed at the fair value at the date of acquisition.

In a step acquisition, where a business combination occurs in stages and control of the business is obtained in stages, the identifiable assets and liabilities of the acquiree are recognised at fair value when control is obtained. A gain or loss is recognised in profit or loss for the difference between the fair value of the previously held equity interest in the acquiree and its carrying amount. Changes in interests in subsidiaries that do not result in a change of control are treated as transactions between equity holders and are reported in equity.

Assets and liabilities of acquisitions and divestments

The following table provides details on the assets and liabilities resulting from the acquisitions or disposals of subsidiaries and equity-accounted investments at the date of acquisition or disposal.

31 December 2013

Introduction

408

	31 December 2015		31 December 2014		31 December 2013
(in millions)	Acquisi tions	Divest ments	Acquisi tions	Divest ments	Acquisi tions	Divest ments
Assets and liabilities of acquisitions and divestments
Cash and balances at central banks				-26		-4
Financial assets held for trading
Derivatives
Financial investments
Securities financing					11	-22
Loans and receivables - banks				-22	2	-269
Loans and receivables - customers			554
Equity accounted investments	25	-103	105	-58	85	-41
Goodwill and other intangible assets					1
Other assets					24	-3
Due to banks				24		180
Due to customers			-900	12	-7	92
Tax liabilities
Other liabilities				1	-18	4
Non-controlling interests					-1	5
Net assets acquired/Net assets divested	25	-103	-241	-70	97	-58
Result on divestments, gross		28		60		28
Cash used for acquisitions/received from divestments:
Total purchase consideration/Proceeds from sale	-25	132	241	130	-97	86
Cash and cash equivalents acquired/divested				-48	2	-273
Cash used for acquisitions/received from divestments	-25	132	241	82	-95	-187

Acquisitions and divestments include increases and decreases in the investments in several equityaccounted investments for 2015, 2014 and 2013.

Acquisitions in 2015

In 2015 no major assets and liabilities were acquired.

On 3 November 2015 Equens SE and Worldline SA announced that they had entered into an agreement with the aim to become one of the leading and most innovative payment service providers for financial institutions and corporates in Europe. Worldline is to contribute the main part of its Financial Processing & Software Licensing activities to Equens. As a result of the proposed transaction, Worldline will become a majority shareholder in the new combined entity. ABN AMRO's participating interest in Equens is expected to be diluted from 18.4% to 7.0%. The transaction is expected to close during the first half of 2016, subject to works council consultation processes and the approval of regulatory and anti-trust authorities. Closing of this transaction could result in a solid positive financial impact for ABN AMRO, the size of which depends on a number of circumstances at the time of closing.

Divestments in 2015

ABN AMRO no longer has an associate interest in RFS Holdings B.V., as the underlying assets and liabilities have been sold.

Acquisitions in 2014

On 27 March 2014 ABN AMRO obtained the beneficial title to certain assets and liabilities in RFS Holdings B.V.

On 31 Augustus 2014 (the acquisition date), ABN AMRO completed the acquisition of the domestic private banking activities from Credit Suisse AG in Germany. The asset and liabilities purchase agreement between Bethmann Bank AG and Credit Suisse AG was signed in December 2013. With the acquisition of the assets and liabilities from Credit Suisse AG, ABN AMRO has further strengthened its private banking activities in Europe and positions Bethmann Bank, ABN AMRO's private bank in Germany, as the third largest private bank in Germany. Following this transaction Bethmann Bank will serve about 20,000 clients with approximately EUR 34 billion in Assets under Management.

The asset purchase consists of EUR 550 million of client receivables (loan book) and EUR 900 million of client liabilities (deposit and saving accounts). These assets and liabilities were settled in cash with Credit Suisse AG. On 31 Augustus 2014 ABN AMRO completed the acquisition of the domestic private banking activites from Credit Suisse AG in Germany. The integration of these activities was finalised in 2015.

Divestments in 2014

The sale of Alcover A.G. to Royal Bank of Scotland N.V. was completed on 1 July 2014. Divestments in 2014 consist of the decrease of ownership in Holland Clearing House B.V. from 100% to 25%. This divestment was completed on 3 December 2014. The remaining 25% interest in Holland Clearing House B.V. was accounted for as an associate.

Acquisitions in 2013

ABN AMRO completed the acquisition of Banco CR2 S.A. in Brazil on 31 July 2013.

Divestments in 2013

Divestments in 2013 consist of the decrease of ownership of European Multilateral Clearing Facility from 78% to 25% due to equal ownership of Depository Trust & Clearing Corporation, BATS Chi-X, Nasdaq OMX and ABN AMRO Clearing Bank in European Multilateral Clearing Facility. This divestment was completed on 5 December 2013.

Composition of the group

Accounting policy for subsidiaries

ABN AMRO Group's subsidiaries are those entities which it directly or indirectly controls. Control over an entity is evidenced by ABN AMRO's ability to exercise its power in order to affect the variable returns that ABN AMRO is exposed to through its involvement with the entity. The existence and effect of potential voting rights that are currently exercisable are taken into account when assessing whether control exists.

The assessment of control is based on the consideration of all facts and circumstances. The Group reassesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control (power, exposure to variability in returns and a link between the two).

ABN AMRO sponsors entities, including certain special purpose entities, which may or may not be directly owned, for the purpose of asset securitisation transactions and other specific and well defined objectives. Particularly in the case of securitisations, these entities may acquire assets from ABN AMRO companies. Some of these entities hold assets that are not available to meet the claims of creditors of ABN AMRO or its subsidiaries. These entities are consolidated in ABN AMRO's financial statements when the substance of the relationship between ABN AMRO and the entity indicates that control is held by ABN AMRO.

ABN AMRO is mainly involved in securitisations of own originated assets such as various consumer and commercial financial assets. This process generally necessitates a sale of these assets to a special purpose entity (SPE), which in turn issues securities to investors. ABN AMRO's interests in securitised assets may be retained in the form of senior or subordinated tranches, issued guarantees, interest-only strips or other residual interests, together referred to as retained interest. In many cases, these retained interests convey control such that the SPE is consolidated and the securitised assets continue to be recognised in the Consolidated Statement of Financial Position.

The financial statements of subsidiaries and special purpose entities are included in the Consolidated Annual Financial Statements from the date on which control commences until the date on which control ceases.

Accounting policy for associates and joint ventures

Associates are those entities in which ABN AMRO has significant influence, but no control or joint control, over the operating and financial policies. Significant influence is generally presumed when ABN AMRO holds between 20% and 50% of the voting rights. Potential voting rights that are currently exercisable are considered in assessing whether ABN AMRO has significant influence. Among other factors that are considered to determine significant influence, representation on the board of directors, participation in the policy-making process and material transactions between the entity and the investee are considered.

A joint venture is an investment in which two or more parties have contractually agreed to share the control over the investment. Joint control only exists when decisions about the relevant activities require the unanimous consent of the parties sharing control. The activities conducted through joint ventures include cash transfer, insurance, finance and leasing.

Investments in associates and joint ventures, including strategic investments, are accounted for using the equity method. Under this method the investment is initially recorded at cost and subsequently increased (or decreased) for post-acquisition net income (or loss), other movements impacting the equity of the investee and any adjustments required for impairment. ABN AMRO's share of the profit or loss of the investee is recognised in Other income in the income statement. When ABN AMRO's share of losses exceeds the carrying amount of the investment, the carrying amount is reduced to zero, including any other unsecured receivables, and recognition of further losses is discontinued except if ABN AMRO has incurred obligations or made payments on behalf of the investee.

Equity investments held without significant influence which are not held for trading or not designated at fair value through profit or loss are classified as Available-for-sale.

Introduction

412

The following table provides an overview of the most significant investments in associates and joint
ventures at 31 December.

			31 December 2015		31 December 2014		31 December 2013
(in millions)	Principle place of business	Business line	Carrying amount	Equity interest (in %)	Carrying amount	Equity interest (in %)	Carrying amount	Equity interest (in %)
Joint ventures:
Neuflize Vie	France	Private banking	215	60%	212	60%	206	60%
Richmond Preferente Aandelen C. B.V.	The Netherlands	Corporate banking	25	50%	25	50%	25	50%
Car Carriers Management B.V.1	The Netherlands	Corporate banking			27	50%	37	50%
Aline Holding S.A.1	Marshall Islands	Corporate banking			35	50%	20	50%
CM Bulk Ltd.1	Bahamas	Corporate banking			15	50%	14	50%
Associates:
Delta Lloyd ABN AMRO Verzekeringen
Holding B.V.	The Netherlands	Retail banking	221	49%	235	49%	252	49%
Equens S.E.	The Netherlands	Group functions	60	18%	63	18%	62	18%
Nederlandse Financieringsmaatschappij
voor Ontwikkelingslanden N.V.	The Netherlands	Group functions	60	20%	48	20%	45	20%
		Corporate
European Merchant Services B.V.	The Netherlands	banking2	20	49%	17	49%	15	49%
RFS Holdings B.V.	The Netherlands	Group functions			77	0%
Alma Maritime Ltd.1	Marshall Islands	Corporate banking			71	39%	74	39%
Safe Ship Inv. Comp. S.C.A. SICAR1	Luxembourg	Corporate banking			24	48%	24	48%
Poseidon Containers LLC1	Marshall Islands	Corporate banking			24	6%	21	6%
Edda Accomodations DIS1	Norway	Corporate banking			29	20%	15	20%
Alcover A.G.	Switzerland	Group functions					52	34%
Private Equity Investments			116		116		128
Other			61		118		92
Total equity accounted investments			778		1,136		1,082

¹ Reclassification to financial investments.

² Reclassification from Retail Banking.

Neuflize Vie is a joint venture whereby the power to govern the financial and operating policies of the economic activity is subject to joint control.

Although ABN AMRO had no legal ownership, the contribution in RFS Holdings B.V. was identified as an associate resulting from the beneficial title to certain assets and liabilities in RFS Holdings B.V. obtained as per 27 March 2014. The underlying assets and liabilities were sold to Indusind Bank Limited in 2015.

Although ABN AMRO has an 18% interest in Equens S.E., ABN AMRO has significant influence in Equens S.E. because of representation in the Supervisory Board. ABN AMRO therefore accounts for Equens S.E. as an associate.

In 2015 an amount of EUR 280 million in investments in venture capital was reclassified from Equity accounted associates to Financial investments. Since initial recognition, these investments are accounted for at fair value through profit or loss by use of the venture capital exemption for investments that otherwise would be classified as associates.

Introduction

413

Other investments in associates and joint ventures represents a large number of associates and joint ventures with an individual carrying amount of less than EUR 15 million.

The combined financial information of the associates and joint ventures include the following assets and liabilities, income and expenses, and represent the proportionate share:

			31 December 2015		31 December 2014	31 December 2013
(in millions)	Associ ates	Joint ventures	Total	Associates	Joint ventures	Total	Associates	Joint ventures	Total
Assets
Financial assets held for trading	2,528		2,528	2,722		2,722	2,916		2,916
Financial investments	342	6,771	7,113	301	6,609	6,910	2,603	6,321	8,924
Loans and receivables banks and customers	1,473	235	1,708	1,853	172	2,025	932	166	1,098
Property and equipment	90	165	255	557	242	799	527	200	727
Other assets	420	326	745	584	89	673	528	98	626
Total assets	4,852	7,497	12,349	6,017	7,112	13,129	7,506	6,785	14,291
Liabilities
Financial liabilities held for trading					33	33	24	24	48
Due to banks and customers	1,290	51	1,341	1,764	114	1,878	3,423	206	3,629
Provisions	2,424	3,624	6,048	2,637	3,578	6,215	2,652	3,407	6,059
Other Liabilities	258	3,575	3,833	469	3,069	3,538	596	2,864	3,460
Total liabilities	3,973	7,250	11,223	4,870	6,794	11,664	6,695	6,501	13,196
Total operating income	562	51	613	774	56	830	452	43	495
Operating expenses	503	26	529	677	38	715	395	28	423
Operating profit/ (loss)	60	25	85	97	18	115	57	15	72
Income tax expense	19	9	28	31	11	42	10	9	19
Profit/(loss) for the period	41	16	57	66	7	73	47	6	53

The majority of all assets of associates is held by Delta Lloyd ABN AMRO Verzekeringen Holding B.V. (EUR 2,737 million compared with EUR 2,949 million in 2014) and by Nederlandse Financieringsmaatschappij voor Ontwikkelingslanden N.V. (EUR 1,418 million compared with EUR 1,213 million in 2014).

Neuflize Vie holds the majority of assets under joint ventures (EUR 7,208 million compared with EUR 6,920 million in 2014).

The profit for the period regarding the Associates decreased partly due to the reclassification of some investments and relates further mainly to the above mentioned associates.

Impairments on equity accounted investments

The following table shows the changes in impairments on equity-accounted investments.

(in millions)	2015	2014	2013
Balance as at 1 January	16		11
Increase in impairments	28	24	7
Release of impairments		-1
Reversal of impairment allowances			-11
Other	-41	-6	-7
Balance as at 31 December	4	16

The majority of the largest equity-accounted investments are regulated entities. Their ability to transfer funds to the Group is therefore subject to regulatory approval.

Due to the reclassification from Equity accounted associates to Financial investments there has been a transfer between the lines Increase in impairments and Others.

The increase in impaired assets was due mainly to the fact that the carrying value of the primary assets of some of ABN AMRO's associates was lower than their fair value.

Structured entities

Structured entities are entities that have been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements.

A structured entity has some or all of the following features or attributes:

• Å restricted activities;
• Å a narrow and well defined objective;
• Å insufficient equity to permit the structured entity to finance its activities without subordinated financial support;
• Å financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks;
• Å relevant activities are directed by contractual arrangements.

ABN AMRO is mainly involved in one type of structured entities: securitisations. ABN AMRO uses securitisation transactions primarily to diversify its funding sources and to manage its liquidity profile. ABN AMRO is mainly involved in securitisation transactions of its own originated assets. Financial assets included in these transactions are residential mortgages and loans to small and medium-sized enterprises (SME). All securitised assets were originated in the Netherlands by ABN AMRO (or one of its predecessors).

Consolidated structured entities

The total amount of assets securitised in true sale securitisations decreased to EUR 52.2 billion at 31 December 2015 (31 December 2014: EUR 66.5 billion; 31 December 2013: EUR 71.4 billion). 414

The amount of notes sold to external parties totalled EUR 3.0 billion at 31 December 2015, compared with EUR 9.0 billion at year-end 2014 (year-end 2013: EUR 12.3 billion). The difference was primarily caused by the calling of several securitisation transactions including SMILE (SME loans).

At 31 December 2015, there were no securitisations with SME loans (year-end 2014: EUR 1.0 billion; year-end 2013: EUR 1.2 billion).

The securitisation transactions are primarily used for funding and liquidity. There was no RWA (REA) relief at year-end 2015 (year-end 2014: EUR 0.2 billion; year-end 2013: EUR 0.3 billion).

The bank had only true sale (traditional) securitisation transactions outstanding in 2015. In a true sale securitisation transaction a foundation (stichting) incorporates a structured entity resulting in a bankruptcy remote structure. ABN AMRO sells a portfolio of receivables to the structured entity. The structured entity funds the purchase by issuing notes. In all securitisation transactions, ABN AMRO provides key ancillary roles such as swap counterparty.

Risks associated with the roles in the securitisation process

Credit risk

Credit risk relates to the risk of credit losses on securitised assets. ABN AMRO retains part of the credit risk by retaining notes and other securitisation positions such as liquidity facilities, swaps and first loss tranches. Regulatory capital is held for all retained securitisation positions in accordance with the applicable regulation.

Liquidity risk

Liquidity risk relates to the risk that ABN AMRO might incur additional cash outflows. Any potential future cash outflows relating to these positions, including collateral requirements, are taken into account within stress tests and are integrated into the liquidity ratios where required. This includes the potential impact of the liquidity facilities or swap agreements which are part of a number of securitisation transactions, most of which relate to transactions for which ABN AMRO is the originator of the underlying assets.

Approaches to calculating risk exposure amount

ABN AMRO does not achieve significant risk transfers for any of the mortgage securitisations. Therefore, the look-through approach is used and REA reduction is not applied.

Monitoring process

ABN AMRO periodically monitors changes in credit risk relating to securitisation exposures. The significance of the amount of credit risk transferred to third parties by securitisation of own originated assets is assessed on a monthly basis in accordance with the regulatory significant risk transfer test. For investments in third-party securitisations, the risk is monitored by reviewing the investor reports of these transactions. Additionally, third-party securitisation positions are included in the firm-wide comprehensive stress tests in which downgrade and default risk under stressed market conditions is assessed.

Overview of securitisation positions and securitised assets

The total amount of assets securitised in true sale securitisations decreased to EUR 52.2 billion (2014: EUR 66.5 billion; 2013: EUR 71.4 billion). Securitisation transactions for the purpose of capital relief were not originated in 2015.

Securitisation overview of own originated assets (overall pool size)

		31 December 2015			31 December 2014	31 December 2013
	True sale securitisa tions	Total	True sale securitisa tions		Total	True sale securitisa tions		Total
(in millions)	Mortgage loans	SME loans	Mortgage loans	SME loans		Mortgage loans	SME loans
Total assets securitised reported under the CRD framework				1,033	1,033		1,206	1,206
Total assets securitised not reported under the CRD framework	52,177	52,177	65,467		65,467	70,203		70,203
Total assets securitised	52,177	52,177	65,467	1,033	66,499	70,203	1,206	71,409

Details on retained and purchased securitisation positions

The tables in the following sections contain data of securitisation positions in which ABN AMRO acts as originator and/or investor. This table shows securitisations that are reported in accordance with the CRD framework; therefore, securitisations with own originated mortgages are not included. Amounts reported are based on the regulatory exposure values calculated in accordance with the regulatory guidelines. Note that this not only includes the notes issued under the securitisation, but also the credit equivalent of interest rate swaps and first loss positions. The following table outlines the total amount of ABN AMRO's exposure value on securitisation positions in which ABN AMRO acts as originator and/or investor. The total securitisation position decreased to EUR 1.1 billion at 31 December 2015 (31 December 2014: EUR 2.4 billion; 2013: EUR 2.5 billion).

Overview of retained, transferred and purchased securitisation positions

	31 December 2015				31 December 2014	31 December 2013
	True sale securitisa tions		Total	True sale securitisa tions		Total	True sale securitisa tions		Total
(in millions, Exposure at Default)	Mortgage loans	SME loans		Mortgage loans	SME loans		Mortgage loans	SME loans
Securitisation position in own originated
transactions					1,150	1,150		1,369	1,369
Securitisation positions transferred					-171	-171		-171	-171
Retained securitisation positions					979	979		1,198	1,198
Securitisation position in purchased securitisations	1,125	1,125		1,456		1,456	1,313		1,313
Total securitisation positions	1,125	1,125		1,456	979	2,434	1,313	1,198	2,511

416

Of the EUR 1.1 billion purchased securitisation positions as per 31 December 2015, the full position is risk-weighted at 7%. Of the EUR 2.4 billion retained and purchased securitisation positions as per 31 December 2014, EUR 1.5 billion is risk-weighted at 7% and EUR 0.9 billion is risk-weighted at 20%. Of the EUR 2.5 billion retained and purchased securitisation positions as per 31 December 2013, EUR 1.3 billion is risk-weighted at 7%.

Details on total notes outstanding per structured entity

The following table provides details on the outstanding notes issued by consolidated structured entities which were established by ABN AMRO for securitisation purposes, exceeding 0.1% of the bank's total assets.

	31 December 2015 31 December 2014				31 December 2013
(in millions)	Total notes issued	% of total assets	Total notes issued	% of total assets	Total notes issued	% of total assets
Category
Dolphin Master Issuer B.V.	30,472	7.81%	30,472	7.88%	30,472	8.19%
Goldfish Master Issuer B.V.	12,407	3.18%	13,900	3.59%	15,000	4.03%
Fishbowl Master Issuer B.V.	7,139	1.83%	7,139	1.85%	8,839	2.38%
Beluga Master Issuer B.V.	3,136	0.80%	3,136	0.81%	3,136	0.84%
SMILE Securitisation Company 2007 B.V.	18	0.00%	1,065	0.28%	1,270	0.34%
Oceanarium Master Issuer B.V.			12,146	3.14%	12,146	3.26%
European Mortgage Securities VIII B.V.					1,782	0.48%
Total	53,172		67,857		72,645

At present, there are no material, consolidated structured entities – not related to securitisation activities – exceeding 0.1% of the bank's total assets.

Support to consolidated structured entities

ABN AMRO did not provide support, financial or otherwise, to a consolidated structured entity including when ABN AMRO was not contractually obligated to do so, nor does ABN AMRO intend to do so in the future.

Unconsolidated structured entities

ABN AMRO has invested EUR 0.8 billion in securitisations which were not set up by ABN AMRO (2014: EUR 1.5 billion; 2013: EUR 1.3 billion). These securitisation notes are part of the liquidity buffer. ABN AMRO does not consolidate the structured entities as the bank does not have control over these entities. As ABN AMRO has not engaged in any additional contractual obligations with these entities, the maximum exposure to these structured entities is the same as the invested amount.

To raise funding, ABN AMRO has interests in two structured entities: Simba Finance B.V. (Simba) and Pumbaa Finance B.V. (Pumbaa). Simba and Pumbaa are unconsolidated structured entities as ABN AMRO does not have the power to govern the variable returns of these entities. Although ABN AMRO is the main shareholder of these entities, it is not significantly exposed to the variability of these entities' returns as this is contractually diverted to third-party investors.

Introduction

417

Sponsoring of unconsolidated structured entities.

An entity is considered a sponsor of an unconsolidated structured entity if it had a key role in establishing that entity so that the transaction, which is the purpose of the entity, could occur. No material sponsoring occurred in 2015.

23 Property and equipment, goodwill and other intangible assets

Accounting policy for property and equipment

In accordance with IAS 16, Property and equipment is stated at cost less accumulated depreciation and any amount for impairment. At each balance sheet date an assessment is performed to determine whether there is any indication of impairment. Subsequent costs are capitalised if these result in an enhancement to the asset. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of items of property and equipment, and of major components that are accounted for separately. ABN AMRO generally uses the following useful lives in calculating depreciation:

• Å Land: not depreciated;
• Å Buildings: 30 years;
• Å Leasehold improvements: 10 years;
• Å Equipment: 5 years;
• Å Computer installations: 2 to 5 years.

Impairment losses are recognised in the income statement as a component of depreciation and amortisation expense. Impairment losses are reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had previously been recognised.

Depreciation rates and residual values are reviewed at least periodically to take into account any change in circumstances. Capitalised leasehold improvements are depreciated in a manner that takes into account the term and renewal conditions of the related lease.

Assets for which the bank acts as a lessor in an operational lease contract are included in Property and equipment. The asset is depreciated on a straight-line basis over its useful life to its estimated residual value.

Accounting policy for intangible assets

Goodwill

Goodwill is determined in accordance with IFRS 3 Business Combinations and IAS 36 Impairments of Assets. Goodwill is capitalised and stated at cost, being the excess of the consideration paid over the fair value of ABN AMRO's share of the acquired entity's net identifiable assets at the date of acquisition, less any accumulated impairment losses. For the purpose of calculating goodwill, the fair values of acquired assets, liabilities and contingent liabilities are determined by reference to market values or by discounting expected future cash flows to present value. Goodwill is not amortised, but is reviewed annually for impairment or more frequently if there are indications that impairment may have occurred. In the test the carrying amount of goodwill is compared with the highest of the fair value less costs to sell and the value in use, being the present value of the cash

418

flows discounted at a pre-tax discount rate that reflects the risk of the cash generating unit to which the goodwill relates. Impairment losses are recognised in the income statement as depreciation and amortisation expense and are irreversible.

Software and other intangible assets

The accounting policy for software and other intangible assets is determined by IAS 38 Intangible assets. Software is amortised over a period of three years unless the software is classified as core application software, which is depreciated over its estimated useful lifetime set at a maximum of seven years. Only the development phase is capitalised for own developed software. Other intangible assets include separately identifiable items arising from acquisition of subsidiaries, such as customer relationships, and certain purchased trademarks and similar items. In general, the estimated useful life does not exceed ten years. Amortisation rates and residual values are reviewed at least annually to take into account any change in circumstances.

The following table shows the carrying amount for each category of Property and equipment at 31 December.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Land and buildings held for own use	781	820	852
Leasehold improvements	43	38	38
Equipment	539	522	505
Other	3	32	31
Total property and equipment	1,366	1,412	1,426

Total Property and equipment decreased by EUR 46 million or 3% to EUR 1,366 million at 31 December 2015 compared with EUR 1,412 million at 31 December 2014, mainly due to the sale of buildings in Guernsey during 2015 (EUR 54 million).

The following table shows the carrying amount for Goodwill and other intangible assets at 31 December.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Goodwill	149	147	138
Purchased software	54	41	39
Internally developed software	6	5	8
Other	54	62	10
Total goodwill and other intangible assets	263	255	195

The book value of Property, equipment, intangible assets and goodwill changed as follows for the years 2015, 2014 and 2013.

419

								2015
(in millions)	Land and Buildings held for own use	Leasehold improve ments	Equipment	Other property and equipment	Total property and equipment	Goodwill	Other intangible assets	Total goodwill and other intangible assets
Acquisition costs as at 1 January	1,742	203	1,451	36	3,432	198	1,162	1,360
Additions	56	17	210		282		41	42
Reversal of cost due to disposals	-86	-3	-198	-38	-324		-3	-3
Foreign exchange differences	3	2	7	3	14	4	2	7
Other	-32		-6	2	-36		-1	-2
Acquisition costs as at 31 December	1,683	218	1,464	3	3,368	202	1,202	1,403
Accumulated depreciation/ amortisation as at 1 January	-911	-165	-927	-4	-2,007		-1,034	-1,034
Depreciation/amortisation	-51	-12	-154		-217		-34	-34
Reversal of depreciation/amortisation
due to disposals	41	3	161	5	209		4	4
Foreign exchange differences	-1	-1	-4		-6		-2	-2
Other	30				29
Accumulated depreciation/ amortisation as at 31 December	-891	-176	-924		-1,991		-1,066	-1,066
Impairments as at 1 January	-11		-2		-13	-51	-21	-71
Increase of impairments charged to the income statement	-4				-4		-1	-1
Reversal of impairments due to disposals	6		1		7
Foreign exchange differences						-3		-3
Other	-1				-1	1		1
Impairments as at 31 December	-10		-1		-11	-53	-22	-75
Total as at 31 December	781	43	539	3	1,366	149	114	263

420

Introduction

(in millions)	Land and Buildings held for own use	Leasehold improve ments	Equipment	Other property and equipment	Total property and equipment	Goodwill	Other intangible assets	Total goodwill and other intangible assets
Acquisition costs as at 1 January	1,759	201	1,394	34	3,388	164	1,079	1,243
Additions	43	10	205		258	35	85	120
Reversal of cost due to disposals	-52	-11	-151	-6	-219		-3	-3
Foreign exchange differences	3	2	7	2	14	6	2	9
Other	-12		-4	6	-10	-7	-1	-8
Acquisition costs as at 31 December	1,742	203	1,451	36	3,432	198	1,162	1,360
Accumulated depreciation/ amortisation as at 1 January	-880	-163	-887	-3	-1,933		-1,003	-1,003
Depreciation/amortisation	-52	-11	-148	-1	-212		-31	-31
Reversal of depreciation/amortisation due to disposals	31	11	108		150		3	3
Foreign exchange differences	-1	-1	-4		-6		-2	-2
Other	-9		4		-5		-1	-1
Accumulated depreciation/ amortisation as at 31 December	-911	-165	-927	-4	-2,007		-1,034	-1,034
Impairments as at 1 January	-27		-2		-29	-26	-19	-45
Increase of impairments charged to the income statement	-8				-8	-28	-2	-30
Reversal of impairments due to disposals	5				6
Foreign exchange differences						-3		-3
Other	19				19	6		6
Impairments as at 31 December	-11		-2		-13	-51	-21	-71
Total as at 31 December	820	38	522	32	1,412	147	108	255

2014

Introduction

421

								2013
(in millions)	Land and Buildings held for own use	Leasehold improve ments	Equipment	Other property and equipment	Total property and equipment	Goodwill	Other intangible assets	Total goodwill and other intangible assets
Acquisition costs as at 1 January	1,790	201	1,405	34	3,430	161	1,089	1,250
Acquisitions/divestments of
subsidiaries			-1		-1	1	-1
Additions	35	7	196		238	5	16	21
Reversal of cost due to disposals	-88	-8	-200		-296		-24	-24
Foreign exchange differences	-1	-1	-4		-6	-3	-1	-4
Other	23	2	-2		23
Acquisition costs as at
31 December	1,759	201	1,394	34	3,388	164	1,079	1,243
Accumulated depreciation/ amortisation as at 1 January
	-873	-131	-880	-3	-1,887		-981	-981
Acquisitions/divestments of subsidiaries			1		1		1	1
Depreciation/amortisation	-50	-40	-166	-1	-257		-48	-48
Reversal of depreciation/amortisation
due to disposals	46	7	153		206		24	24
Foreign exchange differences		1	2		3		1	1
Other	-3		3	1	1
Accumulated depreciation/
amortisation as at 31 December	-880	-163	-887	-3	-1,933		-1,003	-1,003
Impairments as at 1 January	-22		-2		-24	-27	-19	-46
Increase of impairments charged to the
income statement	-9				-9
Reversal of impairments due to disposals	5				5
Foreign exchange differences						1		1
Other	-1				-1
Impairments as at 31 December	-27		-2		-29	-26	-19	-45
Total as at 31 December	852	38	505	31	1,426	138	57	195

The fair value of Land and buildings held for own use is estimated at EUR 694 million at 31 December 2015 (2014: EUR 691 million; 2013: EUR 936 million). Of this fair value, 96% is based on external valuations performed in 2015 or 2014 and 4% is based on Dutch local government property tax valuations with a discount of 0% to reflect the current market situation. There are some properties that have a lower fair value than the recorded carrying value. No impairment is recorded because these properties are considered corporate assets. The value in use for the cash-generating units within ABN AMRO Group is sufficient to cover the total value of all these assets.

Additions at property and equipment increased by EUR 24 million, due to higher investments in Land and buildings held for own use and Leasehold improvements. Lower additions at Goodwill and other intangible assets are mainly due to the acquisition of the German Private Banking activities from Credit Suisse (Deutschland) AG by Bethmann Bank in 2014.

422

Introduction

Lessor

In its capacity as lessor, ABN AMRO leases out various assets, included in Equipment, under operating leases. Future minimum lease receipts under non-cancellable operating lease are EUR 380 million (2014: EUR 357 miilion; 2013: EUR 277 million), of which EUR 338 million (2014: EUR 295 million; 2013: EUR 207 million) matures within five years.

Impairment of goodwill

Impairment testing on goodwill is performed at least annually by comparing the recoverable amount of the cash-generating units (CGU) to their carrying amount. The CGU is the smallest identifiable group of assets that:

• Å generate cash inflows from continuing use; and
• Å are largely independent of the cash inflows from other assets or groups of assets.

Identification of an asset's cash-generating unit involves judgement. If the recoverable amount cannot be determined for an individual asset, an entity identifies the lowest aggregation of assets that generate largely independent cash inflows. The recoverable amount is determined by the highest of the value in use or fair value less costs to sell. The type of the acquired entity determines the definition of the type of CGU.

The value in use of a CGU is assessed through a discounted cash flow model of the anticipated future cash flows of the CGU. The discounted cash flow model uses assumptions which depend on various financial and economic variables, including the risk-free rate in a given country and a premium to reflect the inherent risk of the entity being evaluated. The values assigned to each key assumption reflect past experience that was modified based on management's expectation for the future and are consistent with external sources of information.

Besides the discount rates stated in the following table, calculation of the value in use was also based on cash flows, projected based on past experience, actual operating results and the 5-year budget plan. Cash flows for a further 5-year period were extrapolated using the long-term growth rate stated for the CGU.

						31 December 2015	31 December 2014	31 December 2013
(in millions)	Segment	Method used for recoverable amount	Discount rate	Long term growth rate	Impairment charges	Goodwill	Goodwill	Goodwill
Entity
Bethmann Bank	Private Banking	Value in use	10.0%	1.0%		99	99	64
ABN AMRO (Guernsey)	Private Banking	Fair value	10.0%	1.0%		27	25	48
ABN AMRO Commercial Finance Holding	Corporate Banking	Value in use	10.0%	2.0%		11	10	10
Banque Neuflize	Private Banking	Value in use	10.0%	0.0%		6	6	6
Banco ABN AMRO S.A.	Corporate Banking	Value in use	10.0%	2.0%		3	4	4
Other						2	2	6
Total goodwill and impairment charges						149	147	138

423

(in millions)	2015	2014	2013
Depreciation on tangible assets
Land and buildings held for own use	51	52	50
Leasehold improvements	12	11	40
Equipment	74	71	90
Other		1	1
Amortisation on intangible assets
Purchased software	23	23	40
Internally developed software	3	3	5
Other intangible assets	8	5	3
Impairment losses on tangible assets
Land and buildings held for own use (incl. held for sale)	4	8	13
Impairment losses on intangible assets
Goodwill		28
Purchased software	1	2
Total depreciation and amortisation	177	204	242

Total depreciation and amortisation decreased by EUR 27 million in 2015 (2014: decrease of EUR 38 million).

Impairment losses on Land and buildings held for own use include an impairment amount of EUR 4 million at 31 December 2015 (2014: EUR 0 million; 2013: EUR 4 million) for assets held for sale.

In 2015 no impairments charges on Goodwill were recorded, compared with a total of EUR 28 million in 2014.

24 Other assets

Accounting policy for non-current assets held for sale

In accordance with IFRS 5, non-current assets and/or businesses are classified as held for sale if their carrying amount is to be recovered principally through a sale transaction planned to occur within 12 months, rather than through continuing use. Held-for-sale assets are not depreciated and are measured at the lower of their carrying amount and fair value less costs to sell. Assets and liabilities of a business held for sale are presented separately.

The following table shows the components of Other assets at 31 December.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Accrued other income	490	567	698
Prepaid expenses	24	21	24
Assets held for sale	32	25	29
Unit-linked investments	2,543	2,453	2,171
Reinsurers share, trade and other receivables	1,385	1,339	1,460
Other	452	582	746
Total other assets	4,925	4,986	5,128

424

Unit-linked investments are investments on behalf of insurance contract policyholders who bear the investment risk. Minimum guaranteed rates are agreed for certain contracts.

Reinsurers share, trade and other receivables include the amount of the receivables purchased by ABN AMRO (the factor) from its clients under contract of non–recourse factoring.

Other assets in 2015 include a net receivable of EUR 204 million mainly related to the bankruptcy of DSB Bank (2014: EUR 168 million).

25 Due to banks

Accounting policy for Due to banks and Due to customers

According to IAS 39 Financial Instruments, amounts due to banks and customers are held at amortised cost. That is, fair value at initial recognition adjusted for repayment and amortisation of coupon, fees and expenses to represent the effective interest rate of the asset or liability.

This item is comprised of amounts due to banking institutions, including central banks and multilateral development banks.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Deposits from banks:
Demand deposits	2,728	3,024	2,769
Time deposits	1,332	3,399	5,013
Other deposits	10,544	9,276	3,795
Total deposits	14,604	15,699	11,577
Other Due to banks	26	45	49
Total due to banks	14,630	15,744	11,626

Due to banks decreased by EUR 1.1 billion to EUR 14.6 billion at 31 December 2015 mainly due to the decrease in Time deposits (EUR 2.1 billion), which is partly offset by the increase in Other deposits (EUR 1.3 billion).

26 Due to customers

The accounting policy for Due to customers in included in note 25.

This item is comprised of amounts due to non-banking customers.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Demand deposits	119,109	109,753	100,151
Saving deposits	92,472	88,655	87,448
Time deposits	18,555	17,459	19,638
Total deposits	230,136	215,867	207,237
Other due to customers	160	144	347
Total due to customers	230,297	216,011	207,584

Introduction

425

Due to customers rose by EUR 14.3 billion to EUR 230.3 billion at 31 December 2015, as a result of an increase in Demand deposits (EUR 9.4 billion), Saving accounts (EUR 3.8 billion) and Time deposits (EUR 1.1 billion), reflecting increased client demand for these products.

Demand deposits increased by EUR 9.4 billion to EUR 119.1 billion at 31 December 2015 due to higher outstanding of positions related to Corporate Banking (EUR 5.3 billion), Private Banking (EUR 3.1 billion) and Retail Banking (EUR 1.0 billion).

Saving deposits increased by EUR 3.8 billion to EUR 92.5 billion at 31 December 2015, mainly driven by higher volumes within Commercial Clients and Retail Banking. The increase in Retail Banking includes a growth in deposits at MoneYou outside the Netherlands.

Time deposits increased by EUR 1.1 billion to EUR 18.6 billion at 31 December 2015, primarily due to higher outstanding deposits held by insurance companies and other financial institutions within Corporate Banking (EUR 0.8 billion).

27 Issued debt and subordinated liabilities

Accounting policy for issued debt and subordinated liabilities

Issued debt securities and subordinated liabilities are recorded at amortised cost using the effective interest rate method, unless they are of a hybrid or structured nature and irrevocably designated at initial recognition to be held at fair value through profit or loss. The latter is applied when the instruments are held to reduce an accounting mismatch, are managed on the basis of its fair value or include terms that have substantive derivative characteristics in nature.

ABN AMRO applies IAS 32 Financial Instruments: Presentation to determine whether funding is either a financial liability or equity. Issued financial instruments or their components are classified as financial liabilities where the substance of the contractual arrangement results in ABN AMRO having a present obligation to deliver either cash or another financial asset or to satisfy the obligation other than by the exchange of a fixed number of equity shares. Preference shares that carry a non-discretionary coupon or are redeemable on a specific date or at the option of the holder are classified as liabilities. The dividends and fees on preference shares classified as a liability are recognised as interest expense.

Issued liabilities qualify as subordinated debt if claims by the holders are subordinated to all other current and future liabilities of ABN AMRO and its subsidiaries.

The measurement of liabilities held at fair value includes the effect of changes in own credit spreads. The change in fair value applies to those financial liabilities designated at fair value where own credit risk would be considered by market participants. Exchange-traded own debt at fair value through profit or loss is valued against market prices.

The fair value changes are calculated based on a yield curve generated from observed external pricing for funding and quoted CDS spreads.

427

The following table shows the types of debt certificates issued by ABN AMRO and the amounts outstanding at 31 December.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Bonds and notes issued	64,613	66,349	70,649
Certificates of deposit and commercial paper	9,820	8,729	15,610
Saving certificates	59	72	352
Total at amortised cost	74,492	75,150	86,611
Designated at fair value through profit or loss	1,715	1,981	2,071
Total issued debt	76,207	77,131	88,682
- of which matures within one year	25,844	20,347	30,719

Issued debt at 31 December 2015 amounted to 76.2 billion. This is a decline of EUR 0.9 billion or 1.2% compared with EUR 77.1 billion at 31 December 2014. This decline was due to a decrease of EUR 6.0 billion in external RMBS notes which were called and added to the liquidity buffer as retained. This was partly offset by EUR 1.1 billion higher Certificates of deposits and Commercial paper, and EUR 4.0 billion higher Unsecured medium-term notes. Movements in these debt instruments are a continuous process of redemption and issuance of long-term and short-term funding.

The amounts of issued debt issued and redeemed during the period are shown in the Condensed Consolidated Statement of cash flows.

Further details of the funding programmes are provided in the Risk, funding & capital section.

Financial liabilities designated at fair value through profit or loss

(in millions)	31 December 2015	31 December 2014	31 December 2013
Cumulative change in fair value of the structured notes attributable to changes in credit risk	7	13	-3
Change during the year in fair value of the structured notes attributable to changes in credit risk	-6	16	7

The cumulative change of the fair value of the structured notes attributable to change in credit risk amounted to EUR 7 million (2014: EUR 13 million: 2013 EUR -3 million).

For all financial liabilities designated at fair value through profit or loss, the amount that would contractually be required to pay at maturity was EUR 1.7 billion (2014: EUR 1.9 billion; 2013: EUR 2.2 billion).

The following table specifies the issued and outstanding subordinated liabilities at 31 December.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Perpetual loans	1,255	1,285	1,303
Other subordinated liabilities	8,453	7,043	6,614
Total subordinated liabilities	9,708	8,328	7,917

The subordinated liabilities at 31 December 2015 amounted to EUR 9.7 billion, up EUR 1.4 billion or 16.6% compared with EUR 8.3 billion at 31 December 2014. This increase was driven mainly by a newly issued EUR 1.5 billion 2.875% subordinated loan. The maturity date of this loan is June 2025. Furthermore, a new USD 1.5 billion 4.75% subordinated loan was issued. The maturity date of this loan is July 2025. A total of EUR 1.65 billion was redeemed in 2015.

The issued and outstanding loans qualifying as subordinated liabilities are subordinated to all other current and future liabilities.

Other subordinated liabilities

Other subordinated liabilities comprise a loan held by the Dutch State. This loan (EUR 1.65 billion), which has an interest rate of 1.019% and matures in 2017, was called in the third quarter 2015.

28 Provisions

Accounting policy for provisions

A provision is recognised in the balance sheet when ABN AMRO has a legal or constructive obligation as a result of a past event, and it is more likely than not that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. If the effect of time value is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market rates and, where appropriate, the risks specific to the liability.

A provision for restructuring is recognised when an obligation exists. An obligation exists when ABN AMRO has approved a detailed plan and has raised a valid expectation in those affected by the plan by starting to implement the plan or by announcing its main features. Future operating costs are not provided for. Provisions for insurance risks are determined by actuarial methods, which include the use of statistics, interest rate data and settlement costs expectations.

Provisions are established for certain guarantee contracts for which ABN AMRO is responsible to pay upon default of payment.

The following table shows the breakdown of provisions at 31 December.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Insurance fund liabilities	154	183	380
Provision for pension commitments	85	91	418
Restructuring	200	233	262
Other staff provision	144	182	174
Credit commitments	8	5	1
Legal provisions	292	112	78
Other	381	202	239
Total provisions	1,256	1,003	1,550

428

Insurance fund liabilities

Insurance fund liabilities include the insurance companies' actuarial reserves, premium and claims reserves. The expected cash outflow for 2016 is approximately EUR 60 million and approximately EUR 130 million for the 2017-2020 period.

Provision for pension commitments

Provision for pension commitments includes early retirement benefits payable to non-active employees. In 2014 the pension scheme was changed from a defined benefit plan to a defined contribution plan. Further details are provided in note 29.

Restructuring

Restructuring provisions cover the costs of restructuring plans for which implementation has been formally announced. Restructuring provisions are related to the integration and to further streamlining of the organisation and infrastructure. Restructuring provisions include allowances for staff and other operating expenses. The pre-2014 restructuring programme is almost completed. The remaining balance relates to ongoing costs that are still payable based on the ABN AMRO Social Plan. In 2014 ABN AMRO announced a new restructuring plan for Retail Banking which is scheduled to be completed by the end of 2019. The financial settlement may take up to five years after completion.

Other staff provisions

Other staff provisions relate in particular to disability and other post-employee benefits.

Legal provisions

Legal provisions are based on best estimates available at year-end and taking into account the opinion of legal specialists. The timing of the outflow of cash related to these provisions is by nature uncertain given the unpredictability of the outcome and the time involved in concluding litigations. Any provision recognised does not constitute an admission of wrongdoing or legal liability.

Interest rate derivatives to SME clients

The bank has entered into interest rate derivatives with its SME clients in combination with floating interest rate loans. The bank has around 350,000 SME clients, of which around 4,500 have entered into one or more interest rate derivative transactions. The bank's portfolio consists of around 6,000 interest rate derivatives transactions with SMEs, primarily consisting of interest rate swaps and interest rate caps. The SME clients with a floating interest rate loan entered into an interest rate derivative with the purpose of fixing their interest rate. In most cases, the combination of a floating interest rate loan together with an interest rate derivative resulted in a lower fixed interest rate for the client than the alternative of a loan with a fixed interest rate.

At the request of the AFM, a dedicated project team within the bank undertook a review of all SME client files containing interest rate derivatives. The review was aimed to determine whether the bank has acted in accordance with its duty of care obligations in connection with the sale of interest rate derivatives to its SME clients.

The review of these files was completed in 2015, and all 4,500 SME client files have been reviewed. The outcome of the review is that in several instances ABN AMRO is unable to determine conclusively that it has fully complied with its duty of care obligations in connection with the sale of

interest rate derivatives to SME clients. In these cases it could not be fully established that clients were sufficiently informed about the risks of their particular combination of floating rate interest loan and interest rate derivative, specifically in the scenario of declining interest rates.

The review revealed cases where a variable risk-based fee had been charged on the loans. Even though the provisions of the loans allow for such a risk-based fee (including an increase of the risk-based fee, in such cases the combination of the floating interest rate loan and interest rate derivative no longer resulted in a fixed interest rate for the client. The review also revealed cases of a mismatch between the loan and the interest rate derivative as a result of early prepayments of the loan or differences in tenor between the loan and the interest rate derivative. Such mismatches could lead to the relevant SME client being overhedged. To resolve an overhedge situation, the interest rate derivative has to be fully or partially unwound. However, as a result of the declining floating interest rates, the interest rate derivative has a negative mark-to-market value. Pursuant to the terms of the interest rate derivatives contract, the mark-to-market value has to be settled by the parties when unwinding interest rate derivatives. This settlement results in a payment obligation by the SME client, which is similar to the penalty paid upon early repayment of an equivalent fixed interest rate loan.

Following a case-by-case duty of care analysis, based on a framework as committed to the AFM, the bank has for a number of SME client files agreed to (i) fully or partially unwind the interest rate swap and/or (ii) partly compensate the SME client. ABN AMRO aims to provide an appropriate solution, if applicable, to all other relevant SME clients. ABN AMRO has recognised a provision for the anticipated compensation amounts based on the review of all relevant SME client files.

A contingent liability is disclosed in note 33 Commitments and contingent liabilities for elements that are not included in the provision at year-end 2015. Recognition of these elements in the provision is dependent on future events, such as a possible revision of the compensation framework as advised by the AFM on 1 March 2016. Further details are provided in note 33.

Other duty of care matters

Stichting Belangenbehartiging Gedupeerde Beleggers van den Berg represents victims of a large Ponzi scheme fraud set-up by Mr René van den Berg through his Fortis Bank Nederland accounts. Fortis Bank Nederland is one of the predecessors of ABN AMRO. The victims of this fraud are claiming damages for ABN AMRO by reason of breaching a public duty of care. ABN AMRO has recognised a provision for partial compensation of the victims.

In 2012, a class action was brought by Stichting Stop de Banken in relation to mortgage agreements with a floating interest rate based on EURIBOR, alleging that the Group was contractually not allowed to unilaterally increase the level of the applicable margin and violated its duty of care. On the same subject, the Group was found to have violated its duty of care with respect to an individual out of court settlement proceeding by the appeals commission of Kifid. For these proceedings a provision is recognised at year-end.

In the meantime, multiple individual proceedings and an additional class action have been initiated against the Group. The uncertainties are likely to continue for some time. In those cases where the Group considers it probable that settlement of the claims will require a cash outflow, a provision is

recognised at year-end. A contingent liability is disclosed for all other cases in which a probable cash outflow is not considered remote. Further details are provided in note 33 Commitments and contingent liabilities.

Other provisions

Other provisions include provisions for tax purposes. The tax provisions are based on best estimates available at year-end and taking into account the opinion of tax specialists. The timing of the outflow of cash related to these provisions is by nature uncertain given the unpredictability of the outcome and the time involved.

Discussions with tax authorities in Switzerland and Germany

The tax treatment of certain transactions related to discontinued securities financing activities in the international offices, that date back to the time before ABN AMRO Group assumed control of Fortis Bank Nederland (FBN), are currently the subject of discussion with the Swiss and German tax authorities.

In Switzerland, the discussion regards the beneficial ownership of shares held by subsidiairies of FBN. These subsidiaries executed equity derivative trading transactions and held long positions in Swiss traded equities. The subsidiaries reclaimed dividend withholding tax based on the applicable tax treaties. According to the Swiss tax authorities, the transactions were not carried out for valid business reasons and therefore the subsidiaries were not considered beneficial owners of the respective underlying dividends. In May 2015, in a decision of the Swiss Supreme Court in a proceeding involving a similar transaction, beneficial ownership was denied to the taxpayer. This could lead to an unfavourable result for ABN AMRO in its discussions with the Swiss tax authorities and may have an impact on decisions of tax courts in other countries, for instance in Germany.

In 2012 the German tax authorities issued notices to a former German subsidiairy of FBN stipulating that they intend to reclaim dividend withholding tax amounts claimed by the German company in the years 2007 through 2009. The German company was engaged in derivative trading transactions. The German tax authorities claim that the German company has not acquired beneficial ownership in certain transactions where the German company claimed a refund of dividend withholding tax. The German company has filed objections against these notices.

ABN AMRO has recognised a provision that it currently considers sufficient to cover its exposure in relation to claims made by the Swiss and German tax authorities.

Mortgage administration inconsistencies

There have been inconsistencies in the administration of the bank and business partners with respect to one of our mortgage products. The result of these inconsistencies is a shortfall between actual saving values and guaranteed saving values relating to those mortgage products. The best estimate of this shortfall is recognised as a provision.

Credit commitments

Provisions for credit commitments are provisions covering credit risk on credit commitments recorded in off-balance sheet items that have been identified individually or on a portfolio basis as impaired. The amount of the impairment is the present value of the cash flows which ABN AMRO expects to be required to settle its commitment.

Changes in provisions during the year are as follows:

	Insurance	Provision for pension
(in millions)	fund liabilities	commit ments	Restruc turing	Other staff provision	Legal provisions	Other	Total
At 1 January 2013	401	560	360	182	96	317	1,915
Increase of provisions			120	12	14	33	179
Reversal of unused provisions			-58	-2	-2	-53	-115
Utilised during the year	-3		-166	-16	-32	-91	-308
Accretion of interest			2			1	3
Foreign exchange differences						-1	-1
Other	-18	-142	4	-2	2	33	-123
At 31 December 2013	380	418	262	174	78	239	1,550
Increase of provisions			133		26	21	180
Reversal of unused provisions			-41		-1	-2	-45
Utilised during the year			-125		-5	-219	-349
Accretion of interest			1		9		10
Foreign exchange differences						1	1
Other	-197	-327	4	7	5	163	-344
At 31 December 2014	183	91	233	182	112	202	1,003
Increase of provisions	3		75	1	178	163	420
Reversal of unused provisions	-1		-22	-1	-3	-20	-48
Utilised during the year			-86		-8	-50	-144
Accretion of interest			1		16	34	50
Foreign exchange differences						4	5
Other	-32	-7		-38	-1	48	-30
At 31 December 2015	154	85	200	144	292	381	1,256

Other and Legal provisions were higher in 2015 compared with the previous year due mainly to the recording of a tax provision, a provision for interest rate derivatives for SME clients, a provision related to Euribor mortgages legal claim and a provision for mortgage administration inconsistencies.

During the first half of 2015, ABN AMRO considered several developments around the tax treatment of transactions related to the discontinued part of the Securities Financing activities in 2009. It was concluded that changes to the level of provisioning were required.

29 Pension and other post-retirement benefits

Accounting policy for pension and other post-retirement benefits

ABN AMRO sponsors a number of pension schemes in the Netherlands and abroad and IAS 19 applies to the accounting of these schemes. These schemes are mainly defined contribution plans. The majority of the beneficiaries of the plans are located in the Netherlands.

Introduction

Defined contribution plans

For defined contribution plans, ABN AMRO pays yearly contributions determined by a fixed method and has no legal or constructive obligation to pay any further contributions. Contributions are recognised directly in the income statement in the year to which they relate. Actuarial and investment risk are for the account of the participants in the plan.

Defined benefit plans

For defined benefit schemes, the net obligation of each plan is determined as the difference between the present value of the defined benefit obligations and the fair value of plan assets.

The actuarial assumptions used in calculating the present value of the defined benefit obligation include discount rates based on high-quality corporate bonds, inflation rate, future salary increases, employee contributions, mortality assumptions and rates of employee turnover. The assumptions are based on available market data and management expectations at the end of the reporting period.

Plan assets are measured at fair value at the balance sheet date and are netted against the defined benefit obligation.

Pension costs recognised in the income statement for defined benefit plans consist of:

• Å service costs;
• Å net interest costs determined by multiplying the net defined benefit liability (asset) by the discount rate, both as determined at the start of the annual reporting period, taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments; and
• Å curtailments or plan amendments.

Differences between the pension costs and the contributions payable are accounted for as provisions or prepayments.

Remeasurement

Remeasurements of the net defined benefit liability (asset) are actuarial gains and losses resulting from changes in actuarial assumptions and experience adjustments (i.e. unexpectedly high or low rates of employee turnover) and are recognised in Other comprehensive income and will not be recycled to profit or loss in later periods. In determining the actual return on plan assets, the costs of managing the plan assets and any tax payable by the plan itself are deducted.

Other post-retirement benefits

Some group companies provide post-retirement benefits to their retirees such as long-term service benefits, and discounts on banking products. 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 the same accounting methodology as used for defined benefit pension plans. These obligations are calculated annually.

Plans in all countries comply with applicable local regulations concerning investments and minimum funding levels.

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Pension and other post-retirement benefits

Dutch defined contribution plan

In 2014, ABN AMRO introduced a new pension scheme for its employees in the Netherlands. This is a collective defined contribution (CDC) plan. The Dutch CDC plan has an effective date of 12 June 2014 and is a defined contribution plan based on an average salary plan with a yearly accrual ambition of 1.875% as of 2015 (2.05% in 2014). The normal retirement age is set at 67 years. The contribution payable by pension fund participants is 5.5% as from 2015 (6.67% in 2014). The annual pension contributions are calculated according to a fixed contribution calculation mechanism. The annual pension contribution is maximised at 35% of the pensionable salary.

Amounts recognised in the income statement for pensions and other post-retirement benefits

(in millions)	2015	2014	2013
Current service cost	6	91	228
Interest cost	4	294	616
Interest income	-2	-288	-608
Administrative expenses impacting defined benefit obligations
Administrative expenses impacting plan assets		6	13
Past service cost	-5		-18
Losses/(gains) on settlements and curtailment	-1	297	-8
Impact on asset due to asset ceiling
Other	1	5	1
Pension expenses relating to defined benefit plans	3	405	224
Defined contribution plans	322	170	33
Total Pension expenses	324	575	257

The decrease in the total pension expenses of EUR 251 million in 2015 compared with 2014 was mainly due to the settlement of the Dutch pension plan. The increase excluding the settlement cost was EUR 46 million, mainly due to a decrease of the discount rate in 2015 compared with 2014 which resulted in higher interest cost.

The remaining pension expenses relating to defined benefit plans consist mainly of several small defined benefit plans outside the Netherlands.

Since the introduction of the Dutch collective defined contribution plan the pension expenses for defined contribution plans consist mainly of the cash contributions.

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435

Reconciliation to the statement of financial position and other comprehensive income

(in millions)	2015	2014	2013
Present value of defined benefit obligations - funded	134	140	18,125
Fair value of plan assets	94	91	17,719
	40	49	406
Present value of unfunded obligations	45	47	12
Other		-5
Net recognised liabilities/(assets) at 31 December	85	91	418
Remeasurements arising from changes in demographic assumptions DBO	3	57	-159
Remeasurements arising from changes in financial assumptions DBO	-1	-1,765	294
Remeasurements arising from changes in financial assumptions Plan assets.	1	1,511	-392
Reclassification post-employment benefit plan1		3,599
Other		-1	1
Remeasurements in Other comprehensive income	3	3,400	-256

¹ Reclassification of EUR 3,599 million (EUR 4,799 million gross and EUR 1,200 tax) from Remeasurement gains/(losses) to Other reserves including retained earnings following the change of pension scheme.

Change in defined benefit obligation

(in millions)	2015	2014	2013
Defined benefit obligation as at 1 January	187	18,137	17,881
Current service cost	6	91	228
Interest cost	4	294	616
Past service cost	-5		-18
Administrative expenses impacting defined benefit obligations
Losses/(gains) on settlements and curtailment	-4	-19,845
Participants' contributions	-3	24	57
Benefits paid	-3	-217	-466
Remeasurements arising from changes in demographic assumptions defined benefit obligation	-3	-57	159
Remeasurements arising from changes in financial assumptions defined benefit obligation	1	1,765	-294
Acquisitions and disposals of subsidiaries		2	-14
Foreign exchange differences	1	1	-1
Other	-1	-9	-11
Defined benefit obligation as at 31 December	179	187	18,137

The net defined benefit liabilities/(asset) balance as per December 2015 consist of pensioners with a profit share, the indexation of benefits insured at an insurance company and several small defined benefit plans outside the Netherlands.

The defined benefits obligation and fair value plan assets remained stable excluding the amounts related to the Dutch defined benefits pension plan compared with December 2014.

The decline in the defined benefit obligation in 2014 was due mainly to the settlement of the Dutch pension plan. Due to the change in discount rate from 3.6% to 3.12% for the period until 12 June 2014, the defined benefit obligation increased in 2014 by EUR 1,765 million. Furthermore, an experience gain of EUR 65 million was recognised in 2014 due to lower than expected indexation (1.4% versus

Change in fair value of plan assets

1.8% expected).

(in millions)	2015	2014	2013
Fair value of plan assets as at 1 January	91	17,719	17,281
Interest Income	2	288	608
Remeasurements arising from changes in financial assumptions plan assets	1	1,511	-392
Employer's contributions	6	173	649
Participants' contributions		25	60
Direct payments			-1
Administrative expenses impacting defined plan assets		-6	-13
Benefits paid	-3	-217	-466
Acquisitions and disposals of subsidiaries			-9
Asset distributed on settlements	-3	-19,404
Foreign exchange differences	1	1	-2
Other		1	4
Fair value of plan assets as at 31 December	94	91	17,719

In 2014 the fair value of plan assets mainly declined due to the settlement of the Dutch pension plan. The return on plan assets was higher than the discount rate, which resulted in a gain of EUR 1,511 million in 2014.

Plan participants' contributions to the defined benefit plan in 2014 until 12 June 2014 amounted to EUR 25 million and is included in Salaries and wages.

Principal actuarial assumptions

	2015	2014	2013
Discount rate	2.2%	2.1%	3.6%
Indexation rate	1.8%	1.8%	1.8%
Expected return on plan assets as at 31 December	2.2%	2.1%	3.6%
Future salary increases	2.4%	2.5%	2.5%

The assumptions above are weighted by defined benefit obligations. The discount rate consists of a risk-free rate and a credit spread on AA-rated corporate bonds.

30 Other liabilities

The following table shows the components of Accrued expenses and other liabilities at 31 December.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Accrued other expenses	1,204	1,196	1,303
Liability to unit-linked policyholders	2,543	2,453	2,171
Sundry liabilities and other payables	1,982	1,824	3,639
Total other liabilities	5,729	5,473	7,113

Obligations to policyholders whose return is dependent on the return of unit-linked investments recognised in the balance sheet are measured at fair value with changes through income.

Sundry liabilities and other payables increased as a result of securities transactions that were to be settled as per 31 December 2015.

31 Equity attributable to shareholders and other components of equity

Share capital and other components of equity

Ordinary shares and depositary receipts for ordinary shares

As at 31 December 2015, all shares in the capital of ABN AMRO Group are held by two foundations: NLFI and STAK AAG. On that date, NLFI held 77% and STAK AAG held 23% of the shares in the issued capital of ABN AMRO Group. Both foundations have issued depositary receipts in ABN AMRO Group. Only STAK AAG's depositary receipts are issued with the cooperation of ABN AMRO Group and traded on Euronext Amsterdam. For more information about the STAK AAG and the depositary receipts, please refer to the Corporate Governance section of this report. More details on the shares are provided in the ABN AMRO Shares section.

Preference shares

Preference shares which are non-redeemable and upon which dividends are declared at the discretion of the Company are classified as equity.

Compound financial instruments

Components of compound financial instruments (liability and equity parts) are classified in their respective areas of the Statement of financial position.

Other reserves

The other reserves mainly comprise retained earnings, profit for the period and legal reserves.

Currency translation reserve

The currency translation reserve represents the cumulative gains and losses on the translation of the net investment in foreign operations, net of the effect of hedging.

Available-for-sale reserve

In this component, gains and losses arising from a change in the fair value of available-for-sale assets are recognised, net of taxes, excluding impairment losses recognised in the income

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statement and gains and losses on hedged financial instruments. When the relevant assets are sold or otherwise disposed of, the related cumulative gain or loss recognised in equity is recycled to the income statement.

Cash flow hedging reserve

The cash flow hedging reserve is comprised of the effective portion of the cumulative net change in the fair value of cash flow hedging instruments, net of taxes, that will be recycled to the income statement when the hedged transactions affect profit or loss.

Net investment hedging reserve

The net investment hedging reserve is comprised of the currency translation differences arising on translation of the currency of these instruments to euros, insofar as they are effective.

Dividends

Dividends on ordinary shares and preference shares classified as equity are recognised as a distribution of equity in the period in which they are approved by shareholders.

The following table shows the composition of Equity attributable to shareholders of the parent company at 31 December 2015, 31 December 2014 and 31 December 2013.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Share capital	940	940	940
Share premium	12,970	12,970	12,970
Other reserves (incl. retained earnings/profit for the period)	3,059	1,769	4,554
Other components of equity	-394	-814	-4,909
Equity attributable to shareholders of the parent company	16,575	14,865	13,555
Capital securities	993
Equity attributable to non-controlling interests	17	12	13
Total equity	17,584	14,877	13,568

As at 31 December 2015, the authorised share capital of ABN AMRO Group N.V. amounted to EUR 4.7 million distributed over 4,500,000,000 ordinary shares and 200,000,000 class B ordinary shares.

All shares have a nominal value of EUR 1.00 each and each share entitles the shareholder to one vote per share.

As at 31 December 2015, issued and paid-up capital by ABN AMRO Group N.V. consisted of 940,000,001 ordinary shares (EUR 940 million).

In September 2015 ABN AMRO Bank N.V. issued EUR 1.0 billion in Capital securities including a premium discount of EUR 7 million. Capital securities qualify as Additional Tier 1 as described in CRD IV and CRR. The capital securities are perpetual, unsecured and deeply subordinated. Redemption is discretionary to ABN AMRO Bank N.V. on the interest reset date in year 5 subject to regulatory approval. The securities can be called on a yearly basis after year 5. There is a fixed interest coupon of 5.75%, payable semi-annually. Interest is non-cumulative and fully at the discretion of

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ABN AMRO Bank N.V. No interest will be paid when there are insufficient distributable items and/or maximum distributable amount (MDA) restrictions are constraining. ABN AMRO Bank N.V. will give due consideration to the hierarchy of the instrument with regard to distribution.

In 2015, a final dividend of EUR 275 million was paid out to ordinary shareholders, bringing the total dividend for 2014 to EUR 400 million. An interim dividend of EUR 350 million was paid to ordinary shareholders in August 2015.

In 2014 a final dividend of EUR 200 million was paid out to ordinary shareholders, bringing the total dividend for 2013 to EUR 350 million. An interim dividend of EUR 125 million was paid to ordinary shareholders in November 2014.

As described in the Consolidated statement of changes in equity, the 75,000,000 class A noncumulative preference shares were repurchased and cancelled in 2013, resulting in a decline in share capital and share premium of EUR 75 million and EUR 135 million respectively.

The following table shows the number of shares and paid-up and unpaid-up capital of the authorised, unissued and issued share capital at 31 December 2015, 31 December 2014 and 31 December 2013.

		2015		2014		2013
	Class A ordinary shares	Class B ordinary shares	Class A ordinary shares	Class B ordinary shares	Class A ordinary shares	Class B ordinary shares
Number of shares
Authorised share capital	4,500,000,000	200,000,000	3,750,000,000	100,000,000	3,750,000,000	100,000,000
Unissued share capital	3,559,999,999	200,000,000	2,809,999,999	100,000,000	2,809,999,999	100,000,000
Issued share capital	940,000,001		940,000,001		940,000,001
Amount of shares
Authorised share capital	4,500,000,000	200,000,000	3,750,000,000	1,000,000	3,750,000,000	1,000,000
Unissued share capital	3,559,999,999	200,000,000	2,809,999,999	1,000,000	2,809,999,999	1,000,000
Issued share capital	940,000,001		940,000,001		940,000,001
Par value	1.00	1.00	1.00	0.01	1.00	0.01

32 Transferred, pledged, encumbered and restricted assets

Accounting policy for transferred, pledged, encumbered and restricted assets

Transferred financial assets are arrangements/transactions for which ABN AMRO has:

• Å transferred the contractual rights to receive the cash flows of the financial asset to a third party, or;
• Å retained the contractual rights to receive the cash flows of that financial asset, but assumes a contractual obligation to pay the cash flows to a third party, or;
• Å alternatively, transferred a financial asset when the counterparty has the right to re-pledge or to re-sell the asset.

Depending on the circumstances, these transfers may either result in financial assets that are not derecognised in their entirety or in assets that are derecognised in their entirety. More detailed information on our recognition and derecognition policy is provided in the paragraph Significant accounting policies under note 1 Accounting policies.

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Other

Pledged assets are assets pledged as collateral for liabilities or contingent liabilities and the terms and conditions relating to its pledge. Encumbered assets are those that are pledged or other assets which we believed to be restricted to secure, credit-enhance or collateralise a transaction.

In principle, pledged assets are encumbered assets. The following differences apply to ABN AMRO:

• Å Encumbered assets include mandatory reserve requirements with central banks and unit-linked investments (see note 24 Other assets);
• Å Encumbered assets exclude assets pledged for unused credit facilities with central banks at the statement of financial position date, i.e. mainly retained mortgage-backed securities.

Significant restrictions on assets may arise from statutory, contractual or regulatory requirements such as:

• Å those that restrict the ability of the parent or its subsidiaries to transfer cash or other financial assets to (or from) other entities within the Group;
• Å guarantees or other requirements that may restrict dividends and other capital distributions being paid, or loans and advances being made or repaid to other entities within the Group;
• Å protective rights of noncontrolling interests might restrict the ability of the Group to access and transfer assets freely to or from other entities within the Group and to settle liabilities of the Group.

Transferred financial assets

This disclosure provides insight into the relationship between these transferred financial assets and associated financial liabilities in order to understand which risks the bank is exposed to when the assets are transferred.

If transferred financial assets continue to be recognised on the balance sheet, ABN AMRO Group is still exposed to changes in the fair value of the assets.

Transferred financial assets that are not derecognised in their entirety

The following table shows transferred financial assets that are not derecognised in their entirety.

		31 December 2015		31 December 2014				31 December 2013
(in millions)	Loans and receiva bles (at amor tised cost)	Financial assets held for trading (at fair value through profit and loss)	Total	Loans and receiva bles (at amor tised cost)	Financial assets held for trading (at fair value through profit and loss)	Total	Loans and receiva bles (at amor tised cost)	Financial assets held for trading (at fair value through profit and loss)	Total
Securitisations
Carrying amount Transferred assets	2,915		2,915	8,795		8,795	12,043		12,043
Carrying amount Associated liabilities	2,950		2,950	8,999		8,999	12,285		12,285
Fair value of assets	3,155		3,155	9,156		9,156	12,316		12,316
Fair value of associated liabilities	2,969		2,969	9,053		9,053	12,347		12,347
Net position	186		186	103		103	-31		-31
Securities financing Carrying amount Transferred assets Carrying amount Associated liabilities Fair value of assets Fair value of associated liabilities Net position Other Carrying amount Transferred assets Carrying amount Associated liabilities Fair value of assets Fair value of associated liabilities		221 133 221 133	221 133 221 133		1,226 1,226 1,226 1,226 442 494 442 494	1,226 1,226 1,226 1,226 442 494 442 494		4,000 4,000 4,000 4,000 382 383 382 383	4,000 4,000 4,000 4,000 382 383 382 383
Net position		88	88		-52	-52		-1	-1
Totals
Carrying amount Transferred assets	2,915	221	3,136	8,795	1,668	10,463	12,043	4,382	16,425
Carrying amount Associated liabilities	2,950	133	3,083	8,999	1,720	10,719	12,285	4,383	16,668
Fair value of assets	3,155	221	3,376	9,156	1,668	10,824	12,316	4,382	16,698
Fair value of associated liabilities	2,969	133	3,101	9,053	1,720	10,773	12,347	4,383	16,730
Net position	186	88	274	103	-52	51	-31	-1	-32

Securitisations

The bank uses securitisations as a source of funding whereby the Special Purpose Entity (SPE) issues debt securities. Pursuant to a securitisation transaction utilising true sale mechanics, the bank transfers the title of the assets to SPEs.When the cash flows are transferred to investors in the notes issued by consolidated securitisation vehicles, the assets (mainly residential mortgage loans) are considered to be transferred.

Securities financing

Securities financing transactions are entered into on a collateralised basis for mitigating the bank's credit risk exposure. In repurchase agreements and securities lending transactions, ABN AMRO gets the securities returned at maturity. The counterparty in the transactions holds the securities as collateral, but has no recourse to other assets of ABN AMRO. ABN AMRO transfers the securities and, if the counterparty has the right to re-sell or re-pledge them, the bank considers these assets transferred assets.

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Continuing involvement in transferred financial assets that are derecognised in their entirety

The bank does not have any material transferred assets that are derecognised in their entirety, but where ABN AMRO has continuing involvement.

Pledged and Encumbered assets

Pledged and encumbered assets are no longer readily available to the Group to secure funding, satisfy collateral needs or be sold to reduce the funding requirement. The following activities conducted by ABN AMRO give rise to pledged assets:

• Å cash and securities provided as collateral to secure trading and other liabilities, mainly derivatives;
• Å mortgages and SME loans pledged to secure funding transactions such as covered bonds and securitisations;
• Å securities lent as part of repurchase and securities lending transactions.

The following table provides an overview of assets pledged as security and encumbered assets.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Assets pledged
Cash and balances at central banks		253	253
Financial assets held for trading	106	5,062	4,446
Financial investments available-for-sale			160
Financial investments held at fair value through profit or loss
Financial investments held to maturity
Loans and receivables - banks
- Interest bearing deposits	7,164	9,817	7,193
Loans and receivables - customers
- Residential mortgages	87,874	102,646	111,596
- Commercial loans	5,298	5,644	6,208
Total assets pledged as security	100,442	123,422	129,856
Differences between pledged and encumbered assets
Financial investments available-for-sale	410	133
Loans and receivables - banks1	863	498	221
Loans and receivables - customers2	-42,846	-52,928	-61,298
Other assets3	2,543	2,453	2,171
Total differences between pledged and encumbered assets	-39,030	-49,844	-58,906
Total encumbered assets	61,412	73,578	70,950
Total assets	390,317	386,867	372,022
Total encumbered assets as percentage of total assets	15.7%	19.0%	19.1%

¹ Includes mandatory reserve deposits.

² Excludes mainly mortgage-backed securities.

³ Includes unit-linked investments.

We have aligned our definition for encumbered assets with the EBA, which provided guidance in 2014 stating that cash receivable in securities borrowing and reverse repurchase transactions are not encumbered. These are also no longer considered pledged. We have also adjusted the comparative figures to reflect the correct underlying trend.

The total of encumbered assets decreased by EUR 12,166 million, mainly due the calling of several securitisation transactions.

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Off-balance sheet collateral held as security for assets

Mainly as part of professional securities transactions, ABN AMRO obtains securities on terms which permit it to repledge or resell the securities to others. These transactions are conducted under terms that are usual and customary to standard professional securities transactions.

ABN AMRO controls credit risk associated with these activities by monitoring counterparty credit exposure and collateral value on a daily basis and requiring additional collateral to be deposited with or returned to the Group when deemed necessary.

(in millions)	31 December 2015	31 December 2014	31 December 2013
Fair value of securities received which can be sold or repledged	56,300	54,929	59,039
- of which: fair value of securities repledged/sold to others	33,894	27,988	28,463

ABN AMRO has an obligation to return the securities accepted as collateral to its counterparties.

Significant restrictions on the ability to access or use the Group's assets

The purpose of disclosing assets with significant restrictions is to provide information that enables users of its consolidated financial statements to evaluate the nature and extent of significant restrictions on its ability to access or use assets, and settle liabilities, of the group.

At balance sheet date, the Group did not have any material non-controlling interests and therefore did not give rise to significant restrictions.

Restricted financial assets consist of assets pledged as collateral against an existing liability or contingent liability and encumbered assets. Other restrictions impacting the Group's ability to use assets:

• Å assets as a result of collateralising repurchase and borrowing agreements (2015: EUR 19,075 million, 2014: EUR 16,933 million, 2013: EUR 16,212 million);
• Å assets held in certain jurisdictions to comply with local liquidity requirements and are subject to restrictions in terms of their transferability within the Group (2015: EUR 1,431 million, 2014: EUR 1,199 million, 2013: EUR 745 million).

ABN AMRO Group in general is not subject to significant restrictions that would prevent the transfer of dividends and capital within the Group; except for regulated subsidiaries which are required to maintain capital to comply with local regulations (2015: 1,240 million, 2014: EUR 957 million, 2013: EUR 867 million).

33 Commitments and contingent liabilities

Accounting policy for off-balance sheet items Commitments

Loan commitments that allow for draw-down of a loan within the timeframe generally established by regulation or convention in the marketplace are not recognised as derivative financial instruments. Acceptances comprise undertakings by ABN AMRO to pay bills of exchange drawn on customers.

Introduction

ABN AMRO expects most acceptances to be settled simultaneously with the reimbursement from customers. Acceptances are not recognised in the balance sheet and are disclosed as commitments.

Financial guarantee contracts

A financial guarantee contract requires the issuer to make specified payments to reimburse the holder for a loss it incurs if a specified debtor fails to make payment when due under the original or modified terms of a debt instrument. Initial recognition of financial guarantee contracts is at their fair value. Subsequent measurement is the higher of the amount initially recognised less cumulative amortisation, when appropriate, and the best estimate of the amount expected to settle the obligation.

Contingencies

Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events, and present obligations where the transfer of economic resources is uncertain or cannot be reliably measured. Contingent liabilities are not recognised on the balance sheet but are disclosed unless the outflow of economic resources is remote.

Committed credit facilities

Commitments to extend credit take the form of approved but undrawn loans, overdraft revolving and underwriting facilities. New loan offers have a commitment period that does not extend beyond the normal underwriting and settlement period.

Guarantees and other commitments

ABN AMRO provides financial guarantees and letters of credit to guarantee the performance of customers to third parties. These transactions have fixed limits and generally extend for periods of up to 5 years. Expirations are not concentrated in any particular period. ABN AMRO also provides guarantees by acting as a settlement agent in securities borrowing and lending transactions. In addition, ABN AMRO has entered into transactions to guarantee various liabilities with respect to insurance-related regulatory reserve financing transactions.

The contractual amounts of commitments and contingent liabilities are set out by category in the following table. The amounts stated in the table for commitments assume that amounts are fully advanced. The amounts reflected in the table for guarantees and letters of credit represent the maximum accounting loss that would be recognised at the balance sheet date if the relevant contract parties completely failed to perform as contracted.

Many of the contingent liabilities and commitments are expected to expire without being advanced in whole or in part. This means that the amounts stated do not represent expected future cash flows. Additionally, guarantees and letters of credit are supported by varying levels of collateral.

Aside from the items which are included in the Guarantees and other commitments, specific non-quantified guarantees can be identified. The following contracts belong to the category of non-quantified guarantees:

• Å Guarantees that have been given for ABN AMRO's securities custody operations
• Å Guarantees given to CCPs: In its capacity as clearing member, ABN AMRO guarantees the settlement of obligations to CCPs of clients' transactions. In the event of a client defaulting,

ABN AMRO has the obligation to settle the clients' outstanding positions towards CCPs. ABN AMRO collects (cash) margins from clients to minimise this settlement risk. Given the stringent margin requirements, possible future outflows of resources are considered to be close to zero.

Å Guarantees provided for interbank bodies and institutions: ABN AMRO or Group companies participate in collective guarantee schemes (e.g. deposit guarantees) applicable or mandatory in various countries.

Furthermore, statements of liability within the meaning of Article 403 Book 2 of the Dutch Civil Code have been issued for a number of its affiliated companies.

The committed credit facilities, guarantees and other commitments at 31 December 2015, 2014 and 2013 are summarised in the following table.

(in millions)	Less than one year	Between one and three years	Between three and five years	After five years	Total
31 December 2015
Committed credit facilities	9,136	4,173	4,667	3,583	21,559
Guarantees and other commitments:
Guarantees granted	299	124	70	1,947	2,440
Irrevocable letters of credit	3,675	1,042	407	613	5,737
Recourse risks arising from discounted bills	5,440	196	18	37	5,691
Total guarantees and other commitments	9,414	1,362	495	2,597	13,868
Total commitments and contingent liabilities	18,550	5,535	5,162	6,180	35,427
31 December 2014
Committed credit facilities	6,558	2,907	4,261	2,436	16,164
Guarantees and other commitments:
Guarantees granted	540	73	94	1,884	2,592
Irrevocable letters of credit	3,841	878	276	504	5,499
Recourse risks arising from discounted bills	6,940	275	16	12	7,243
Total guarantees and other commitments	11,322	1,227	386	2,401	15,335
Total commitments and contingent liabilities	17,880	4,134	4,647	4,837	31,498
31 December 2013
Committed credit facilities	5,623	3,110	2,268	2,763	13,764
Guarantees and other commitments:
Guarantees granted	440	1,091	102	1,901	3,534
Irrevocable letters of credit	4,125	772	186	332	5,415
Recourse risks arising from discounted bills	6,983	133	13	25	7,154
Total guarantees and other commitments	11,548	1,996	301	2,258	16,103
Total commitments and contingent liabilities	17,171	5,106	2,569	5,021	29,867

Payments due by period

Commitments and contingent liabilities at 31 December 2015 amounted to EUR 35 billion, an increase of EUR 4 billion compared with EUR 31 billion at 31 December 2014. This increase was mainly caused by an increase of EUR 5 billion in the Committed credit facilities granted to corporate clients of which EUR 1.5 billion related to facilities given to ECT clients. This was partly offset by a decrease of EUR 1 billion in the recourse risks arising from discounted bills.

The increase in Committed credit facilities of EUR 5 billion to EUR 22 billion was mainly related to the credit lines granted to corporate clients.

Leasing

ABN AMRO mainly enters into leases classified as operating leases (including property rental). The total payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense. If it is decided that an operating lease will be terminated or vacated before the lease period has expired, the lesser of any penalty payments required and the remaining payments due once vacated (less sub leasing income) is recognised as an expense. If the lease agreement transfers substantially all the risks and rewards inherent to ownership of the asset, the lease is recorded as a finance lease and the related asset is capitalised.

Operating lease commitments

ABN AMRO leases various offices and other premises under non-cancellable operating lease arrangements. The leases have various terms, escalation and renewal rights. There are no contingent rents payable. ABN AMRO also leases equipment under non-cancellable lease arrangements. Total operating lease agreements amounted to EUR 448 million (2014: EUR 467 million), of which EUR 376 million (2014: EUR 387 million) is due within five years.

Transactions involving the legal form of a lease

ABN AMRO has entered into IT outsourcing arrangements that involve leases in form but not in substance. The contract periods of the arrangements vary between one and five years. The total amount of the lease payments was EUR 558 million for 2015 (2014: EUR 524 million).

Other contingencies

ABN AMRO is involved in a number of legal proceedings in the ordinary course of business in a number of jurisdictions. In presenting consolidated financial information, management makes estimates regarding the outcome of legal, regulatory and arbitration matters, and takes provisions to the income statement when losses with respect to such matters are more likely than not.

Provisions are not recognised for matters for which expected cash outflow cannot be reasonably estimated or are not considered more likely than not to lead to a cash outflow. Some of these matters may be regarded as a contingency. It is not practicable to provide an aggregate estimate of potential liability for our legal proceedings and regulatory matters as a class of contingent liabilities. On the basis of information currently available, and having taken counsel with legal advisors, ABN AMRO is of the opinion that the outcome of these proceedings is unlikely to have a material adverse effect on the consolidated financial position and the consolidated result of ABN AMRO. In particular the following matters are regarded as contingencies:

Å Certain hedge funds initiated proceedings in Belgium and claimed an amount of EUR 1.75 billion plus 8.75% coupon until 7 December 2030 from four issuers, amongst which ABN AMRO, in relation to the conversion of Ageas mandatory convertible securities. On 23 March 2012, the Commercial Court in Brussels (Belgium) rejected all claims of the hedgefunds. This verdict underlines the verdict in the summary proceedings (kort geding) of November 2010. Certain hedge funds have filed an appeal against the verdict. ABN AMRO remains confident that has acted within its rights and therefore also continues to be positive about the outcome of the currently pending appeal proceedings;

Å As previously reported, ABN AMRO, certain of its subsidiaries and some of their client funds had exposure to funds that suffered losses (in some cases, significant losses) as a result of the Madoff fraud. Provision of the custodial services has resulted in a number of legal claims, including by BLMIS' trustee in bankruptcy (Irving Picard), and liquidators of certain funds, as they pursue legal actions in attempts to recover payments made as a result of the Madoff fraud and/or to make good their alleged losses. Certain ABN AMRO subsidiaries are defendants in these proceedings. In light of the preliminary status of those claims and other arrangements that may mitigate litigation exposure, it is not possible to estimate the total amount of ABN AMRO's potential liability, if any. ABN AMRO continues to investigate and implement strategies for recovering the losses suffered. As previously reported, a total amount of EUR 16 million (exclusive of costs) was recovered in the first half of 2009. In 2011, 2012 and 2013, one of ABN AMRO's subsidiaries was able to sell shares and limited partnership interests that were provided to it as collateral or which it had bought to hedge its exposure in the context of the collateralized loans and total return swap transactions referred to above. These sales resulted in proceeds of EUR 52 million, EUR 78 million and EUR 253 million respectively and an equivalent amount provided for in 2008 was subsequently released.

The Imtech N.V. group has been in financial difficulties ever since certain fraudulent events, perpetrated by certain managers and staff, were discovered a few years ago and was declared bankrupt in August 2015. ABN AMRO has extended credit to the Imtech N.V. group of businesses and it holds shares in Imtech N.V. further to its underwriting commitment in the Imtech N.V. rights offering of October 2014. In April 2015, Stichting Imtechclaim threatened to initiate a collective action lawsuit against, among others, Imtech N.V. and the four underwriters (including ABN AMRO Bank) of the Imtech N.V. rights offering of October 2014. Since a claim has not yet been formally filed, the complaint is not entirely clear but ABN AMRO expects that it would, among other complaints, appear to refer to prospectus liability and inappropriate behaviour as a result of conflicts of interest ("dubieuze dubbelrol"). The amount of damages that Stichting Imtechclaim can claim depends on the number of people in the class.

In 2007, ABN AMRO Bank (Luxembourg) SA ('AA Luxembourg') provided a EUR 50 million loan to a client, which was secured by real estate mortgages and pledges on an art collection. In 2009, the client received negative press coverage regarding a dispute with other international banks and the Belgian tax authorities. In order to strengthen its collateral position, AA Luxembourg executed its right with respect to the real estate mortgages. AA Luxembourg also took steps to ensure that the pledged art collection came into the custody of the bank. After AA Luxembourg discovered that the client had breached its obligations towards the bank, it started execution measures, eventually resulting in partial repayment of the loan. The Belgian public prosecutor initiated criminal proceedings against the client and 18 related parties, including AA Luxembourg, regarding suspicion of criminal acts in connection with alleged tax evasion by the client. All parties were summoned before the Council Chamber of the Court of Antwerp in December 2014. According to the writ, AA Luxembourg is suspected of money laundering. Allegedly, AA Luxembourg would have committed money laundering through the establishment of mortgages and pledges as security for the loan, the sale of certain pledged art work, the acceptance of partial repayment of the loan, the subsequent release of certain pledges and other related facts, as the client's property involved in those actions allegedly had an illegal origin. If AA Luxembourg is convicted for these allegations, the sanction could be a fine and the compulsory confiscation of the 'goods laundered', including confiscation of mortgaged and pledged goods (or their counter-value) and of the money used as repayment of the loan. The Council Chamber of the Antwerp

448

Court decided on 1 October 2015 that several parties, including AA Luxembourg, will be formally brought to trial in the correctional court. AA Luxembourg has filed an appeal against this decision. The appeal is expected to be handled by the court in the first quarter of 2016.

In August 2007, Sentinel Management Group, Inc. ('Sentinel'), a futures commission merchant that managed customer segregated funds for the Company, filed for bankruptcy. Shortly before Sentinel filed for bankruptcy, Sentinel sold securities to Citadel Equity Fund, Ltd. The US Bankruptcy Court ordered funds from the sale to Citadel Equity Fund, Ltd be distributed to certain Sentinel customers. The Company received its pro rata share of in total USD 52,755,815. On or about 15 September 2008, the bankruptcy trustee filed an adversary proceeding against all of the recipients of the court-ordered distribution of funds from the Citadel Equity Fund, Ltd sale, including the Company, claiming the repayment of the amounts received. The complaint also includes a claim for other monies the Company received shortly before Sentinel filed for bankruptcy. This regards an amount of USD 4,000,399 and a claim for pre-judgement interest which could range from USD 443,000 to USD 9,720,000.

Duty of care matters

A number of proceedings have been initiated against ABN AMRO for alleged breach of its duty of care in transparency-related standards and a larger number of proceedings have been threatened. Where applicable, provisions for these matters have been made.

There can be no assurance that additional proceedings will not be brought or that the amount demanded in claims brought to date will not rise. Current proceedings are pending and their outcome, as well as the outcome of any threatened proceedings, is uncertain, as is the timing of reaching any finality on these legal claims and proceedings. The uncertainties are likely to continue for some time. As a result, although the consequences could be substantial for ABN AMRO, with a potentially material adverse effect on ABN AMRO's reputation, results of operations, financial condition and prospects, it is not possible to reliably estimate or quantify ABN AMRO's exposure at this time. In conclusion, although claims in relation to alleged breach of the duty of care remain contingent, they have been (partly) provisioned.

Interest rate derivatives to SME clients

Since 2014, there has been a public debate in the Netherlands on a bank's duty of care towards SMEs with respect to interest rate derivatives.

As explained in note 28 Provisions, the bank has entered into interest rate derivatives with approximately 4,500 SME clients in combination with floating interest rate loans. These SME clients entered into an interest rate derivative with the purpose of fixing their interest rate risk on their floating rate notes. A combination of a floating interest rate loan together with an interest rate swap was less expensive for the clients than the alternative of a loan with a fixed interest rate.

As a result of the decline in interest rates, the interest rate swaps have a negative mark-to-market value. There are no negative consequences for clients as long as the loan is not repaid, in whole or in part, prior to its maturity date.

Individual or class action complaints and litigation

Some SME clients needed or wanted to repay their floating interest rate loans prior to their maturity date. As a consequence, the interest rate swap needed to be unwound in order to assure that no overhedge was created. In line with standard market practice, in such situations the SME clients had to pay the bank the negative mark-to market value of the interest rate swap. Such payment may be compared to the penalty interest on a fixed rate loan. The bank received several complaints and some clients and/or interest groups instigated legal proceedings about the bank's alleged violation of its duty of care, for instance that the bank did not properly inform them of the risks associated with interest rate swaps. In some of these cases, the client's claim was denied. In some other cases, the bank paid compensation to the client.

For litigation in relation to SME derivatives, the bank does not recognise provisions for claims that do not meet the recognition and/or measurement criteria. There can be no assurance that additional proceedings will not be brought or that the amount demanded in claims brought to date will not rise. Current proceedings are pending and their outcome is uncertain. The uncertainties are likely to continue for some time. In conclusion, claims in relation to the alleged breach of duty of care remain contingent.

AFM supervision

At the request of the AFM, a dedicated project team within the bank, with the assistance of external specialists and in regular consultation with the AFM, has been reviewing our SME client files containing interest rate derivatives. The objective of this review is to determine whether the bank acted in accordance with the laws and regulations applicable at that time and, if necessary, offer the relevant clients a solution. Based on the outcome of this review ABN AMRO recognised a provision at year-end, details of which are included in note 28 Provisions.

In December 2015 the AFM concluded that some aspects of the reviews banks were conducting would need to be amended. On 1 March 2016, the AFM published a press release and a letter addressed to the Dutch Minister of Finance advising him to appoint a panel of independent experts. These experts, in cooperation with the banks involved, will try to determine a uniform recovery framework which will serve as a benchmark with which banks will need to re-perform all client file reviews. This may lead to revised compensation solutions for clients. The uniform recovery framework is expected to be finalised by mid-2016. ABN AMRO will consult with the panel of independent experts to determine how these changes will affect ABN AMRO's review process.

As a result, the future review process may change and parameters for future compensation levels may increase. This may impact the scope of the contracts that require compensation as well as the level of compensation per contract. As this is a possible liability dependent on a future event, there is no provision for this possible outflow of resources and it is therefore considered a contingency.

Cross-liability

A legal demerger may cause so-called cross-liabilities. Pursuant to section 2:334t of the Dutch Civil Code, the acquiring company or companies and the demerging company, if it continues to exist, are jointly and severally liable for the obligations of the demerging company at the time of the demerger. The acquiring companies and the continuing demerged company will remain fully liable for indivisible obligations. For divisible obligations (e.g. monetary obligations) the acquiring company to whom the obligation transferred or, if the obligation remained where it was, the company that continued to

exist is fully liable. However, if an obligation has not been transferred to or remained with a company, that company's liability for divisible obligations will be limited to the value of the assets acquired or retained in the demerger. A cross-liability is of a secondary nature. The company that did not acquire or retain the obligation is not required to perform until the company that did acquire or retain the obligation has failed to perform.

On 6 February 2010, the former ABN AMRO Bank N.V. demerged into two entities: RBS N.V. and ABN AMRO Bank N.V. (the '2010 Demerger'), giving rise to cross-liabilities similar to the crossliabilities described above. If ABN AMRO Bank N.V. fails to perform its obligations existing at the time of the 2010 Demerger, RBS N.V. is liable for the performance; if RBS N.V. fails to perform its obligations existing at the time of the 2010 Demerger, ABN AMRO Bank N.V. is liable. RBS N.V.'s contingent liability for divisible obligations as a result of the 2010 Demerger is limited to EUR 4 billion, whereas ABN AMRO Bank N.V.'s contingent liability is limited to EUR 1.8 billion (which amount remained unchanged as per 31 December 2015). ABN AMRO Bank N.V. has put in place arrangements to mitigate the risks of such contingent liability and received collateral from RBS Plc amounting to EUR 1,848 million (2014: EUR 949 million). ABN AMRO Bank N.V. did not post any collateral with RBS N.V. or RBS Plc.

On 7 August 2008, the EC Remedy part of ABN AMRO Bank N.V. was demerged to New HBU II N.V. (the '2008 Demerger'), giving rise to cross-liabilities similar to the cross-liabilities as described above. If ABN AMRO Bank N.V. fails to perform its obligations existing at the date of the 2008 Demerger, New HBU II N.V. is liable for the performance; if New HBU II N.V. fails to perform its obligations existing at the date of the 2008 Demerger, ABN AMRO Bank N.V. is liable.

On 1 April 2010, New HBU II N.V. was transferred to Deutsche Bank AG and renamed Deutsche Bank Nederland N.V. As a result of the cross-liabilities described above, if RBS N.V. or ABN AMRO Bank N.V. fails to perform its obligations existing at the date of the 2008 Demerger, Deutsche Bank Nederland N.V. is liable for the performance. Deutsche Bank Nederland N.V.'s contingent liability in this regard is limited to EUR 950 million. On 27 September 2014, pursuant to a put option exercised by Deutsche Bank AG, the assets and liabilities of Deutsche Bank Nederland N.V., apart from the cross-liabilities created as a result of the 2008 Demerger, were demerged into a newly incorporated subsidiary of Deutsche Bank AG (the '2014 Demerger'). Deutsche Bank Nederland N.V. was subsequently acquired by ABN AMRO Bank and renamed Sumsare N.V. As a consequence, Deutsche Bank Nederland N.V.'s contingent liability under the 2008 Demerger is now held by Sumsare N.V., a wholly-owned subsidiary of ABN AMRO Bank N.V. Deutsche Bank AG indemnified Sumsare N.V. for any claims (including cross-liabilities) in connection with the 2014 Demerger.

34 Related parties

Parties related to ABN AMRO include NLFI with control, the Dutch State with significant influence, associates, pension funds, joint ventures, the Managing Board, the Supervisory Board, close family members of any person referred to above, entities controlled or significantly influenced by any person referred to above and any other related entities. ABN AMRO has applied the partial exemption for government-related entities as described in IAS 24 paragraphs 25-27.

As part of its business operations, ABN AMRO frequently enters into transactions with related parties. Transactions conducted with the Dutch State are limited to normal banking transactions, taxation and other administrative relationships with the exception of items specifically disclosed in this note. Normal banking transactions relate to loans and deposits and are entered into under the same commercial and market terms that apply to non-related parties.

Total outstanding loans and advances to members of the Managing Board and Supervisory Board of ABN AMRO amounted to EUR 4.4 million in 2015 (2014: EUR 5.8 million; 2013: EUR 6.1 million). The outstanding loans and advances to members of the Managing Board and the Supervisory Board mainly consist of residential mortgages granted under standard personnel conditions. Other loans and advances are granted under client conditions (further information is provided in the Remuneration report).

Credits, loans and bank guarantees in the ordinary course of business may be granted by ABN AMRO companies to executive managers or to close family members of Board members and close family members of executive managers. At 31 December 2015, there were no outstanding credits, loans or bank guarantees, other than the ones included in the ordinary course of business noted above.

Balances with joint ventures, associates and other

(in millions)	Joint ventures	Associates	Other	Total
31 December 2015
Assets	15	364		379
Liabilities	232	991		1,222
Guarantees given		15		15
Guarantees received	9	38		47
Irrevocable facilities		28		28
2015
Income received	35	46		81
Expenses paid	15	9	281	305
31 December 2014
Assets	20	325		345
Liabilities	161	749		910
Guarantees given		16		16
Guarantees received	2	42		44
Irrevocable facilities		40		40
2014
Income received	33	47		80
Expenses paid1	15	10	247	272
31 December 2013
Assets	13	372		385
Liabilities	178	2,156	357	2,691
Guarantees received	2	42		44
Guarantees given
Irrevocable facilities		22		22
2013
Income received	34	46		80
Expenses paid	14	9	241	264

¹ Expenses paid in the column Other are adjusted in 2014 reflecting pension expenses.

Liabilities with Associates increased by EUR 242 million as of 31 December 2015 compared with 2014 due to higher balances with financial institutions.

Expenses paid with Other parties for 2015 were higher compared with 2014 due to increased pension expenses as a result of lower discount rates (EUR 34 million).

453

Balances with the Dutch State1

(in millions)	31 December 2015	31 December 2014	31 December 2013
Assets:
Financial assets held for trading	423	897	1,262
Derivatives1	1,891	2,267	1,448
Financial investments - available for sale	6,540	6,884	5,666
Loans and receivables - customers	882	1,606	377
Other assets	99	22	30
Liabilities:
Derivatives1	2,641	3,794	1,751
Due to customers	1,811	1,968	2,247
Financial liabilities held for trading1	204	573	541
Subordinated loans		1,654	1,654
	2015	2014	2013
Income statement:
Interest income	150	147	142
Interest expense	107	106	112
Net trading income	-8	1	64
Net fee and commission income	1	-3	-26
Other income1	1	2

¹ As from 2015 Derivatives, Financial liabilities held for trading and Other income are shown. The 2014 and 2013 figures have been adjusted accordingly.

Royal Bank of Scotland (RBS) is still the legal owner of specific Consortium shared assets and liabilities. This means that these assets and liabilities are for the risk and reward of RBS, Santander and the Dutch State as the shareholder of RFS Holdings B.V. On 1 April 2010, ABN AMRO signed an indemnity agreement with the Dutch State for a shortfall in capital above a certain amount related to specific assets and liabilities of RFS Holdings.

Transactions and balances related to taxation are included in note 10 Income tax expense, tax assets and tax liabilities. Most of the tax items in this note consist of transactions and balances with the Dutch tax authorities.

The regulatory charges Bank tax, NRF (National Resolution Fund) and DGS (Deposit Guarantee Scheme) are included in note 9 General and administrative expenses.

Financial assets held for trading decreased mainly as a result of lower Dutch government bonds, as a result of primary dealership in the Netherlands and of client facilitation. Most of these contracts are hedged with short positions in government bonds.

Due to customers decreased by EUR 0.2 billion as of 31 December 2015 compared with year-end 2014, due to the redemption of part of the loan (including accrued interest) acquired from the Dutch State related to Ageas on 3 October 2008.

Subordinated loans to the Dutch State were fully redeemed in July 2015 (EUR 1.6 billion).

Derivatives related to both Assets and Liabilities decreased by EUR 0.8 billion as of 31 December 2015 compared with the previous year mainly due to lower lending positions of the Dutch State. Derivatives transactions with the Dutch State are related to the normal course of business.

35 Remuneration of Managing Board and Supervisory Board

Remuneration of Managing Board

ABN AMRO's remuneration policy was formally approved by shareholders and adopted by the Supervisory Board.

The remuneration package for the Managing Board consists of the following components:

• Å annual base salary;
• Å benefits and other entitlements;
• Å severance payments.

The following statement summarises the income components for the individual Managing Board members for the year 2015.

											2015
	Base salary1	Tempory fixed income2	Variable remunera tion3	Total pension related contribitions4		Severance payments	Temporary fixed income repayment2	Total	Repay ment tempo rary fixed income	Repay ment post-em ployment pension	Total recog nised in profit and loss
(In thousands)				Post employee pension (4a)	Short-term allowances (4b)
G. Zalm	767			31	252			1,050			1,050
J. van Hall	614			31	195			840	-100	-28	712
C. van Dijkhuizen	614			31	154			799	-100	-30	669
C.E. Princen	614			31	195			840	-100	-32	708
W. Reehoorn	614			31	195			840	-100	-28	712
C.F.H.H. Vogelzang	614			31	195			840	-100	-28	712
J.G. Wijn	614			31	195			840	-100	-31	709
Total	4,451			217	1,381			6,049	-600	-177	5,272

¹ The 2015 base salary includes 1% salary adjustment in accordance with the developments in the collective labour agreement for the banking industry ("CAO Banken")

² Allowance during the applicability of the Bonus Prohibition Act. The Board members who were eligible for this pensionable allowance decided to forego this

entitlement retroactively to 2014 and for the future; the allowance that they received in 2014 was paid back to the bank.

³ As a consequence of the applicability of the Bonus Prohibition Act the Managing Board members are not entitled to receive variable compensation. This prohibition has applied since the performance year 2011.

⁴ The Managing Board members participate in the Group's pension plans as applicable to employees in the Netherlands. Total pension related contributions as applicable as of 2015 refer to (4a) the employer contribution to the pension fund (for the CDC pension scheme for pensionable income up to EUR 100,000) and (4b) the arrangement in accordance with the ABN AMRO collective labour agreement ("ABN AMRO CAO").

2014 corrected

	Base salary	Tempory fixed income1	Temporary fixed income repayment1,3	Variable remuneration2	Total pension related costs corrected for the pension related contributions to the temporary fixed income1, 3, 4	Severance payments	Total
G. Zalm	759				303		1,062
J. van Hall	608	100	-100		194		802
C. van Dijkhuizen	608	100	-100		184		792
C.E. Princen	608	100	-100		220		828
W. Reehoorn	608	100	-100		196		804
C.F.H.H. Vogelzang	608	100	-100		198		806
J.G. Wijn	608	100	-100		223		831
Total	4,407	600	-600		1,518		5,925

2014 as published in Annual Report 2014

	Base salary	Temporary fixed income repayment1	Variable remuneration2	Pension costs4	Severance payments Total
G. Zalm	759			303	1,062
J. van Hall	608	100		222	930
C. van Dijkhuizen	608	100		214	922
C.E. Princen	608	100		252	960
W. Reehoorn	608	100		224	932
C.F.H.H. Vogelzang	608	100		226	934
J.G. Wijn	608	100		254	962
Total	4,407	600		1,695	6,702

¹ Allowance during the applicability of the Bonus Prohibition Act. The Board members who were eligible for this pensionable allowance decided to forego this entitlement retroactively to 2014 and for the future; the allowance that they received in 2014 was paid back to the bank.

² As a consequence of the applicability of the Bonus Prohibition Act the Managing Board members are not entitled to receive variable compensation. This prohibition has applied since the performance year 2011.

³ The pension contributions related to the temporary fixed allowance were included in the originally tabled Pension Costs 2014 and have been corrected as a consequence of the repayment of the 2014 temporary fixed allowance.

⁴ Pension costs exclusively comprise service costs for the year computed on the basis of the amended pension accounting standard IAS 19 (for the DB pension scheme until 12 June 2014) and employer contribution to the pension fund (for the CDC pension scheme as of 12 June 2014).

Loans from ABN AMRO to Managing Board members

The following table summarises outstanding loans to the members of the Managing Board at 31 December.

	2015			2014
(In thousands)	Outstanding 31 December	Interest rate	Outstanding 31 December	Interest rate
G. Zalm
C. van Dijkhuizen			308	2.8%
J. van Hall	69	3.5%	69	3.5%
C.E. Princen	794	3.0%	810	3.2%
W. Reehoorn	1,429	3.8%	1,429	3.8%
C.F.H.H. Vogelzang	1,415	1.9%	1,426	2.1%
J.G. Wijn	650	1.8%	761	2.1%

Remuneration of the Supervisory Board

The following statement summarises the income components for the individual Supervisory Board members.

Introduction

(In thousands)	20151	20141
D.J.M.G. van Slingelandt2	91	91
J.H.M. Lindenbergh3		28
H.P. de Haan	78	78
S. ten Have	62	60
A. Meerstadt	65	63
M.J. Oudeman4	54	68
J.M. Roobeek	63	63
P.N. Wakkie5	19	75
O.L. Zoutendijk6	77	38
Total	507	564

¹ Remuneration amounts excluding VAT.

² D.J.M.G. van Slingelandt was appointed as Chairman of the Supervisory Board as of 10 April 2014.

³ J.H.M. Lindenbergh stepped down as Chairman and member of the Supervisory Board as of 10 April 2014.

⁴ M.J. Oudeman stepped down as member of the Supervisory Board as of 30 September 2015.

⁵ P.N. Wakkie stepped down as member of the Supervisory Board as of 1 April 2015.

⁶ O.L. Zoutendijk was appointed to the Supervisory Board as of 1 July 2014.

Loans from ABN AMRO to Supervisory Board members

The following table summarises the outstanding loans to the members of the Supervisory Board at 31 December.

		2015		2014
(In thousands)	Outstanding loan	Interest	Outstanding loan	Interest
S. ten Have1	600	3.8%	600	3.8%
J.M. Roobeek1	1,850	4.0%	1,850	4.0%
P.N. Wakkie2			971	4.3%

¹ The loans to J.M. Roobeek and S. ten Have were not included in this table in 2014; these have been retrospectively corrected in 2015.

² P.N. Wakkie stepped down as member of the Supervisory Board as of 1 April 2015.

36 Employee share option and share purchase plans

No employee share option plans were in place for the years 2015, 2014 and 2013.

37 Statutory financial statements of ABN AMRO Group N.V.

Accounting policies

The company financial statements of ABN AMRO Group N.V. have been prepared in accordance with the requirements in Title 9 Book 2 of the Dutch Civil Code. ABN AMRO Group N.V. prepares its Consolidated Financial Statements in accordance with International Financial Reporting Standards as adopted by the European Union (EU IFRS). ABN AMRO Group N.V. applies the exemption as included in section 2:362 paragraph 8. Participating interests in group companies are valued at net asset value determined on the basis of EU IFRS. The share in the results of participating interests in group companies is reported in accordance with the principles of valuation and profit determination that apply to the Consolidated Financial Statements. Reference is made to the accounting policies section in the Consolidated Financial Statements and the respective notes.

457

Basis of preparation

The financial statements are presented in euros, which is the presentation currency of the company, rounded to the nearest million (unless otherwise stated). The Statement of comprehensive income has been drawn up in accordance with Section 402, Book 2 of the Dutch Civil Code.

Statement of comprehensive income ABN AMRO Group N.V.

(in millions)	2015	2014	2013
Income:
Share in result from participating interests after taxation	1,919	1,134	1,162
Profit/(loss) for the period	1,919	1,134	1,162
Other comprehensive income	416	501	154
Total comprehensive income/expense for the year	2,335	1,635	1,316

Share in result from participating interests after taxation increased by EUR 785 million in 2015.

Other comprehensive income decreased to EUR 416 million in 2015 (2014: EUR 501 million). The decrease (EUR 85 million) in 2015 compared with 2014 was mainly due to a decrease of unrealised gains and losses.

Statement of financial position ABN AMRO Group N.V.

(before appropriation of profit)

(in millions)	31 December 2015	31 December 2014	31 December 2013
Assets
Participating interest in Group companies	17,568	14,865	13,555
Total assets	17,568	14,865	13,555
Equity
Share capital	940	940	940
Share premium	12,970	12,970	12,970
Other reserves (incl. retained earnings/profit for the period)	2,038	744	3,534
Reserve participation	1,620	211	-3,889
Total equity	17,568	14,865	13,555
Total liabilities and equity	17,568	14,865	13,555

Statement of changes in equity ABN AMRO Group N.V.

		Share premium	Other reserves including retained	Reserve
(in millions)	Share capital	reserve	earnings	participation	Total
Balance at 1 January 2013	1,015	13,105	2,787	-4,043	12,864
Total comprehensive income			1,162	154	1,316
Dividend			-412		-412
Increase/(decrease) of capital	-75	-135	-3		-213
Balance at 31 December 2013	940	12,970	3,534	-3,889	13,555
Total comprehensive income1			1,134	501	1,635
Dividend			-325		-325
Increase/(decrease) of capital
Reclassification post-employment
benefit plan1			-3,599	3,599
Balance at 31 December 2014	940	12,970	744	211	14,865
Total comprehensive income			1,919	416	2,335
Dividend			-625		-625
Increase of capital				993	993
Balance at 31 December 2015	940	12,970	2,038	1,620	17,568

¹ Reclassification of EUR 3,599 million (EUR 4,799 million gross and EUR 1,200 tax) from Remeasurement gains/(losses) to Other reserves including retained earnings following the change of pension scheme.

Reserve participation includes currency translation reserve, available-for-sale reserve and cash flow hedge reserve, which are non-distributable reserves.

Other reserves including retained earnings also includes legal reserves for participating interests of EUR 48 million (2014: EUR 75 million) which relates to profits retained form participating interests. The legal reserve is calculated in accordance with the collective method. Legal reserves are nondistributable reserves.

Legal reserves also include a reserve for the positive revaluation of financial instruments through the income statement that are not traded on an active market, in accordance with Part 9, Book 2 of the Dutch Civil Code (BW2, article 390(1)). If and to the extent that increases in the value of such assets must be included in a revaluation reserve, the net amount in unrealised changes in fair value as at December 2015, 2014 and 2013 did not give ABN AMRO Group N.V. reason to form a revaluation reserve.

Total comprehensive income includes EUR 1,919 million profit for 2015, compared with EUR 1,134 million for 2014.

The total dividend for 2014 was EUR 400 million. A final dividend of EUR 275 million was paid to ordinary shareholders in 2015 (an interim dividend of EUR 125 million was paid out in 2014). For 2015, an interim dividend of EUR 350 million was paid to ordinary shareholders in August 2015. The total dividend paid out in 2015 was EUR 625 million.

Introduction

459

Participating interests in group companies

ABN AMRO Group N.V. has one subsidiary, ABN AMRO Bank N.V. ABN AMRO Group N.V. is the sole shareholder of ABN AMRO Bank N.V.

Movements in participating interests in group companies are shown in the following table.

(in millions)	2015		2014		2013
Balance as at 1 January	14,865		13,555		12,864
Increase/(decrease) of capital	993				-213
Result from participating interests	1,919		1,134
Dividend upstream	-625	-325			-412
Actuarial gains/(losses) on defined benefit pension plans	-2	-135		-218
Currency translation	101	100		-69
Available for sale	144	270		35
Cash flow hedge	166	244		406
Share of OCI of associates and joint
ventures	11	17		4
Other	-4	5		-4
Other comprehensive income	416		501		154
Balance as at 31 December	17,568		14,865		13,555

Issued capital and reserves

As at 31 December 2015, the authorised share capital of ABN AMRO Group N.V. amounted to EUR 4.7 billion distributed over 4,500,000,000 ordinary shares and 200,000,000 class B ordinary shares.

All shares have a nominal value of EUR 1.00 each and each share entitles the shareholder to one vote per share.

As at 31 December 2015, issued and paid-up capital by ABN AMRO Group N.V. consisted of 940,000,001 ordinary shares (EUR 940 million).

Issued guarantees

For a few group companies established in the Netherlands, general guarantees have been issued within the scope of Article 403, Book 2 of the Dutch Civil Code by ABN AMRO Group N.V. for an amount of EUR 186.2 billion (2014: EUR 193.5 billion).

Other information provides a list of the major subsidiaries and associated companies of ABN AMRO Group N.V. for which a general guarantee has been issued.

Fiscal unity

ABN AMRO Group N.V. forms a fiscal unity with several Dutch subsidiaries for corporate income tax purposes. All the members of the fiscal unity become jointly and severally liable for the corporate income tax liabilities of the fiscal unity.

460

38 Post balance sheet events

There have been no significant events between the year-end and the date of approval of these accounts which would require a change to or disclosure in the accounts.

Other information

Other information

Major subsidiaries and participating interests

The following table shows the Branches, major subsidiaries and participating interests at 31 December 2015.

ABN AMRO Bank N.V. Amsterdam, The Netherlands Retail banking ABN AMRO Hypotheken Groep B.V.1 Amersfoort, The Netherlands ALFAM Holding N.V.1 Bunnik, The Netherlands APG - ABN AMRO Pensioeninstelling N.V. 70% Amsterdam, The Netherlands Delta Lloyd ABN AMRO Verzekeringen Holding B.V. 49% Zwolle, The Netherlands International Card Services B.V.1 Diemen, The Netherlands MoneYou B.V.1 Amsterdam, The Netherlands Private banking ABN AMRO Bank (Luxembourg) S.A. Luxembourg, Luxembourg ABN AMRO Life Capital Belgium N.V. Brussels, Belgium ABN AMRO Life S.A. Luxembourg, Luxembourg ABN AMRO Social Impact Investments B.V. Amsterdam, The Netherlands ABN AMRO Social Impact Fund B.V. Amsterdam, The Netherlands ABN AMRO (Guernsey) Ltd St Peter Port, Guernsey, Channel Islands Banque Neuflize OBC S.A. 99.86% Paris, France Bethmann Bank A.G. Frankfurt am Main, Germany Bethmann Liegenschaft K.G. 50% Frankfurt am Main, Germany Cofiloisirs S.A. 45% Paris, France Neuflize Vie S.A. 60% Paris, France Triodos MeesPierson Sustainable Investment Management B.V. 50% Zeist, The Netherlands

Corporate banking ABN AMRO Capital USA LLC New York, USA ABN AMRO Clearing Bank N.V.1 Amsterdam, The Netherlands ABN AMRO Clearing Chicago LLC Chicago, USA ABN AMRO Clearing Hong Kong Ltd Hong Kong, China ABN AMRO Clearing Singapore Pte Ltd Singapore, Singapore ABN AMRO Clearing Sydney Pty Sydney, Australia ABN AMRO Clearing Tokyo Ltd Tokyo, Japan ABN AMRO Commercial Finance Holding B.V.1 s-Hertogenbosch, The Netherlands ABN AMRO Commercial Finance (UK) Ltd Haywards Heath, United Kingdom ABN AMRO Commercial Finance GmbH Köln, Germany ABN AMRO Commercial Finance N.V.1 s-Hertogenbosch, The Netherlands ABN AMRO Commercial Finance S.A. Paris, France ABN AMRO Effecten Compagnie B.V.1 Amsterdam, The Netherlands ABN AMRO Groenbank B.V.1 Amsterdam, The Netherlands ABN AMRO Investment Holding B.V.1 Amsterdam, The Netherlands ABN AMRO Jonge Bedrijven Fonds B.V.1 Amsterdam, The Netherlands ABN AMRO Lease N.V.1 Utrecht, The Netherlands ABN AMRO Participaties Fund I B.V.1 Amsterdam, The Netherlands ABN AMRO Participaties NPE Fund N.V.1 Amsterdam, The Netherlands

ABN AMRO Securities USA LLC	New York, USA
-----------------------------	---------------

Aline Holding S.A. 50% Majuro, Marshall Islands Alma Maritime Ltd 42% Majuro, Marshall Islands Attema B.V. 93% Gorinchem, The Netherlands Banco ABN AMRO S.A. São Paulo, Brazil Bass Drill Alpha Ltd 26% Hamilton, Bermuda Car Carriers Management B.V. 50% Breskens, The Netherlands CM Bulk Ltd 50% Nassau, Bahamas Edda Accommodation Holding AS 20% Oslo, Norway European Merchant Services B.V. 49% Diemen, The Netherlands European Central Counterparty N.V. 25% Amsterdam, The Netherlands Graig MCI Ltd 49% Cardiff, United Kingdom Holland Ventures B.V. 45% Amsterdam, The Netherlands ICE Clear Netherlands B.V. 25% Amsterdam, The Netherlands Iceman IS 39% Oslo, Norway Icestar B.V. Rotterdam, The Netherlands Maas Capital Investments B.V.1 Rotterdam, The Netherlands Maas Capital Offshore B.V. Amsterdam, The Netherlands MP Solar B.V. Amsterdam, The Netherlands Poseidon Containers Holdings LLC 6% Majuro, Marshall Islands Principal Finance Investments Holding B.V.1 Amsterdam, The Netherlands Richmont Preferente aandelen C B.V. 50% Amsterdam, The Netherlands Safe Ship Investment Company S.C.A. SICAR 48% Luxembourg, Luxembourg

Group Functions ABN AMRO Arbo Services B.V.1 Amsterdam, The Netherlands ABN AMRO Funding USA LLC New York, USA ABN AMRO Holding International AG Zug, Switzerland ABN AMRO Holdings USA LLC New York, USA Currence Holding B.V. 36% Amsterdam, The Netherlands Equens S.E. 18% Utrecht, The Netherlands Geldservices Nederland B.V. 33% Amsterdam, The Netherlands Nederlandse Financieringsmij voor Ontwikkelingslanden N.V. 20% Den Haag, The Netherlands Stater N.V. Amersfoort, The Netherlands

Branches/Representative Offices ABN AMRO Bank N.V. (Belgium) Branch Berchem, Belgium ABN AMRO Bank N.V. (Hong Kong) Branch Hong Kong, China ABN AMRO Bank N.V. (Jersey) Branch St Helier, Jersey, Channel Islands ABN AMRO Bank N.V. (Norway) Branch Oslo, Norway ABN AMRO Bank N.V. (Singapore) Branch Singapore, Singapore ABN AMRO Bank N.V. (UAE/DIFC) Branch Dubai, United Arabic Emirates ABN AMRO Bank N.V. (UK) Branch London, United Kingdom ABN AMRO Bank N.V. Branch Spain Marbella, Spain ABN AMRO Bank N.V. Frankfurt Branch Frankfurt am Main, Germany ABN AMRO Bank N.V. Shanghai Branch Shanghai, China ABN AMRO Bank N.V. Representative Office (Dubai Multi Commodities Centre) Dubai, United Arabic Emirates ABN AMRO Bank N.V. Representative Office Greece Piraeus, Greece

ABN AMRO Bank N.V. Representative Office Moscow Moscow, Russia ABN AMRO Bank N.V. Representative Office New York New York, USA ABN AMRO Bank N.V. Representative Office Shanghai Shanghai, China

0%	Majuro, Marshall Islands
0%	Majuro, Marshall Islands
0%	Gorinchem, The Netherlands
	São Paulo, Brazil
0%	Hamilton, Bermuda
0/0	Breskens, The Netherlands
0%	Nassau, Bahamas
96	Oslo, Norway
96	Diemen, The Netherlands
0%	Amsterdam, The Netherlands
0%	Cardiff, United Kingdom
0%	Amsterdam, The Netherlands
0%	Amsterdam, The Netherlands
0%	Oslo, Norway
	Rotterdam, The Netherlands
	Rotterdam, The Netherlands
	Amsterdam, The Netherlands
	Amsterdam, The Netherlands
0%	Majuro, Marshall Islands
	Amsterdam, The Netherlands
0%	Amsterdam, The Netherlands
0%	Luxembourg, Luxembourg

			Annual Financial Statements 2015 / Other information
--	--	--	------------------------------------------------------

ABN AMRO Clearing Bank N.V. (Singapore) Branch Singapore, Singapore ABN AMRO Clearing Bank N.V. (UK) Branch London, United Kingdom ABN AMRO Clearing Bank N.V. Frankfurt Branch Frankfurt am Main, Germany ABN AMRO Lease N.V. (UK) Branch London, United Kingdom ABN AMRO Lease N.V. Branch Deutschland Frankfurt am Main, Germany International Card Services B.V. Branch Deutschland Düsseldorf, Germany

¹ A statement of liability within the meaning of Article 403, subsection 1, paragraph f, Book 2 of the Dutch Civil Code has been issued for these companies.

The interest is 100%, unless otherwise stated.

The full list of participating interests as referred to in Article 414, Book 2 of the Dutch Civil Code has been filed with the Trade Register.

Provisions of the Articles of Association concerning profit appropriation

The provisions regarding the reservation and distribution of profits are included in Article 10 of the Articles of Association. In accordance with the reserve and dividend policy and subject to the approval of the Supervisory Board, the Managing Board proposes to the General Meeting of Shareholders which part of the profit is to be reserved. The remainder of the profit will be at the free disposal of the General Meeting of Shareholders, pursuant to a proposal to this end by the Management Board, subject to the approval of the Supervisory Board.

ABN AMRO announced its dividend policy in September 2015, which targets a payout ratio of 40% of the reported net annual profit for 2015 to 50% of the 2017 net profit. This target was increased based on the expected strong capital generation, while allowing for a further build-up of capital. Even though ABN AMRO remains well capitalised under Basel III, the bank would like to further build up additional capital buffers in order to execute its strategic ambitions and manage the impact of new regulations (Basel IV).

An interim dividend of EUR 350 million was paid on 27 August 2015.

Any distribution of dividend remains discretionary and deviations from the above policy may be proposed by the bank.

In accordance with Article 38.4 of the Articles of Association, the Managing Board proposes, subject to the approval of the Supervisory Board, paying out a final dividend of EUR 414 million on the shares of 2015.

As a result, the Managing Board proposes to the shareholders to pay out 40% (EUR 764 million) of the net reported profit of 2015 as dividend on the shares, with a dividend amount of EUR 0.81 per share.

Independent auditor's report on financial statements

Independentauditor'sreport

To: the General Meeting of Shareholders and the Supervisory Board of ABN AMRO Group N.V.

Report on the audit of the annual financial statements 2015

Opinion

In our opinion:

• the consolidated financial statements give a true and fair view of the financial position of ABN AMRO Group N.V. as at 31 December 2015, and of its result and its cash flows for the year 2015 in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Netherlands Civil Code;
• the statutory financial statements give a true and fair view of the financial position of ABN AMRO Group N.V. as at 31 December 2015, and of its result for the year 2015 in accordance with Part 9 of Book 2 of the Netherlands Civil Code.

What we have audited

We have audited the financial statements 2015 of ABN AMRO Group N.V., based in Amsterdam. The financial statements include the consolidated financial statements and the statutory financial statements.

The consolidated financial statements comprise:

• 1 the consolidated statement of financial position as at 31 December 2015;
• 2 the consolidated income statement;
• 3 the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended; and
• 4 the notes comprising a summary of the significant accounting policies and other explanatory information.

The statutory financial statements comprise:

• 1 the statement of financial position as at 31 December 2015;
• 2 the statement of comprehensive income and statement of changes in equity for the year then ended; and
• 3 the notes comprising a summary of the significant accounting policies and other explanatory information.

Basis for our opinion

We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the 'Our responsibilities for the audit of the financial statements' section of our report.

We are independent of ABN AMRO Group N.V. in accordance with the Regulation regarding the independence of auditors in case of assurance engagements ('Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten' (ViO)) and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the Regulation code of conduct and professional practice for auditors ('Verordening gedrags- en beroepsregels accountants' (VGBA)).

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

KPMG Accountants N.V., registered with the trade register in the Netherlands under number 33263683, is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ('KPMG International'), a Swiss entity.

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Other

Materiality

Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.

Based on our professional judgement we determined the materiality for the financial statements for the Group as a whole at EUR 50 million with reference to a primary benchmark of operating profit before taxation 1.8% (2014: EUR 50 million). We have applied this benchmark based on our assessment of the general information needs of users of the financial statements. We believe that operating profit before tax is a relevant metric for assessment of the financial performance of the Group. Given the relatively high balance sheet total and gross income, we have not taken these alternative benchmarks into consideration. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for qualitative reasons for the users of the financial statements, such as possible misstatements in the information on Board remuneration disclosures.

Our audits of the components were performed in most instances to materiality levels based on the local statutory accounts which are considerably lower than the materiality for the financial statements as a whole. In the other cases, based on our judgement we set the materiality for the audits at components at levels that we deemed appropriate for the circumstances with a maximum of EUR 37.5 million, having regard to the materiality for the financial statements for the Group as a whole and the reporting structure within the Group.

We agreed with the Supervisory Board that all unadjusted misstatements in excess of EUR 2 million, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.

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Strategic Report

Scope of the group audit

ABN AMRO Group N.V. is the parent company of the Group. The financial information of this group is included in the consolidated financial statements of ABN AMRO Group N.V.

Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this respect we have determined the nature and extent of the audit procedures to be carried out for group entities.

We scoped components of ABN AMRO Group N.V. into the group audit where they are of significant size or have significant risks to the group. Where this does not give adequate coverage we used our judgement to scope-in additional components.

Applying these scoping criteria led to a full scope audit for 53 components, in total covering 6 countries. This resulted in coverage of 87.1% of net results and 89.3% of total assets. The remaining 12.9% of net results and 10.7% of total assets results from a significant number of components, none of which individually represented more than 3% of net results or total assets. For these remaining components, we performed specified audit procedures on significant risk areas such as legal claims and the tax position. Those procedures include among other inquiries with management, inspection of available documentation, testing of management's assumptions, other substantive procedures. Furthermore, we performed analytical procedures at the aggregated group level on the remaining components in order to corroborate our assessment that there are no significant risks of material misstatement within these remaining components.

All components in scope for group reporting are audited by KPMG member firms. We sent detailed instructions to all component auditors, covering significant areas including the relevant risks of material misstatement and set out the information required to be reported back to the group audit team. We visited component locations in Chicago, Brussels, Luxembourg and Paris where we performed detailed file reviews. Conference calls and/or physical meetings were held with the auditors of the components in the Netherlands, Belgium, Germany and the United States of America. At these visits, meetings and calls, the planning, risk assessment, procedures performed, findings and observations reported to the group auditor were discussed in more detail and any further work deemed necessary by the group audit team was then performed.

The consolidation of the group, the disclosures in the financial statements and certain accounting topics that are performed at group level are audited by the group audit team. The accounting matters on which audit procedures are performed by the group audit team include, but are not limited to, assessment of the use of the going concern assumption, goodwill impairment testing, equity, group financing, corporate income tax for the Dutch fiscal unity, employee benefits and claims and litigations.

By performing the procedures above at components, together with additional procedures at group level, we have obtained sufficient and appropriate audit evidence about the Group's financial information to provide an opinion on the financial statements.

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Business Report

Our key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the Supervisory Board. The key audit matters are not a comprehensive reflection of all matters discussed. These matters were addressed in the context of our audit on the financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters.

Estimation uncertainty with respect to impairment losses on loans and receivables

Description

Certain aspects of the accounting for loan losses require significant judgement of management, such as the identification of loans that are deteriorating, the assessment of objective evidence for

impairment, the assessment of the recoverable amount and the value of collateral. Due to the significance of loans and receivables (representing 70% of total assets) and the related estimation uncertainty, we consider this a key audit matter. The portfolios which give rise to the greatest estimation uncertainty are typically those with exposures that are unsecured or are subject to potential cash flow or collateral shortfalls.

Refer to the Critical Accounting Estimates and Judgements section in Note 1 on the Financial Statements and related disclosures of credit risk within the Risk sections of the Managing Board Report.

Our response

Our audit procedures included the assessment of controls over the approval, recording and monitoring of loans and advances, and evaluating the methodologies, inputs and assumptions used in determining and calculating the impairment for loan losses. We have been able to rely on these controls for our audit. Our audit procedures included, among others, a comprehensive testing of the Group's credit management and credit monitoring procedures with an emphasis on internal controls on the timely recognition and measurement of impairments.

In 2015, we continued to pay particular attention to collective impairment methodologies, focusing specifically on the Dutch mortgage portfolio and other retail lending exposures due to their relative size and the potential impact of changing inputs and assumptions. We tested the sufficiency of the models, assumptions and data used by the Group to measure loan loss impairments for these portfolios of loans with the assistance of our own credit risk modelling and valuation specialists.

Likewise we have tested with the assistance of our specialists the models, assumptions and data used by the Group for the collective impairment for incurred but not identified loan losses, including the appropriateness of the loss emergence period as a critical factor used in these models.

We examined a selection of loan exposures that either continued to be, have become, or were at risk of being individually impaired. We applied professional judgement in selecting those exposures for our detailed inspection, placing an emphasis on portfolios that were potentially more sensitive to developing economic

trends, including the ECT portfolio and exposures to commercial real estate, the retail sector and medium sized businesses. For each selected loan file we challenged management's assessment of the recoverable amount, including the cash generating capacity and the value of realisable collateral, based on available financial information, market information and where applicable the analysis of alternative recovery scenario's. Our examination of specific loan files included exposures managed by the financial recovery and restructuring department.

Additionally, we assessed whether the financial statement disclosures appropriately reflect the Group's exposure to credit risk, specifically considering those portfolios identified in 2015 as presenting the greatest risk.

Our observation

Overall we assess that the assumptions used by management and related estimates resulted in a mildly cautious valuation of loans and receivables after deduction of loan loss impairments and concur with the related disclosures in the financial statements.

Annual Financial Statements 2015 / Independent auditor's report on financial statements

Estimation uncertainty with respect to financial instruments measured at fair value

Description

The financial instruments that are measured at fair value are significant for the financial statements, such as derivatives, trading positions and available for sale investments. For financial instruments that are actively traded and for which quoted market prices or market parameters are available, there is high objectivity in the determination of fair values (level 1 instruments). However, when observable market prices or market parameters are not available the fair value is subject to significant estimation uncertainty. The fair value of those financial instruments (level 2 and level 3 instruments) is determined through the application of valuation techniques which often involve the exercise of judgement by management and the use of assumptions and estimates. At 31 December 2015, financial instruments carried at fair value represent 16.6% of total assets and

7.3% of total liabilities. Due to the related estimation uncertainty, this is considered a key audit matter. Estimation uncertainty is particularly high for those instruments where significant valuation inputs are unobservable in the financial markets (i.e. Level 3 instruments).

In 2015, we have continued to focus on developments in derivative fair value methodologies and specifically on the credit, debit and funding fair value adjustments for the measurement of uncollateralised derivatives.

Refer to the Critical Accounting Estimates and Judgements section and disclosures of fair values in Notes 1 and 18 on the Financial Statements.

Our response

Our audit procedures included an assessment of controls over the identification, measurement and management of valuation risk, and an evaluation of the methodologies, inputs and assumptions used by the Group in determining fair values. We have tested the level 1 fair valuations by comparing the fair values applied by the Group with publicly available market data. For the Group's fair value models, we assessed the appropriateness of the models and inputs. We compared observable inputs against independent sources and externally available market data. For a sample of instruments with significant unobservable valuation inputs, with the assistance of our own valuation specialists, we assessed the assumptions and models used or reperformed an independent valuation assessment, by reference to what we considered to be available alternative methods and sensitivities to key factors. We also evaluated the methodology and inputs used by management in determining its credit value, debit value and funding value adjustments recorded on the uncollateralised derivatives portfolio and compared that against current market practice based on our experience of comparable institutions. Additionally, we assessed the appropriateness of the financial statement disclosures in Notes 1 and 18.

Our observation

Overall we assess that the assumptions used by management and related estimates resulted in appropriate valuations and disclosures of financial instruments at fair value.

Litigation, regulatory action and client care remediation

Description

The recognition and measurement of provisions and the measurement and disclosure of contingent liabilities in respect of litigation, regulatory action and client care remediation (together 'legal matters') require significant judgement. Due to the significance of these legal matters and the difficulty in assessing and measuring the amount from any resulting obligations, we consider this a key audit matter. In 2015, we paid particular attention to significant matters that experienced notable developments or that emerged during the period, including the SME derivatives remediation program and related litigation.

Refer to the Critical Accounting Estimates and Judgements section and disclosures of provisions and contingent liabilities in Note 28 on the Financial Statements.

Our response

Our audit procedures included the assessment of controls over the identification, evaluation and measurement of potential obligations arising from legal matters. For matters identified, we considered whether an obligation exists, the appropriateness of provisioning and/or disclosure based on the facts and circumstances available.

In order to assess the facts and circumstances, we obtained and assessed the relevant regulatory and litigation documents, including lawyer's letters and we interviewed the Group's legal counsel. We also assessed the assumptions made and key judgements applied by management and considered possible alternative outcomes based on our own experience and knowledge of market information. Additionally we considered whether the Group's disclosures of the application of judgement in estimating provisions and contingent liabilities adequately reflects the uncertainties associated with legal matters.

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Introduction

Strategic Report

Business Report

Annual Financial Statements 2015 / Independent auditor's report on financial statements

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Strategic Report

Litigation, regulatory action and client care remediation

Our observation

Overall we assess the level of provisioning for claims in respect of legal matters and related disclosures as appropriate and concur with the disclosure of the contingent liabilities for claims and litigation in the financial statements.

Reliability and continuity of the information technology and systems

Description

The Group is vitally dependent on its IT-infrastructure for the reliability and continuity of its operations and financial reporting In 2015 the Group again made significant investments in its IT systems and -processes to continuously improving the efficiency and effectiveness of the IT-infrastructure and the reliability and continuity of the IT processing. This includes the remediation of identified weaknesses and inefficiencies and to accommodate the ongoing regulatory changes imposed on the banking industry. We have therefore identified this as a key audit matter.

Our response

Our IT auditors assessed the reliability and continuity of the IT environment, insofar as needed within the scope of our audit of the financial statements. Our procedures included the assessment of developments in the IT-domain and testing of the relevant internal controls with respect to IT-systems and processes. Insofar as relevant to our audit of the financial statements we also performed an assessment of the initiatives and measures of the Group in fighting cybercrime.

Our observation

In our reporting to the Group we provided recommendations for improvements to the IT-controls and related data quality initiatives as referred to in the report of the Audit Committee.

Responsibilities of Managing Board and the Supervisory Board for the financial statements The Managing Board is responsible for:

• the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Netherlands Civil Code, and for the preparation of the Managing Board Report in accordance with Part 9 of Book 2 of the Netherlands Civil Code; and
• such internal control as the Managing Board determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

As part of the preparation of the financial statements, the Managing Board is responsible for assessing the company's ability to continue as a going concern. Based on the financial reporting frameworks mentioned, management should prepare the financial statements using the going concern basis of accounting unless the Managing Board either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so. The Managing Board should disclose events and circumstances that may cast significant doubt on the company's ability to continue as a going concern in the financial statements.

The Supervisory Board is responsible for overseeing the Group's financial reporting process.

Our responsibilities for the audit of financial statements

Our objective is to plan and perform the audit to obtain sufficient and appropriate audit evidence for our opinion. Our audit has been performed with a high, but not absolute, level of assurance, which means we may not have detected all errors and fraud. For a further description of our responsibilities in respect of an audit of financial statements we refer to the website of the professional body for accountants in the Netherlands (NBA) www.nba.nl/standardtexts-auditorsreport.

904621/16W00141114AVN

Report on other legal and regulatory requirements

Report on the Managing Board Report and the other information

Pursuant to legal requirements of Part 9 of Book 2 of the Netherlands Civil Code (concerning our obligation to report about the Managing Board Report and Other information):

• We have no deficiencies to report as a result of our examination whether the Managing Board Report, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of the Netherlands Civil Code, and whether the information as required by Part 9 of Book 2 of the Netherlands Civil Code has been annexed.
• We report that the Managing Board Report, to the extent we can assess, is consistent with the financial statements.

Engagement

We were engaged by the General Meeting of Shareholders as auditor of ABN AMRO Group N.V. on 1 April 2010 and have operated as statutory auditor ever since then. Starting 2016 the financial statements of ABN AMRO Group N.V. will be audited by another audit firm following our rotation as external auditors.

Amstelveen, 15 March 2016

KPMG Accountants N.V.

D. Korf RA

Introduction

471

904621/16W00141114AVN

Strategic Report

Annual Financial Statements 2015

ABN AMRO Group Annual Report 2015

Other

Other

Other gives an overview of definitions of important terms and abbreviations used in the Annual Report. Enquiries and the Cautionary statements are included in Other.

474 Independent auditor's assurance report

476 Definitions of important terms

Abbreviations

484 Cautionary statements

Enquiries

Strategic Report

Independent auditor's assurance report

Independentauditor'sassurancereport

To: the readers of the Annual Report 2015 of ABN AMRO Group N.V.

Our conclusion

We have reviewed the sustainability indicators marked with '' in the Annual Report 2015 (hereafter: The Selected Indicators) of ABN AMRO Group N.V. (hereafter: the Group). Based on our review, nothing has come to our attention to indicate that The Selected Indicators are not presented, in all material respects, in accordance with the internally developed reporting criteria.

Basis for our conclusion

We conducted our engagement in accordance with the Dutch Standard 3000:" Assurance Engagement other than Audits or Reviews of Historical Financial Information".

Our responsibilities under Standard 3000 and procedures performed have been further specified in the paragraph titled "Our responsibility for the review of The Selected Indicators".

We are independent of ABN AMRO Group N.V. in accordance with the Regulation regarding the independence of auditors in case of assurance engagements ('Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten' (ViO)) and other relevant independence requirements in the Netherlands. Furthermore we have complied with the Regulation code of conduct and professional practice for auditors ('Verordening gedrags- en beroepsregels accountants' (VGBA)).

We believe that the assurance evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion.

Responsibilities of the Managing Board for the Selected Indicators

The Managing Board is responsible for the preparation of the sustainability information in the Annual Report in accordance with the Sustainability Reporting Guidelines G4 of the Global Reporting Initiative supported by internally developed guidelines as described on the ABN AMRO Sustainable banking website. It is important to view the sustainability information in the Annual Report in the context of these criteria. We believe these criteria are suitable in view of the purpose of our assurance engagement.

As part of this, the Managing Board is responsible for such internal control as it determines is necessary to enable the preparation of The Selected Indicators that are free from material misstatement, whether due to fraud or error.

Our responsibility for the review of the Selected Indicators

Our objective is to plan and perform the review assignment in a manner that allows us to obtain sufficient and appropriate assurance evidence for our conclusion.

We apply the Further Regulations for Audit Firms Regarding Assurance Engagements ('Nadere voorschriften accountantskantoren ter zake van assurance opdrachten') and accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Our review engagement has been performed with a limited level of assurance. Procedures performed in a limited assurance engagement are aimed at determining the plausibility of information and therefore vary in nature and timing from - and are less extensive than - a reasonable assurance engagement.

The procedures selected depend on our understanding of The Selected Indicators and other engagement circumstances, and our consideration of areas where material misstatements are likely to arise.

The following procedures were performed:

• A risk analysis, including a media search, to identify relevant sustainability issues for the Group in the reporting period.
• Reviewing the suitability and application of the internal reporting criteria including conversion factors used in the preparation of The Selected Indicators and accompanying notes.
• Evaluating the design and implementation of the reporting processes and the controls regarding The Selected Indicators.
• Interviewing management and relevant staff at corporate level responsible for sustainability management and reporting.
• Interviews with relevant staff at corporate and business level responsible for providing The Selected Indicators, carrying out internal control procedures on the data and consolidating The Selected Indicators.
• Evaluating internal and external documentation, based on sampling, to determine whether The Selected Indicators in the Annual Report are supported by sufficient evidence.
• An analytical review of the data and trend explanations submitted by all businesses for consolidation at group level as far related to The Selected Indicators.

Amsterdam, 15 March 2016

KPMG Sustainability,

Part of KPMG Advisory N.V.

W.J. Bartels RA

475

Introduction

Strategic Report

Definitions of important terms

Definitions of important terms

ABN AMRO or the Group

ABN AMRO Group N.V. incorporated on 18 December 2009 ('ABN AMRO Group' or 'the Company') and its consolidated subsidiaries.

ABN AMRO Bank

ABN AMRO Bank N.V.. (formerly known as 'ABN AMRO II N.V.').

Absolute sensitivity

The absolute sensitivity adds up the different positions on the yield curve, regardless of whether they are positive or negative. It measures the absolute interest rate position.

Additional Tier 1 Capital securities

Unsecured, perpetual and deeply subordinated securities.

Advanced Internal Ratings Based (AIRB)

The highest and most detailed level of credit risk calculation for determining capital adequacy levels under Basel II, based on the use of internal models to assess risk.

Advanced Measurement Approach (AMA)

The highest and most detailed level of operational risk calculation for determining capital adequacy levels under Basel II, based on the use of internal models to assess risk.

Ageas

Refers to ageas SA/NV (formerly known as Fortis SA/NV) and ageas N.V. (formerly known as Fortis N.V.) together.

Article 403

Section 2:403 of the Dutch Civil Code, which states that companies that are part of a consolidating group entity may publish limited annual accounts if the parent company, among other things, assumes joint and several liability for all liabilities of the group company.

Asset Quality Review (AQR)

Extensive review of asset quality performed by the ECB as part of a comprehensive assessment.

Basel I

The Basel Capital Accord is the 1988 agreement among the G10 central banks to apply common minimum capital standards to the banking industry.

Basel II

The Basel II Framework offers a new set of standards for establishing minimum capital requirements for banks. It was prepared by the Basel Committee on Banking Supervision.

Basel III

The third set of Basel accords, which was developed in response to the financial crisis of the late 2000's. The Basel III standards include higher and better-quality capital, better risk coverage and the introduction of a maximum leverage ratio

Basis point (bp)

One hundredth of 1 percentage point.

Capital adequacy

Measure of a company's financial strength, often expressed in equity as a percentage of balance sheet total or – for banks – in the BIS ratio.

Capital markets products

Sales and distribution of primary equity and debt capital markets products and making a market in long-term and short-term debt.

Cash and balances at central banks

This item includes all cash and only credit balances with central banks that are available on demand.

Certificate of deposit (CD)

Certificate of deposit is an unsecured short-term funding instrument with maturities up to one year.

Clearing

Refers to the clearing businesses of ABN AMRO.

Client assets

Assets, including investment funds and assets of private individuals and institutions, which are professionally managed with the aim of maximising the investment result. Client assets also include cash and securities of clients held on accounts with ABN AMRO

Commercial paper (CP)

Commercial paper is an unsecured short-term funding instrument with maturities up to one year.

Consortium

Refers to The Royal Bank of Scotland Group plc ('RBS Group'), Ageas and Banco Santander S.A. ('Santander'), which jointly acquired ABN AMRO Holding on 17 October 2007 through RFS Holdings B.V. ('RFS Holdings'). On 3 October 2008 the State of the Netherlands became the successor of Ageas.

Core Tier 1 ratio

The bank's core capital, excluding preference shares, expressed as a percentage of total risk exposure amount.

Cost of risk

The cost of risk is defined as annualised impairment charges on loans and other receivables, divided by average loans and receivables customers.

Country risk

Country risk is part of credit risk and is defined as the risk of losses due to country-specific events or circumstances (political, social, economic) relevant for credit exposures that are cross-border in nature.

Coverage ratio

The coverage ratio shows to which extent the impaired exposures are covered by impairment allowances for identified credit risk.

Credit equivalent

Sum of the costs of replacement transactions (when counterparties fail to fulfil their obligations) and the potential future credit risk, reflected in a mark-up percentage on the principal of the contract. The mark-up percentage depends on the nature and remaining term of the contract.

Covered bonds

Covered bonds (CB) are secured long-term funding instruments. This type of bond differs from a standard bond by recourse to a pool of assets. In a default event, the bondholder has recourse to the issuer and this pool of assets.

Credit rating

Assessment of a credit rating agency expressed in a combination of letters and/or figures indicating the creditworthiness of a country, company or institution.

Credit risk

Credit risk is the risk of a financial loss that occurs if a client or counterparty fails to meet the terms of a contract or otherwise fails to perform as agreed.

Credit valuation adjustments

Market value adjustments for counterparty credit risk.

Customer Excellence

A new way of working being implemented at ABN AMRO, which is based on lean management principles.

Defaulted exposures

Exposures for which there are indicators that a counterparty may not be able to meet its contractual obligations and/or when an exposure is more than 90 days past due.

Derivatives

Financial instruments whose value is derived from the price of one or several underlying assets (e.g. currencies, securities, indices).

Dow Jones Sustainability Index (DJSI)

A family of benchmarks, performed by RobecoSAM, for investors who believe sustainable business practices may lead to long-term shareholder value.

Duration of equity

Duration of equity indicates the sensitivity of the market value of equity to a 1% parallel change in the yield curve. The targeted interest risk profile results in a limit of the duration of equity between 0 and 7 years.

Introduction

Strategic Report

Business Report

Risk, funding & capital Report

Governance Report

Annual Financial Statements

Other

Dutch State

Refers to the State of the Netherlands.

Earnings per share

Profit for the period excluding coupons attributable to AT 1 Capital securities and results attributable to non-controlling interests divided by the average outstanding and paid-up ordinary shares.

Economic capital

An estimate of the amount of capital that the bank should possess in order to be able to sustain larger-than-expected losses with a given level of certainty.

Economic profit

Net profit after tax less risk-adjusted cost of capital.

Economic value

The value of future economic profits discounted to the present.

Employee Engagement

A business management concept that describes the extent to which employees feel passionate about their jobs and are committed to the organisation. The more engaged an employee is with his or her company, the more effort they put into their work.

Encumbered assets

Assets that were pledged or subject to an arrangement, either explicitly or implicitly, in any way to secure, collateralise or credit enhance a transaction.

Exposure at Default (EAD)

EAD models estimate the expected exposure at the time of a counterparty default.

Fortis Bank Nederland (FBN)

The legal entity Fortis Bank (Nederland) N.V., previously named Fortis Bank Nederland (Holding) N.V., which merged with ABN AMRO Bank Standalone pursuant to the Legal Merger.

Financing products

Solutions regarding (securities) financing, liquidity, risk and collateral (e.g. securities borrowing and lending, stock borrowing, stock lending, repo and total return swaps).

Global Sustainability Risk Index (GSRI)

A tool that is used to assess credit applications on environmental, social and ethical (ESE) aspects.

Goodwill

The difference between the purchase price of a participation and the fair value of the individual net assets and liabilities.

Green bond

A product that enables investors to invest in mortgages of highly energy-efficient homes, loans for solar panels on existing homes and sustainable commercial property.

Global Reporting Initiative (GRI)

A reporting framework that provides metrics and methods for measuring and reporting sustainability-related impacts and performance.

Hedge

Protecting a financial position by going either long or short, often using derivatives.

Household

In Retail Banking, products and services are primarily administered by family/cohabitation cluster, which is called a financial household.

Impaired exposures

Exposures for which not all contractual cash flows are expected and/or exposures more than 90 days past due for which impairments are determined on a portfolio basis.

Impaired ratio

The impaired ratio shows which fraction of the gross carrying amount of a financial asset category consists of impaired exposures.

Impaired EAD ratio

The impaired EAD ratio shows which fraction of an EAD category consists of impaired exposures.

Impairment charges on loans and other receivables

Charge to the income statement to cover possible loan losses on non-performing loans.

Interest rate mismatch

Interest rate mismatch is the difference in interest maturity between funds lent and funds borrowed.

International Financial Reporting Standards (IFRS)

IFRS, formerly known as International Accounting Standards, are drawn up and recommended by the International Accounting Standards Board. The European Union requires that IFRS be used by all exchange-listed companies in the EU starting from the financial year 2005.

Investment products

Providing equity brokerage and research services to investors and primary equity services to companies (i.e. equity research, cash equities, government bonds and credit bonds)

Liquidity coverage ratio (LCR)

The LCR is intended to promote resilience to potential liquidity disruptions over a thirty-day horizon. The LCR requires banks to hold sufficient highly-liquid assets equal to or greater than the net cash outflow during a thirty-day period.

Loan impairment allowance

Balance sheet allowance held against non-performing loans.

Market risk (banking book)

Market risk in the banking book, mainly interest rate risk, is the risk of yield curve development that is unfavourable for the bank. Other market risks are limited in the banking book either through hedging (foreign rate exchange risk) or in general (other market risk types).

Market risk (trading book)

Market risk in the trading book is the risk of loss resulting from unfavourable market price movements which can arise from trading or holding positions in financial instruments in the trading book.

Materiality

Materiality is the threshold at which topics become sufficiently important to be reported. Material topics are those that may reasonably be considered important for reflecting the organisation's economic, environmental and social impacts, or influencing the decisions of stakeholders, and, therefore, potentially merit inclusion in a report.

Medium-term notes (MTN)

Medium-term notes are unsecured funding instruments with maturities up to ten years issued in several currencies.

Mergers & Acquisitions (M&A)

Activities in the fields of mergers, acquisitions, privatisations, advisory services and organisations.

Net Promoter Score (NPS)

This metric shows the extent to which customers would recommend a company to others. The customer is regarded as a 'promoter' (score of 9 or 10), as 'passively satisfied' (score of 7 or 8) or as a 'detractor' (score of 0 to 6). The NPS is calculated by subtracting the percentage of 'detractors' from the percentage of 'promoters'. The score is expressed as an absolute number between -100 and +100.

Net Stable Funding Ratio (NSFR)

The objective of the NSFR is to promote resilience over a longer time horizon by creating additional incentives to fund activities with more stable sources of funding on an ongoing basis.

NII-at-Risk

The NII-at-Risk metric indicates the change in net interest income during the coming 12 months, comparing the NII calculated using a constant yield curve with the NII calculated using a yield curve that is gradually shifted to a total of 200 basis points. The net interest income is negatively impacted when rates rise.

479

Other

480

NLFI

Stichting administratiekantoor beheer financiële instellingen (NL Financial Investments (foundation)). On 29 September 2011 the Dutch State transferred its shares in ABN AMRO Group N.V. and in ABN AMRO Preferred Investments B.V. to NLFI. NLFI was set up as a means to avoid potential conflicting responsibilities that the Minister of Finance might otherwise face, as a shareholder and as a regulator, and to avoid political influence being exerted.

Non-performing loans

Exposures for which there are indicators that a counterparty may not be able to meet its contractual obligations and/or when an exposure is more than 90 days past due.

Notional amounts

The value of the principal of the underlying financial derivatives contracts.

OECD Guidelines

The OECD Guidelines for Multinational Enterprises provide non-binding principles and standards for responsible business conduct in a global context.

Operational risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems or from external events.

Options (shares and currencies)

Contractual right to buy (call option) or sell (put option) a specified amount of underlying shares or currency at a fixed price during a specified period or on a specified date.

Past due exposure

A financial asset is past due if a counterparty has failed to make a payment when contractually due, if it has exceeded an advised limit or if it has been advised of a limit lower than its current outstanding.

Past due ratio

The past due ratio shows which fraction of the gross carrying amount of a financial asset category is past due but not impaired.

Preference share

Share that receives a fixed rate of dividend prior to ordinary shares.

Qualifying revolving exposures

Qualifying revolving exposures are revolving, unsecured, and uncommitted exposures to private individuals that meet additional criteria specified in the CRD. These outstanding balances are permitted to fluctuate based on their decisions to borrow and repay, up to a limit established by the bank.

RARORAC

A combination of two other measures: risk-adjusted return on capital (RAROC) and return on risk-adjusted capital (RORAC).

Regulatory capital adequacy

Measure of a bank's financial strength, often expressed in risk-bearing capital as a percentage of total risk exposure amount.

Repurchase agreement (Repo)

The sale of securities together with an agreement for the seller to buy back the securities at a later date.

Residential mortgage backed securities (RMBS)

Residential mortgage backed securities are secured long-term funding instruments. A pool of underlying assets, in this case own-originated residential mortgages, provides the cash flows to bondholders.

Return on equity (ROE)

Net profit attributable to ordinary shareholders of the parent company divided by shareholders' equity.

Risk management products

Products and strategic advice to manage the risk exposure of clients (e.g. solutions to hedge foreign exchange and interest rate risks and various types of capital markets solutions for ECT clients such as commodity derivatives).

Risk-weighted assets (RWA)

Total assets and off-balance sheet items calculated on the basis of the risks relating to the various balance sheet items.

Royal Bank of Scotland (RBS)

The Royal Bank of Scotland N.V., formerly known as ABN AMRO Bank N.V. prior to the Legal Demerger.

Salient human rights

Those human rights that are at risk of the most severe negative impacts through a company's activities or business relationships.

Savings certificates

Savings certificates are non-exchange traded instruments with an annual coupon payment and have the same characteristics as bonds.

Savings mortgages

Savings mortgages are mortgages with a separate savings account whereby the balance of savings is used for redemption of the principal at maturity.

Securities financing transaction (also referred to as 'professional securities transaction')

A transaction whereby securities are temporarily transferred from a lender to a borrower, with the commitment to re-deliver the securities.

Securitisation

Restructuring credits in the form of marketable securities.

Social impact bond

A contract with the public sector or governing authority, whereby it pays for better social outcomes in certain areas and passes on part of the savings achieved to investors.

Social impact fund

Investing that aims to generate specific beneficial social or environmental effects in addition to financial gain.

Standardised Approach (Basel II)

The standardised approach for credit risk measures credit risk in a standardised manner, supported by external credit assessments.

Stress testing

Method of testing the stability of a system or entity when exposed to exceptional conditions.

Three lines of defence

ABN AMRO's approach to risk management. The three lines of defence principle consists of a clear division of activities and responsibilities in risk management at different levels of the bank and at different stages in the life cycle of risk exposures.

Tier 1 ratio

Tier 1 capital, the sum of CET1 capital and AT1 capital, of the bank expressed as a percentage of total riskweighted assets.

Trust Monitor

A survey conducted by market research institute GfK on how Dutch people think about banks in general, their own bank and how they experience various aspects of services provided by banks.

UN Global Compact

The United Nations Global Compact is a United Nations initiative to encourage businesses worldwide to adopt sustainable and socially responsible policies, and to report on their implementation.

Uniform Counterparty Rating (UCR)

The UCR is an obligor rating and refers to the probability of default by an obligor, i.e. the likelihood that a counterparty fails to pay interest and/or principal and/or other financial obligations to the bank.

Value-at-Risk banking book

Value-at-Risk banking book (VaR banking book) is used as a statistical measure for assessing interest risk exposure. It estimates potential losses and is defined as the predicted maximum loss that might be caused by changes in risk factors under normal circumstances, over a specified period of time, and at a specified level of statistical confidence. A VaR for changes in the interest rate for the banking book is calculated at a 99% confidence level and a two-month holding period.

Volatility

Statistical measure for the degree to which items (market rates, interests) fluctuate over time.

481

Abbreviations

Abbreviations

AACB	ABN AMRO Clearing Bank
AFM	Autoriteit Financiële Markten (Netherlands
	Authority for the Financial Markets)
AFS	Annual Financial Statements
AIRB	Advanced Internal Ratings Based (Approach)
ALCO	(ABN AMRO's) Asset & Liability Committee
ALM	Asset & Liability Management
AMA	Advanced Measurement Approach
AQR	Asset Quality Review
AT 1 Additional Tier 1
BIS	Bank for International Settlements
BLMIS Bernard L Madoff Investment Securities
bn Billion
bp(s)	Basis point(s)
	BREEAM Building Research Establishment
	Environmental Assessment Methodology
BRRD	Bank Recovery and Resolution Directive
CAO	Collectieve Arbeidsovereenkomst (collective
	labour agreement)
CAF	Cycle Adjustment Factor
CBS Centraal Bureau voor de Statistiek
	(Statistics Netherlands)
CCC	(ABN AMRO's) Central Credit Committee
CD	Certificate of Deposit
CDO	Collateralised Debt Obligation
CDS	Credit Default Swap
CE	Customer Excellence
CEBS	Committee of European Banking Supervisors
CET1	Common Equity Tier 1
CFO	Chief Financial Officer
CGU	Cash-Generating Units
CHF	Swiss franc
CP	Commercial Paper
CRD	(the EU's) Capital Requirements Directive
CRE	Commercial Real Estate
CRO	Chief Risk Officer
CRR	Capital Requirements Regulation
CVA	Credit Value Adjustment
DGS	Deposit Guarantee Scheme
DJSI	Dow Jones Sustainability Index
DNB	De Nederlandsche Bank N.V.
	(Dutch central bank)
DSTA	Dutch State Treasury Agency
DTA	Deferred Tax Asset

DTL	Deferred Tax Liability
DVA	Debt Valuation Adjustment
EAD	Exposure At Default
EBA	European Banking Authority
EBITDA	Earnings Before Interest, Taxes,Depreciation
	and Amortisation
EC	European Commission
ECAI	External credit assessment institutions
ECB	European Central Bank
ECT	(ABN AMRO's) Energy, Commodities &
	Transportation
EDTF	Enhanced Disclosure Task Force
EMIR European Market Infrastructure Regulation
EPS	Earnings per share
ESE	Environmental, Social and Ethical
ESG	Environmental, Social and Governance
EU	European Union
EUR	Euro
EVCA	European Private Equity and Venture
	Capital Association
FATCA	Foreign Account Tax Compliance Act
FBN	Fortis Bank Nederland
FCCM	Financial Collateral Comprehensive Method
Fed	Federal Reserve
FR&R	(ABN AMRO's) Financial Restructuring &
	Recovery
FTE	Full-Time Equivalent (a measurement of
	number of staff)
FVA	Funding Value Adjustment
FX	Foreign exchange
GBP	British pound
GDP	Gross Domestic Product
GfK	Gesellschaft für Konsumforschung
	(Society for Consumer Research)
GSRI	Global Sustainability Risk Index
GRC	(ABN AMRO's) Group Risk Committee
GRESB	Global Real Estate Sustainability Benchmark
GRI	Global Reporting Initiative
HR	Human Resources
HRM	Human Resource Management
IAS	International Accounting Standards
IASB	International Accounting Standards Board
IBNI	Incurred But Not Identified
ICS	International Card Services

ICB	Industry Classification Benchmark
IFRS	International Financial Reporting Standards
ILO	International Labour Organisation
IMA	Internal Models Approach
INSEAD Institut Européen d'Administration des Affaires
	(European Institute of Business Administration)
INSID	Institute for Sustainable Innovation and
	Development
IPO	Initial Public Offering
IRB	Internal Ratings-Based (Approach)
ISO	Information Security Office
IT	Information Technology
KPI	Key Performance Indicator
LAD	Loss at Default
LCR	Liquidity Coverage Ratio
LGD	Loss Given Default
LtD	Loan-to-Deposit (ratio)
LtMV	Loan-to-Market-Value
m	Million
M&A	Mergers & Acquisitions
MCI	Maas Capital Investment B.V.
MiFID	(the EU's) Markets in Financial Instruments
	Directive
MiFIR	(the EU's) Markets in Financial Instruments
	Regulation
MtM	Mark-to-Market
NHG	Nationale Hypotheek Garantie
	(Dutch State-guaranteed mortgages)
NII	Net Interest Income
NLFI	NL Financial Investments (foundation)
NPS	Net Promoter Score
NSFR	Net Stable Funding Ratio
OCI	Other Comprehensive Income
OECD	Organisation for Economic Cooperation
	and Development
OOE	One Obligor Exposure
OTC	Over-The-Counter
PD	Probability of Default
PR&I	People, Regulations & Identity
RAROC	Risk-Adjusted Return On Capital
	RARORAC Risk-Adjusted Return On Risk-Adjusted Capital
RBB	Regeling Beheerst Beloningsbeleid Wft 2011

(Regulation on Sound Remuneration Policies
Pursuant to the Financial Supervisor Act 2011)

RBS	The Royal Bank of Scotland plc
REA	Risk exposure amount
RMBS	Residential Mortgage-Backed Security
RM&S	(ABN AMRO's) Risk Management & Strategy
ROE	Return on Equity
RWA	Risk-Weighted Assets
SA	Standardised Approach
SEC	U.S. Securities and Exchange Commission
SGD	Singapore dollar
SMEs	Small and Medium-sized Enterprises
SPE	Special Purpose Entity
SRM	Single Resolution Mechanism
SSM	Single Supervisory Mechanism
SWOT	Strengths, Weaknesses, Opportunities
	and Threats
TLTRO	Targeted Long Term Refinancing Operations
TOPS	(ABN AMRO's) Technology, Operations &
	Property Services
UCR	Uniform Counterparty Rating
UNGP	United Nations Guiding Principles
USD	US dollar
VaR	Value-at-Risk
WSW	Waarborgfonds Sociale Woningbouw
YE	Year-end

ABN AMRO Group Annual Report 2015

Cautionary statements

Cautionary statements

The Group has included in this Annual Report, and from time to time may make certain statements in its public filings, press releases or other public statements that may constitute "forward-looking statements" within the meaning of the safe-harbour provisions of the United States Private Securities Litigation Reform Act of 1995. This includes, without limitation, such statements that include the words "expect", "estimate", "project", "anticipate", "should", "intend", "plan", "aim", "desire", "strive", probability", "risk", "Value at Risk" ("VaR"), "target", "goal", "objective", "will", "endeavour", "outlook", "optimistic", "prospects" and similar expressions or variations on such expressions. In particular, this document includes forward-looking statements relating, but not limited, to ABN AMRO's potential exposures to various types of operational, credit and market risk, such as counterparty risk, interest rate risk, foreign exchange rate risk and commodity and equity price risk. Such statements are subject to risks and uncertainties. These forward-looking statements are not historical facts and represent only ABN AMRO's beliefs regarding future events, many of which by their nature are inherently uncertain and beyond the bank's control.

Other factors that could cause actual results to differ materially from those anticipated by the forward-looking statements contained in this document include, but are not limited to:

• Å The extent and nature of future developments and continued volatility in the credit and financial markets and their impact on the financial industry in general and ABN AMRO in particular;
• Å The effect on ABN AMRO's capital of write-downs in respect of credit exposures;
• Å Risks related to ABN AMRO's merger, separation and integration process;
• Å General economic, social and political conditions in the Netherlands and in other countries in which ABN AMRO has significant business activities, investments or other exposures, including the impact of recessionary economic conditions on ABN AMRO's performance, liquidity and financial position;
• Å Macroeconomic and geopolitical risks;
• Å Reductions in ABN AMRO's credit ratings;
• Å Actions taken by the EC, governments and their agencies to support individual banks and the banking system;
• Å Monetary and interest rate policies of the ECB and G20 central banks;
• Å Inflation or deflation;
• Å Unanticipated turbulence in interest rates, foreign currency exchange rates, commodity prices and equity prices;
• Å Liquidity risks and related market risk losses;
• Å Potential losses associated with an increase in the level of substandard loans or non-performance by counterparties to other types of financial instruments, including systemic risk;
• Å Changes in Dutch and foreign laws, regulations, policies and taxes;
• Å Changes in competition and pricing environments;
• Å Inability to hedge certain risks economically;
• Å Adequacy of loss reserves and impairment allowances;
• Å Technological changes;
• Å Changes in consumer spending, investment and saving habits;
• Å Effective capital and liquidity management;
• Å The success of ABN AMRO in managing the risks involved in the foregoing.

The forward-looking statements made in this Annual Report are only applicable as from the date of publication of this document. ABN AMRO does not intend to publicly update or revise these forward-looking statements to reflect events or circumstances after the date of this report, and ABN AMRO does not assume any responsibility to do so. The reader should, however, take into account any further disclosures of a forwardlooking nature that ABN AMRO may make in ABN AMRO's interim reports.

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Other

Enquiries

Enquiries

ABN AMRO Investor Relations

investorrelations@nl.abnamro.com +31 20 6282 282

ABN AMRO Press Office

pressrelations@nl.abnamro.com +31 20 6288 900

ABN AMRO Group N.V.

Gustav Mahlerlaan 10 1082 PP Amsterdam The Netherlands

Mailing address

P.O. Box 283 1000 EA Amsterdam The Netherlands

Internet

abnamro.com (corporate website in English) abnamro.nl (client website in Dutch) abnamro.nl/en (client website in English) abnamro.com/corporatereporting

Information on our websites does not form part of this Annual Report, unless expressly stated otherwise.

Acknowledgements

General coordination

Finance and Communications & Sustainability departments

Editing and translation

Merilee Dranow

Photography

Erik Borst (Nargis Goldfinger Rasheed, Dies Donker, Adrian de Groot Ruiz) Jon Skille Amundsen (Petter Heier) Olivier Middendorp (Hans Muysson, Managing Board, Supervisory Board)

Concepting and layout DartGroup, Amsterdam

Production and lithography Sumis

ABN AMRO Group Annual Report 2015

abnamro.nl/corporatereporting/2015